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In December 2008, the National Bureau of Economic Research (NBER) announced that the economy was in a recession and that the recession began in December 2007. However, some economists and forecasters have been concerned that a combination of factors might make this economic contraction much worse than other post-war slowdowns. At first, economic instability seemed limited to the housing sector as housing values decreased in many markets, forcing some subprime and highly leveraged home owners into foreclosure. The problems that began in housing, quickly spread to banking and financial services and were compounded earlier in 2008 by spikes in energy prices. The solvency of automobile manufacturers rapidly deteriorated, possibly due in part to tight credit policies, rising unemployment, and high fuel costs. National unemployment rose steadily throughout 2008 reaching 7.2% in December. Many states also face large tax revenue decreases, forcing them to consider reducing Medicaid eligibility and spending, just when the demand for additional public sector health care is expanding to fill the gap left when unemployed individuals no longer can afford employer-based health insurance for their families. Although by themselves the problems in housing, financial services, manufacturing, and energy sectors might not force the economy into recession, taken together these problems have contributed to the emergence of a recession and, if the underlying fundamentals have changed as some forecasters suspect, perhaps a prolonged, global economic slow down that could have widespread impact on living standards here and abroad. Policymakers quickly moved to prevent the instability in housing and financial services from spilling over into the broader economy. Looking to the future, members of Congress and the Obama Administration have sought additional mechanisms to stimulate economic activity. Various approaches have been considered to ensure that a stimulus package could reach many different segments of the economy, provide a sustained economic boost, and wide spread job growth. Some stimulus proposals have included infrastructure spending, revenue sharing with states, middle class tax cuts, business tax cuts, unemployment benefits, and food stamps. On January 22, 2009 the House Committee on Energy and Commerce marked-up and approved selected health components of the American Recovery and Reinvestment Act of 2009 (ARRA, H.R. 1 ). The full House amended and approved H.R. 1 on January 28, 2009. ARRA included approval of an amendment to Division B, Title V, Medicaid Provisions, that removed a provision that would have given states the option to cover family planning services under Medicaid. Similar legislation to H.R. 1 was introduced in the Senate (ARRA, S. 350 ) and referred to the Committee on Finance, where a markup of selected health components was approved on January 27. The Senate Committee on Finance mark-up of S. 350 and approved S.Amdt. 98 , which was offered as a substitute for H.R. 1 . S.Amdt. 98 was amended further before being approved by the full Senate, where an S.Amdt. 570 was offered in the nature of a substitute H.R. 1 . on February 10, 2009. Table 1 displays a summary of Medicaid provisions in H.R. 1 and S.Amdt. 570 . Additional detail on major provisions and differences between H.R. 1 and S.Amdt. 570 include the following: FMAP. Although the House-passed and Senate Finance versions of a temporary increase in the federal medical assistance percentage (FMAP) are broadly similar, they differ on the degree to which funds are targeted at states experiencing unemployment rate increases and whether the temporary FMAP increase applies to expenditures for individuals who are eligible for Medicaid because of an increase in a state's income eligibility standards. Unemployed Covered Under Medicaid . Under H.R. 1 , but not S.Amdt. 570 , states would have a temporary option to cover unemployed workers under Medicaid. States would receive 100% FMAP for this temporary Medicaid expansion for both medical services and related administrative expenditures. Medicaid Regulations Moratoria. H.R. 1 includes a 60-day extension until July 1, 2009, of moratoria on six controversial Medicaid regulations, and a new moratorium on a seventh regulation. S.Amdt. 570 does not have a provision to extend the Medicaid moratoria. DSH Allotment Increases . H.R. 1 would temporarily, but uniformly, increase states' DSH allotments by 2.5% for FY2009 and FY2010. S.Amdt. 570 also would increase temporarily states' DSH allotments, but the enhanced allotments would be provided only to low-DSH states (states with DSH spending below 3% of their total Medicaid expenditures in FY2006). States with higher DSH spending would not receive enhanced allotments under S.Amdt. 570 . Medicare Special Workload Agreements . S.Amdt. 570 includes a provision that would require the HHS Secretary, in consultation with the SSA Commissioner, to negotiate agreements with states on the Medicare Special Disability Workload program. H.R. 1 does not have a similar provision. Medicaid Indian Protections . H.R. 1 and S.Amdt. 570 both include provisions that would exempt Indians from Medicaid and SCHIP cost sharing and premiums as well as provide for the creation of a Tribal Technical Advisory Panel within CMS. Under S.Amdt. 570 , in order to receive Medicaid payment, managed care entities would need to fulfill certain conditions. The Senate amendment would also apply specific provisions affecting Medicaid managed care to SCHIP. TMA and QI Extensions . H.R. 1 would extend the work-related Transitional Medical Assistance (TMA) program through December 2010. Similar to H.R. 1 , S.Amdt. 570 would extend the work-related TMA program through December 2010, as well as the Qualified Individual (QI) program through the end of 2010. OIG and GAO . Under S.Amdt. 570 , but not H.R. 1 , funds would be appropriated to OIG for Medicaid integrity activities related to increased recession spending. Also under S.Amdt. 570 and not H.R. 1 , GAO would be tasked with preparing a report on the effect of recessions since 1974 on Medicaid. NH Prompt Pay . Under S.Amdt. 570 , states would need to comply with Medicaid's prompt payment rules to receive recessionary FMAP increases. Sunset. Under S.Amdt. 570 , all of the provisions in Title III, Subtitle D, Other Provisions, would sunset at the end of the recession period, December 31, 2010, including Indian protections (Sec. 3301, 3302, 3303) and nursing home prompt pay requirements (Sec. 3304). For a discussion of the Medicaid provisions approved in the Joint House and Senate Conference Agreement, see CRS Report R40223, American Recovery and Reinvestment Act of 2009 (ARRA): Title V, Medicaid Provisions , coordinated by [author name scrubbed]. The American Recovery and Reinvestment Act of 2009 (ARRA, H.R. 1 ) is intended to stimulate additional economic activity in selected industrial sectors to save existing and create new jobs, reduce taxes, invest in future technologies, and fund infrastructure improvements. In addition, ARRA contains provisions to provide temporary support to families and individuals in need by providing additional unemployment compensation benefits, short-term access to Medicaid, financial assistance for individuals eligible under COBRA to purchase health insurance through their former employer, temporary increases in federal Medicaid matching rates for states, and other Medicaid changes. On January 26, 2009, the Congressional Budget Office (CBO) issued a preliminary estimate of the impact of H.R. 1 as it was reported to the House. The Medicaid provisions in the version of H.R. 1 introduced in the House, were in two titles, Title III, Health Insurance Assistance, and Title V, State Fiscal Relief, of Division B, Direct Spending. CBO preliminarily estimated that the Medicaid provisions in H.R. 1 , as approved by the House, would increase federal spending by $37 billion in FY2009 and $100.1 billion over the five-year period FY2009-2013. On January 28, 2009, CBO issued estimated budget impacts of the House-approved version of ARRA. These estimates do not include separate line items for all Medicaid provisions, but summarize spending by Titles. CBO indicated that their preliminary individual provision estimates did not change from the introduced version of H.R. 1 to the House-approved version. The Medicaid provisions in Title III and Title V of the House-approved version of ARRA included: Title III — Health Insurance Assistance: Temporary Optional Medicaid Coverage for the Unemployed. Title V— State Fiscal Relief: Temporary Increase in Medicaid Federal Medical Assistance Percentage (FMAP), Moratoria on Certain Regulations, Transitional Medical Assistance (TMA), Protections for Indians under Medicaid and the Children's Health Insurance Program (CHIP), Consultation with Indian Health Programs, Temporary Increase in Disproportionate Share Hospital (DSP) Allotments. Title IV, Health Information Technology, in the House-approved version of ARRA, also includes Medicaid provisions related to health technology. On January 27, 2009, an economic stimulus bill S. 336 , American Recovery and Reinvestment Act of 2009 (ARRA), was introduced in the Senate and referred to the Committee on Appropriations. A related stimulus bill, S. 350 , with the same name, was introduced on January 29, 2009, and referred to the Committee on Finance. The Committee on Finance amended and approved S. 350 on January 30, 2009. On February 2, 2009, S. 350 was combined with provisions from S. 336 and an amendment, S.Amdt. 570 , was offered as a replacement for the House-approved stimulus bill, H.R. 1 . The full Senate approved S.Amdt. 570 on February 10, 2009. Medicaid provisions in Title III and Title V of Senate-approved ARRA included: Title III — Health Insurance Assistance: Extension of Transitional Medical Assistance (TMA). Extension of the Qualified Individual (QI) Program. Premiums and Cost Sharing Protections Under Medicaid, Eligibility Determinations Under Medicaid and CHIP, and Protection of Certain Indian Property from Medicaid Estate Recovery. Rules Applicable Under Medicaid and CHIP to Managed Care Entities with Respect to Indian Enrollees and Indian Health Care Providers and Indian Managed Care Entities. Consultation on Medicaid, CHIP, and Other Health Care Programs Funded Under the Social Security Act Involving Indian Health Programs and Urban Indian Organizations. Application of Prompt Pay Requirements to Nursing Facilities. Period Of Application; Sunset. Title V — State Fiscal Relief: Temporary Increase in Medicaid Federal Medical Assistance Percentage (FMAP). Extension and Update of Special Rule for Increase of Medicaid DSH Allotments for Low-DSH States. Payment of Medicare Liability to States as a Result of the Special Disability Workload Project. Funding for the Department of Health and Human Services Office of the Inspector General. GAO Study and Report Regarding State Needs During Periods of National Economic Downturn. CBO prepared estimates of the effect of S.Amdt. 570 on federal spending. In its analysis, CBO did not make separate estimates for each Medicaid provision contained in Division B, Direct Spending. CBO estimated that all S.Amdt. 570's Title III, Health Insurance Assistance, provisions would increase direct spending by $28.6 billion over the period FY2009-FY2019. The Medicaid provisions in Title III by themselves would increase federal spending by $2.6 billion over the same 10-year period FY2009-2019. CBO estimated that the S.Amdt. 570's Title V, State Fiscal Relief, provisions would increase federal expenditures by $36 billion in FY2009 and by $90 billion over 10 years from FY2009-2019. This report follows the organization of the Medicaid provisions in the House-passed version of ARRA, so the House-passed provisions are presented first, with comparable Senate provisions following, unless the House-passed version of ARRA does not have a comparable provision to the Senate version; then the Senate provisions are presented first. This report will not be updated. For additional information on ARRA Conference Agreement's Medicaid provisions, see CRS Report R40223, American Recovery and Reinvestment Act of 2009 (ARRA): Title V, Medicaid Provisions , coordinated by [author name scrubbed]. H.R. 1 . Sec. 3003. Temporary Optional Medicaid Coverage for the Unemployed. Under this provision, states would temporarily have the option to cover unemployed workers and their families under Medicaid. Under this optional benefit, states could extend Medicaid benefits to three categories of workers that involuntarily had lost their jobs (including spouses and children under age 19), since September 1, 2008. Table 2 summarizes the three categories of workers that would be covered under this provision, requirements for coverage, and rules states would need to follow in adding this optional coverage to their state Medicaid plans. As shown in Table 2 , the HHS Secretary would have the option to define an additional comparable category through rules or guidance that could include independent contractors in Category A. States would receive 100% FMAP for individuals who were eligible for Medicaid under this provision until January 1, 2011. In addition, states would receive 100% matching for administrative activities related to this provision, such as outreach, modification and operation of eligibility information systems, enrollment, and eligibility determination. In its preliminary estimate of spending effects of H.R. 1 , issued on January 26, 2009, CBO estimated that the temporary, optional coverage for the unemployed under Medicaid provision in the House-approved version of ARRA would increase federal spending in FY2009 by $4.0 billion and by $10.8 billion from FY2009-FY2014. In the January 30, 2009, analysis of the House-approved version of ARRA, CBO did not provide a separate estimate of the impact of Sec. 3003 on federal spending, but indicated its overall estimate was unchanged. On February 9, 2009, CBO estimated that an additional 1.2 million individuals (adults and children) would receive Medicaid benefits by the end of FY2009 under this provision. S.Amdt. 570 did not include a provision to extend temporary optional Medicaid coverage to the unemployed. H.R. 1 . Sec. 5001. Temporary Increase of Medicaid FMAP. The federal medical assistance percentage (FMAP) is the rate at which states are reimbursed for most Medicaid service expenditures. It is based on a formula that provides higher reimbursement to states with lower per capita incomes relative to the national average (and vice versa); it has a statutory minimum of 50% and maximum of 83%. The FMAP is calculated on an annual basis. Exceptions to the FMAP formula have been made for certain states and situations. For example, the District of Columbia's Medicaid FMAP is set in statute at 70%, and the territories have FMAPs set at 50% (they are also subject to federal spending caps). Under the Jobs and Growth Tax Relief Reconciliation Act of 2003 ( P.L. 108-27 ), all states received a temporary increase in Medicaid FMAPs for the last two quarters of FY2003 and the first three quarters of FY2004 as part of a fiscal relief package. In addition to Medicaid, the FMAP is used in determining the federal share of certain other programs (e.g., foster care and adoption assistance under Title IV-E of the Social Security Act) and serves as the basis for calculating an enhanced FMAP that applies to the State Children's Health Insurance Program. During a recession adjustment period that begins with the first quarter of FY2009 and runs through the first quarter of FY2011, the proposal agreed to by the House would hold all states harmless from any decline in their regular FMAPs, provide all states with an increase of 4.9 percentage points, and provide high unemployment states with an additional increase. It would also allow each territory to choose between an FMAP increase of 4.9 percentage points along with a 10% increase in its spending cap, or its regular FMAP along with a 20% increase in its spending cap. States would be evaluated on a quarterly basis for the additional unemployment-related FMAP increase, which would equal a percentage reduction in the state share. The percentage reduction would be applied to the state share after the hold harmless increase and before , the 4.9 percentage point increase. For example, after applying the 4.9 point increase provided to all states, a state with a regular FMAP of 50% (state share of 50%) would have an FMAP of 54.90%. If the state share were further reduced by 6%, the state would receive an additional FMAP increase of 3 points (50 * 0.06 = 3). The state's total FMAP increase would be 7.9 points (4.9 + 3 = 7.9), providing an FMAP of 57.90%. The additional unemployment-related FMAP increase would be based on a state's unemployment rate in the most recent 3-month period for which data are available (except for the first two and last two quarters of the recession adjustment period, for which the 3-month period would be specified) compared to its lowest unemployment rate in any 3-month period beginning on or after January 1, 2006. The criteria would be as follows: unemployment rate increase of at least 1.5 but less than 2.5 percentage points = 6% reduction in state share; unemployment rate increase of at least 2.5 but less than 3.5 percentage points = 12% reduction in state share; unemployment rate increase of at least 3.5 percentage points = 14% reduction in state share. If a state qualifies for the additional unemployment-related FMAP increase and later has a decrease in its unemployment rate, its percentage reduction in state share could not decrease until the fourth quarter of FY2010 (for most states, this corresponds with the first quarter of SFY2011). If a state qualifies for the additional unemployment-related FMAP increase and later has an increase in its unemployment rate, its percentage reduction in state share could increase. The full amount of the temporary FMAP increase would only apply to Medicaid (excluding disproportionate share hospital payments). A portion of the temporary FMAP increase (hold harmless plus 4.9 percentage points) would apply to Title IV-E foster care and adoption assistance. States would be required to maintain their Medicaid eligibility standards, methodologies, and procedures as in effect on July 1, 2008, in order to be eligible for the increase. They would be prohibited from depositing or crediting the additional federal funds paid as a result of the temporary FMAP increase to any reserve or rainy day fund. States would also be required to ensure that local governments do not pay a larger percentage of the state's nonfederal Medicaid expenditures than otherwise would have been required on September 30, 2008. (For more details, see CRS Report RL32950, Medicaid: The Federal Medical Assistance Percentage (FMAP) , by [author name scrubbed] (pdf)). CBO estimated that the FMAP provision in the House-approved version of ARRA would increase federal spending on Medicaid by about $87 billion and on Title IV-E by about $0.8 billion over the five-year period from FY2009-2013. S.Amdt. 570 . Sec. 5001. Temporary Increase of Medicaid FMAP. Similar to the House-passed version, the Senate Finance version would hold all states harmless from any decline in their regular FMAPs. However, it would provide a larger across-the-board increase of 7.6 percentage points and a smaller unemployment-related increase. It would increase spending caps in the territories by 15.2%. As in the House-passed version, the Senate Finance version would calculate the unemployment-related increase as a percentage reduction in the state share. However, the percentage reduction would be applied to the state share after the across-the-board increase of 7.6 percentage points. The Senate Finance version would evaluate states based on the same unemployment data, except that it would not specify the three-month period to be used for the first two and last two quarters of the temporary FMAP increase. The criteria would be as follows: unemployment rate increase of at least 1.5 but less than 2.5 percentage points = 2.5% reduction in state share; increase of at least 2.5 but less than 3.5 percentage points = 4.5% reduction; increase of at least 6.5 percentage points = 6.5% reduction. Similar to the House-passed version, a state's percentage reduction could increase over time as its unemployment rate increases, but it would not be allowed to decrease until the last quarter of FY2010. Unlike the House-passed version, the Senate Finance version would not apply the temporary FMAP increase to expenditures for individuals who are eligible for Medicaid because of an increase in a state's income eligibility standards above what was in effect on July 1, 2008. It would also prohibit states from receiving the temporary increase if they are not in compliance with existing requirements for prompt payment of health care providers under Medicaid, and require them to report to the Secretary of HHS on their compliance with such requirements. Otherwise, the Senate Finance version is similar to the House-passed version. (For more details, see CRS Report RL32950, Medicaid: The Federal Medical Assistance Percentage (FMAP) , by [author name scrubbed] (pdf)). CBO estimated that the FMAP provision in the Senate Finance version of ARRA would increase federal spending on Medicaid by $85.5 billion and on Title IV-E by about $1.2 billion over the five-year period from FY2009-FY2013. H.R. 1 . Sec. 5002. Moratoria on Certain Regulations In 2007 and 2008, the Centers for Medicare and Medicaid Services (CMS), issued seven Medicaid regulations, which generated controversy during the 110 th Congress. To address concerns with the impact of the regulations, several laws passed during the 110 th Congress imposed moratoriums on six of the Medicaid regulations until April 1, 2009 (excluding the rule on outpatient hospital facility and clinic services). The seven Medicaid regulations issued during the most recent Congress covered the following Medicaid areas: Graduate Medical Education, Cost Limit for Public Providers, Rehabilitation Services, Case Management, School-Based Services, Provider Taxes, and Outpatient Hospital Services. Graduate Medical Education. Most states make Medicaid payments to help cover the costs of training new doctors in teaching programs. The proposed rule would have eliminated federal reimbursement for graduate medical education and changed how Medicaid upper payment limits for hospital services were calculated. (For more details, see CRS Report RS22842, Medicaid and Graduate Medical Education , by [author name scrubbed] and [author name scrubbed]). Intergovernmental Transfers. Intergovernmental transfers (IGTs) are used by some states to finance the non-federal share of Medicaid costs. Certain IGTs are specifically allowed for funding the state share of program costs. Some states have instituted programs where the state share of Medicaid spending is paid by hospitals or nursing homes that are public providers, but not units of government, or are units of government, but the state share is returned to the provider sometimes through Medicaid payments. This regulation would have clarified the types of IGTs allowable for financing a portion of Medicaid costs, imposed a limit on Medicaid reimbursement for government-owned hospitals and other institutional providers, and required certain providers to retain all Medicaid reimbursement. (For more details, see CRS Report RS22848, Medicaid Regulation of Governmental Providers , by [author name scrubbed]). Rehabilitation Services. Medicaid rehabilitation services include a full range of treatments designed to reduce physical or mental disability or restore eligible beneficiaries to their best possible functional levels. There has been enough misunderstanding about what Medicaid pays for and what constitutes rehabilitation services that both the executive and legislative branches have addressed this benefit repeatedly. The rehabilitation services proposed rule was intended to define the scope of the rehabilitation benefit and to identify services that could be claimed under Medicaid. (For more details, see CRS Report RL34432, Medicaid Rehabilitation Services , by [author name scrubbed]). Case Management. Case management services assist Medicaid beneficiaries in obtaining needed medical and related services. Targeted case management (TCM) refers to case management for specific beneficiary groups or for individuals who reside in state-designated geographic areas. Similar to rehabilitative services, there has been considerable ambiguity about what services are covered and what is legitimately considered TCM. The case management regulation addressed a provision of the Deficit Reduction Act of 2005 (DRA; P.L. 109-171 ), where Congress added new language to clarify and narrow the case management definition and directed the Secretary of HHS to issue regulations to guide states' claims for matching federal reimbursement for case management. (For more details, see CRS Report RL34426, Medicaid Targeted Case Management (TCM) Benefits , by [author name scrubbed]). School-Based Services. As a condition of accepting funds under the Individuals with Disabilities Education Act ( P.L. 108-446 , IDEA), public schools must provide special education and related services necessary for children with disabilities to benefit from public education. States can finance only a portion of these costs with federal IDEA funds. Medicaid may cover IDEA required health-related services for enrolled children as well as related administrative activities. According to federal investigations and congressional hearings, Medicaid payments to schools have sometimes been improper. To address these problems, CMS issued this regulation that was intended to restrict federal Medicaid payments for school-based administrative activities (e.g., outreach, service coordination, referrals performed by school employees or contractors), and for certain transportation services (e.g., from home to school and back for certain school-age children). (For more details, see CRS Report RS22397, Medicaid and Schools , by [author name scrubbed]). Provider Taxes. States use provider-specific taxes to help finance their share of the Medicaid program. Under these funding methods, states collect funds (through taxes or other means) from providers and pay the money back to those providers as Medicaid payments, and claim the federal matching share of those payments. Once the state share has been subtracted, the federal matching funds may be used to raise provider payment rates, to fund other portions of the Medicaid program, or for other non-Medicaid purposes. Provider taxes must be consistent with federal laws and regulations, which may have been ambiguous or changing. CMS issued a provider tax regulation to address issues related to provider taxes. (For more details, see CRS Report RS22843, Medicaid Provider Taxes , by [author name scrubbed]). Outpatient Hospital Services. Under Medicaid, outpatient hospital (OPH) services are a mandatory benefit for most beneficiaries. OPH services include preventive, diagnostic, therapeutic, rehabilitative, or palliative services provided under the direction of a physician or a dentist in the hospital. These outpatient facilities may be located on or off the hospital campus or in satellite facilities. States use a number of different reimbursement methods for different types of services provided in OPH departments and clinics. CMS issued a regulation intended to limit the definition and scope of Medicaid-covered OPH. Given the moratorium on a related regulation covering cost limits for government providers, CMS excluded from the regulatory language methods for demonstrating compliance with the upper payment limit for Medicaid OPH and clinic services provided in privately operated facilities. (For more details, see CRS Report RS22852, Medicaid and Outpatient Hospital Services , by [author name scrubbed] and [author name scrubbed]). This provision would extend the moratoriums on the first six regulations beyond April 1, 2009, when the moratoriums expire, to July 1, 2009. The regulations covered under the extension would include those regulations that have been under moratoria, including (1) Graduate Medical Education, (2) Cost Limit for Public Providers, (3) Rehabilitative Services, (4) Case Management, (5) School-Based Services, and (6) Provider Taxes. In addition, this provision specifically would prohibit the Health and Human Services Secretary from taking any action until after June 30, 2009 (through regulation, regulatory guidance, use of federal payment audit procedures, or other administrative action, policy, or practice, including Medical Assistance Manual transmittal or state Medicaid director letter) to implement a final regulation covering OPH facilities. CBO's preliminary estimate of the effect of extending the Medicaid moratoria described in the House-approved version of ARRA would be an increase in federal spending of $200 million in FY2009 and the same $200 million increase for the five-year period from FY2009-2013. S.Amdt. 570 had no comparable provision to H.R. 1 . H.R. 1 . Sec. 5003. Transitional Medical Assistance (TMA). States are required to continue Medicaid benefits for certain low-income families who would otherwise lose coverage because of changes in their income. This continuation is called transitional medical assistance (TMA). Federal law permanently requires four months of TMA for families who lose Medicaid eligibility due to increased child or spousal support collections, as well as those who lose eligibility due to an increase in earned income or hours of employment. However, Congress expanded work-related TMA under Section 1925 of the Social Security Act in 1988, requiring states to provide at least six, and up to 12, months of coverage. Since 2001, these work-related TMA requirements have been funded by a series of short-term extensions, most recently through June 30, 2009. (For more details, see CRS Report RL31698, Transitional Medical Assistance (TMA) Under Medicaid , by [author name scrubbed]). The provision would extend work-related TMA under Section 1925 through December 31, 2010. States could opt to treat any reference to a 6-month period (or 6 months) as a reference to a 12-month period (or 12 months) for purposes of the initial eligibility period for work-related TMA, in which case the additional 6-month extension would not apply. States could opt to waive the requirement that a family have received Medicaid in at least three of the last six months in order to qualify. Under the TMA provision, states would be required to collect and submit to the Secretary of Health and Human Services (and make publicly available) information on average monthly enrollment and participation rates for adults and children under work-related TMA, and on the number and percentage of children who become ineligible for work-related TMA and whose eligibility is continued under another Medicaid eligibility category or who are enrolled in the State Children's Health Insurance Program. CBO's preliminary estimate of the fiscal impact of the House-approved version of ARRA was for no spending increase for the TMA extension in FY2009, but a $1.3 billion increase for the five years FY2009-2013. S.Amdt. 570 . Sec. 3101. Extension of Transitional Medical Assistance (TMA). Same as the House-passed version (see H.R. 1 , Sec. 5003, below). CBO estimated that this provision would increase federal spending by $1.3 billion over the FY2009-FY2014 five-year period. H.R. 1 . Sec. 5 004 . Protections for Indians Under Medicaid and CHIP. This provision would specify that no enrollment fee, premium or similar charge, and no deduction, co-payment, cost-sharing, or similar charge shall be imposed against an Indian who receives Medicaid-coverable services or items directly from the Indian Health Service (IHS), an Indian Tribe (IT), Tribal Organization (TO), or Urban Indian Organization (UIO), or through referral under the contract health service. In addition, Medicaid payments due to the IHS, an IT, TO, or UIO, or to a health care provider through referral under the contract health service for providing services to a Medicaid-eligible Indian, could not be reduced by the amount of any enrollment fee, premium or similar charge, as well as any cost-sharing or similar charge that would otherwise be due from an Indian, if such charges were permitted. A rule of construction would specify that nothing in this provision could be construed as restricting the application of any other limitations on the imposition of premiums or cost-sharing that may apply to a Medicaid-enrolled Indian. This language would also add Indians receiving services through Indian entities to the list of individuals exempt from paying premiums or cost-sharing under the DRA option for alternative premiums and cost-sharing under Medicaid. This provision would be effective October 1, 2009. Further, the Indian protection provisions would prohibit consideration of four different classes of property from resources in determining Medicaid eligibility of an Indian. The provision would also apply this new language to SCHIP in the same manner it would apply to Medicaid and provide that certain income, resources, and property would remain exempt from Medicaid estate recovery if they were exempt under Section 1917(b)(3) of the Social Security Act (allowing the Secretary to specify standards for a state hardship waiver of asset criteria) under instructions regarding Indian tribes and Alaskan Native Villages as of April 1, 2003. The Secretary would be permitted to provide additional estate recovery exemptions for Indians under Medicaid. CBO's preliminary estimate of the effect of the Indian protection provisions on federal spending in the House-approved version of ARRA was for no spending increase in FY2009 or for the period FY2009-2013. S.Amdt. 570 . Sec. 3301. Premiums and Cost Sharing Protections Under Medicaid, Eligibility Determinations Under Medicaid and CHIP, and Protection of Certain Indian Property from Medicaid Estate Recovery. This provision is nearly the same as H.R. 1 , Sec. 5004, Protections for Indians Under Medicaid and SCHIP. The only difference is that S.Amdt. 570 does not specify an effective date. H.R. 1 . Sec. 5005 . Consultation on Medicaid and CHIP. The provision would require the Secretary to maintain within CMS a Tribal Technical Advisory Group (TTAG), previously established in accordance with requirements of a charter dated September 30, 2003. The provision also would require that the TTAG include a representative of the UIOs and IHS. The UIO representative would be deemed an elected official of a tribal government for the purposes of applying Section 204(b) of the Unfunded Mandates Reform Act of 1995, which exempts elected tribal officials from the Federal Advisory Committee Act for certain meetings with federal officials. The provision also would require certain states to establish a process for obtaining advice on a regular, on-going basis from designees of Indian Health Providers (IHPs) and UIOs regarding Medicaid law and its direct effects on those entities. Applicable states would include those in which one or more IHPs or UIOs provide health care services. This process must include seeking advice prior to submission of state Medicaid plan amendments, waiver requests, or proposed demonstrations likely to directly affect Indians, IHPs, or UIOs. This process may include appointment of a medical care advisory panel. The advisory panel could include IHP and UIO designees who would provide input to states on their Medicaid plans. These consultation provisions also would apply to SCHIP. Finally, the provision would prohibit construing these amendments as superseding existing advisory committees, working groups, guidance or other advisory procedures established by the Secretary or any state with respect to the provision of health care to Indians. In their preliminary estimate of the impact of the consultation with Indian health programs on federal spending, CBO forecasted less than a $50 million increase in federal outlays for FY2009 and the same $50 million amount for five-year period FY2009-2013 for this provision of the House-approved version of ARRA. S.Amdt. 570 . Sec. 3303. Consultation on Medicaid, CHIP, and Other Health Care Programs Funded Under the Social Security Act Involving Indian Health Programs and Urban Indian Organizations. This provision is comparable to the House-approved provision in H.R. 1 . Both versions would require the Secretary to maintain within CMS a Tribal Technical Advisory Group (TTAG), previously established in accordance with requirements of a charter dated September 30, 2003. The provision also would require that the TTAG include a representative of UIOs and the IHS. The UIO representative would be deemed an elected official of a tribal government for the purposes of applying Section 204(b) of the Unfunded Mandates Reform Act of 1995, which exempts elected tribal officials from the Federal Advisory Committee Act (FACA) for certain meetings with federal officials. Unlike in H.R. 1 , however, under this provision in S.Amdt. 570 , the TTAG would include a representative of a national urban Indian Health organization, rather than a representative of the UIOs. The non-application of FACA would still hold for a representative of a national UIO. CBO has not specifically estimated the effect of this provision on federal spending, but in scoring H.R. 1 , CBO estimated there would be no effect on federal spending either in FY2009 or over five years. H.R. 1 . Sec. 5006 . Temporary Increase in DSH Allotments During Recession . This provision would increase states' FY2009 annual Disproportionate Share Hospital (DSH) allotments by 2.5% above the allotment they would have received in FY2009 (in FY2009, regular and low-DSH allotments increased by 4% over FY2008 allotment levels). In addition, states' DSH allotments in FY2010 would be equal to the FY2009 DSH allotment (with the adjustment) increased by 2.5%. After FY2010, states' annual DSH allotments would return to 100% of the annual DSH allotments as determined under current law. If under this provision states' annual DSH allotments grew at a greater rate than what they would have received without the 2.5% adjustment, then states would receive the higher DSH allotments without the recession adjustment. CBO's preliminary estimate of the financial impact of the temporary DSH allotment increase in the House-approved version of ARRA would be approximately $200 million in FY2009 and FY2010 and $500 million over the five-year period from FY2009-2013. S.Amdt. 570 . Sec. 5002. Extension and Update of Special Rule for Increase of DSH Allotments for Low Income DSH States. Under this provision, states that reported to the Health and Human Services Secretary, as of August 31, 2009, FY2006 total (federal and state) disproportionate share hospital (DSH) allotments of less than 3% of the state's total state plan medical assistance expenditures would receive a special DSH allotments established under the Medicare Modernization Act of 2003 (MMA, P.L. 108-173 ). This provision may affect the number of states that are determined to be low-DSH states since the provision would rely on a different base year than that used under MMA. Under this provision, low-DSH states would receive the following revised DSH allotments: for FY2009, the DSH allotment would be the FY2008 DSH allotment increased by 16%; for FY2010, the DSH allotment would be the FY2009 DSH allotment increased by 16%; for FY2011, for the first quarter (through December 31, 2010), the DSH allotment would be ¼ of the DSH allotment for FY2010 increased by 16%; for FY2011, the remainder of the fiscal year (January 1, 2011-September 30, 2011), the DSH allotment would be ¾ of the FY2010 DSH allotment for each qualified state without the changes contained in this provision; for FY2012, qualified states' DSH allotments would be FY2010 DSH allotment (as if this provision had not been enacted); for FY2013 and subsequent years, qualified states would receive the DSH allotment for the previous fiscal year with an inflation adjustment, as described in the Social Security Act (SSA), Section 1923(f)(5). CBO estimated that the Senate amendment DSH allotment provision would increase federal spending by $400 million over the period from FY2009-2014. S.Amdt. 570 . Sec. 3201. Extension of the Qualifying Individual (QI) Program. This provision would extend the Qualifying Individual (QI) program an additional year from December 2009 to December 2010. Under the Medicare Savings Program (MSP), Medicaid pays Medicare Part B premiums for individuals with income between 120% and 135% of poverty (who otherwise do not qualify for Medicaid). These individuals are called Qualifying Individuals (QIs). Federal spending for the QI program is subject to annual limits. The QI program was recently extended through December 2009. This provision approved by the Senate Committee on Finance would extend the QI program through December 2010 and establish specific funding limits: from January 1, 2010, through September 30, 2010, the total allocation amount would be $412.5 million, and from October 1, 2010, through December 31, 2010, the total allocation amount would be $150 million. CBO estimated that the extension of the QI program would increase federal spending by $550 over the period FY2009-FY2014. H.R. 1 , does not have a comparable provision for QI program extension. S.Amdt. 570 . Sec. 3302. Rules Applicable Under Medicaid and CHIP to Managed Care Entities with Respect to Indian Enrollees and Indian Health Care Providers and Indian Managed Care Entities. Under this provision, Medicaid managed care contracts with Managed Care Entities (MCEs) and Primary Care Case Management (PCCMs) companies would be required to meet conditions to receive Medicaid payments, including MCEs and PCCMs would need to demonstrate that the number of participating Indian health care providers was sufficient to ensure timely access to covered Medicaid managed care services for eligible enrollees, and MCEs and PCCMs would need to agree to pay Indian health care providers (IHPs) at rates equal to the rates negotiated between these organizations and the provider involved, or, if such a rate has not been negotiated, at a rate that is not less than the level and amount of payment which the MCE or PCCM would make for services rendered by a participating non-Indian health care provider. In addition, this provision would specify that MCEs and PCCMs must agree to make prompt payment, as required under Medicaid rules for all providers, to participating Indian health care providers, and states would be prohibited from waiving requirements relating to assurance that payments are consistent with efficiency, economy, and quality. Further, this provision would apply special payment provisions to certain Indian health care providers that are Federally Qualified Health Centers (FQHCs). For non-participating Indian FQHCs that provide covered Medicaid managed care services to Indian MCE enrollees, the MCE must pay a rate equal to the payment that would apply to a participating non-Indian FQHC. When payments to such participating and non-participating providers by an MCE for services rendered to an Indian enrollee with the MCE are less than the rate under the state plan, the state must pay such providers the difference between the rate and the MCE payment. Likewise, if the amount paid to a non-FQHC Indian provider (whether or not the provider participates with the MCE) is less than the rate that applies under the state plan, the state must pay the difference between the applicable rate and the amount paid by MCEs. Under this provision, Indian Medicaid MCEs would be permitted to restrict enrollment to Indians and to members of specific tribes in the same manner as IHPs may restrict the delivery of services to such Indians and tribal members. Finally, the provision would apply specific sections affecting Medicaid to the SCHIP program, including (1) Section 1932(a)(2)(C) in current law regarding enrollment of Indians in Medicaid managed care (e.g., states cannot require Indians to enroll in a MCE unless the entity is the IHS, certain IHPs operated by tribes or tribal organizations, or certain urban IHPs operated by Urban Indian Organizations [UIOs]), and (2) the new Section 1932(h) as described above. H.R. 1 does not include comparable managed care provisions. CBO did not separately estimate the effect of the Sec. 3302 provision on federal spending. S.Amdt. 570 . Sec. 3304. Application of Prompt Pay Requirements to Nursing Facilities. Under this provision, nursing facilities specifically would be listed in the SSA as providers to receive payment for services within 30 days of the receipt of a reimbursement claim. This section of the SSA identifies requirements for state medical assistance programs. Under these requirements, states' Medicaid programs are to reimburse providers for 90% of claims submitted for payment within 30 days of receipt of the claim. Medicaid also is to process and pay 99% of claims within 90 days from the date of receipt of such claims. These requirements allow states additional time to process claims that are inaccurate, incomplete, or otherwise can not be processed. Penalties to states for failing to meet the claims processing requirements are not defined in the SSA. CBO preliminarily estimated the effect of this provision on federal spending would be an increase of $760 million in FY2009 and approximately a $290 million increase from FY2009-FY2014. H.R. 1 does not have a comparable prompt pay requirement to nursing facilities provision. S.Amdt. 570 . Sec. 3305. Period Of Application; Sunset. Under this provision, all provisions under subtitle D—Other Provisions of Title III—Health Insurance Assistance, would sunset at the end of the recession period, December 31, 2010: S.Amdt. 570 . Sec. 3301. Premiums and Cost Sharing Protections Under Medicaid, Eligibility Determinations Under Medicaid and CHIP, and Protection of Certain Indian Property from Medicaid Estate Recovery; S.Amdt. 570 . Sec. 3302. Rules Applicable Under Medicaid and CHIP to Managed Care Entities with Respect to Indian Enrollees and Indian Health Care Providers and Indian Managed Care Entities; S.Amdt. 570 . Sec. 3303. Consultation on Medicaid, CHIP, and Other Health Care Programs Funded Under the Social Security Act Involving Indian Health Programs and Urban Indian Organizations; and S.Amdt. 570 . Sec. 3304. Application of Prompt Pay Requirements to Nursing Facilities. Any Amendments made under S.Amdt. 570 , Title III, Subtitle D, Other Provisions, would be in effect only during the recession period, April 1, 2009-December 31, 2010. After January 1, 2011, Title XIX of the Social Security Act (Medicaid) would be applied, as if subtitle D had not been enacted. H.R. 1 does not have a comparable provision to S.Amdt. 570 's Period of Application; Sunset. S.Amdt. 570 . Sec. 5003. Payment of Medicare Liability to States as a Result of the Special Disability Workload Project. Under this provision, within three months after enactment of this law, the Secretary, in consultation with the Social Security Commissioner, would negotiate an agreement on a payment amount to be made to each state for the Medicare Special Disability Workload (SDW) project. Payments to states would be subject to certain conditions: states would waive the right to file or be a part of any civil action in any federal or state court where payment was sought for liability related to the Medicare SDW project; states would release the federal government from any further claims for reimbursement of state expenditures arising from the SDW project; states that are parties to civil actions in any federal or state court seeking reimbursement for the SDW project, would be ineligible to receive payment under this provision while such action is pending or if it is resolved in a state's favor. In negotiating with states, the Secretary and SSA Commissioner would use the most recent federal data available, including estimates, to determine the amount of payment to be offered to each state that elects to enter into an agreement with the Secretary. The payment methodology would consist of the following factors: the number of SDW cases that were eligible for benefits under Medicare and the month when these cases initially became eligible; the applicable non-federal share of Medicaid expenditures made by states during the period these cases were eligible; and other factors determined appropriate by the Secretary and the SSA Commissioner in consultation with states. However, as a condition of payment under a negotiated agreement for SDW cases, states would not be required to submit individual paid Medicaid claims (data). To make payments to states for the SDW project, $3 billion would be appropriated for FY2009 from money in the treasury not otherwise appropriated. Aggregate payments to states could not exceed $3 billion. Payments to states would be provided within four months from the date of enactment of ARRA. An SDW case would be defined as an individual determined by the SSA Commissioner to have been eligible for benefits under Title II of the SSA for a period during which such benefits were not provided to the individual and who was, during all or part of such period, enrolled in Medicaid. CBO estimated that the Medicare SDW provision would increase federal spending by $3 billion in FY2009, with no effect beyond FY2009. H.R. 1 does not have a provision comparable to S.Amdt. 570 's Payment of Medicare Liability to States as a Result of the Special Disability Workload Project. S.Amdt. 570 . Sec. 5004 Funding for the Department of Health and Human Services Office of the Inspector General. Under this provision, the Health and Human Services Office of the Inspector General (HHS OIG) is to receive $31.25 million to ensure the proper expenditure of federal funds. These funds are appropriated from any money in the Treasury not otherwise appropriated and are available throughout the recession period (defined as October 1, 2008- December 31, 2010). Amounts appropriated under this provision would be available until September 30, 2012, without further appropriation, and would be in addition to any other amounts appropriated or made available to HHSOIG. CBO has not estimated the effect of the OIG funding on federal spending. H.R. 1 does not have a provision comparable to S.Amdt. 570 's Funding for the Department of Health and Human Services Office of the Inspector General. S.Amdt. 570 . Sec. 5005. GAO Study and Report Regarding State Needs During Periods of National Economic Downturn. Under this provision, the Comptroller General of the United States, the Government Accountability Office (GAO), would study the current (on the date of enactment of the legislation) economic recession as well as previous national economic downturns since 1974. GAO would develop recommendations to address states' needs during economic recessions, including the past and projected effects of temporary increases in the federal medical assistance percentage (FMAP) during these recessions. By April 1, 2011, GAO would submit a report to appropriate congressional committees that would include the following: Recommendations for modifying the national economic downturn assistance formula for temporary Medicaid FMAP adjustments (a "countercyclical FMAP," as described in GAO report number, GAO-07-97), to improve the effectiveness of the countercyclical FMAP for addressing states' needs during national economic downturns: what improvements are needed to identify factors to begin and end the application of a countercyclical FMAP; how to adjust the amount of a countercyclical FMAP to account for state and regional variations; and how a countercyclical FMAP could be adjusted to better account for actual Medicaid costs incurred by states during economic recessions. Analysis of the impact on states of recessions, including declines in private health insurance benefits coverage; declines in state revenues; and maintenance and growth of caseloads under Medicaid, SCHIP, or any other publically funded programs that provide health benefits coverage to state residents. CBO has not specifically estimated the effect of the GAO study and report on federal spending. H.R. 1 does not have a comparable provision to S.Amdt. 570 's GAO Study and Report Regarding State Needs During Periods of National Economic Downturn.
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The economy officially was considered in a recession in December 2008, but many forecasters had long recognized the downturn and some believed this economic contraction would be more severe than other post-World War II economic slowdowns. A combination of factors have combined to present policymakers with difficult decisions on how best to stimulate the economy. Troubling instability in the housing and financial services sectors have combined with weak auto manufacturing demand, and high energy costs earlier in the year to slow growth dramatically and force millions into unemployment. With declining tax revenue and increasing costs to provide unemployment and other benefits to unemployed workers, states are considering measures to rein in spending, including restricting Medicaid eligibility and services. Congress is considering legislation aimed at stimulating economic activity in selected industrial sectors to save existing and create new jobs, reduce taxes, invest in future technologies, and fund infrastructure improvements. The House-approved the American Recovery and Reinvestment Act of 2009 (ARRA, H.R. 1) on January 22. ARRA provisions would provide temporary support to families and individuals by providing additional unemployment compensation benefits, short-term access to Medicaid, financial assistance for individuals to maintain their health coverage under provisions in the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), and temporary increases in Medicaid matching rates and disproportionate share hospital allotments. The full House amended and approved H.R. 1 on January 28, 2009. Similar legislation to H.R. 1 was introduced in the Senate (ARRA, S. 350) and referred to the Committee on Finance, among others, where provisions were approved on January 27. [See the Senate Committee on Finance website for S.Amdt. 98 at http://finance.senate.gov/sitepages/leg/LEG%202009/020209%20complete%20legislative%20text%20of%20American%20Recovery%20and%20Reinvestment%20Act.pdf.] An amendment in the nature of a substitute (SAmdt. 570) was offered as a substitute for H.R. 1 and was approved by the full Senate on February 10, 2009. The Senate version of ARRA was referred to a joint Senate and House conference committee. This report describes Medicaid provisions presented under Division B, Title III and Title V, of the House-approved version of the ARRA, and similar provisions in Titles III and V in a Senate Amendment (ARRA, S.Amdt. 570) offered in the nature of a substitute for H.R. 1. Table 1 provides a summary of major provisions in H.R. 1 and S.Amdt. 570. For details on the Conference Agreement's Medicaid provisions, see CRS Report R40223, American Recovery and Reinvestment Act of 2009 (ARRA): Title V, Medicaid Provisions, coordinated by [author name scrubbed].
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The skills, knowledge, and credentials obtained through education are widely believed to be connected to positive occupational and economic outcomes. In recent decades, considerable attention has been devoted to improving educational attainment levels of students with disabilities. Several federal policies have aimed to require educators to pay greater attention to the educational progress and attainment of students with disabilities, and many others provide for a variety of supports with the goal of improving levels of attainment. Data collection efforts have also been launched to allow for better tracking of relevant trends. This report discusses policies aiming to promote educational attainment and examines trends in high school graduation and college enrollment for students with disabilities. It begins with a discussion of the laws related to the education of students with disabilities at the secondary and postsecondary levels. Subsequent sections discuss the existing data on transition-aged students with disabilities, what is currently known about such students, and federal legislation and other factors that may have contributed to changes in students with disabilities' high school graduation rates and postsecondary enrollment over time. The report offers a brief overview of what is currently known about the U.S. population of students with disabilities in secondary and postsecondary education. It focuses on data gathered in conjunction with federal programs and federally funded studies of nationally representative samples of students with disabilities. It does not attempt to provide an overview or review of existing research on transition-aged students with disabilities or to provide an in-depth examination of the differences between the rights of and services afforded to students with disabilities at the secondary and postsecondary levels. The next sections of the report provide an overview of the education and civil rights laws that aim to support students with disabilities as they work toward completing high school and potentially transition into further educational pursuits. The IDEA was originally enacted in 1975 ( P.L. 94-142 ) and was most recently reauthorized in 2004. It is the primary federal act providing for special education and related services for children with disabilities between birth and 21 years old. Approximately 13% of the K-12 student population received IDEA services in the 2013-2014 school year (SY). The IDEA provides states with grants that support the identification, evaluation, and provision of special education services to children with disabilities. States may receive grants under the condition that, among other requirements, they provide each qualifying student with (1) an individualized education program (IEP) outlining the student's goals, and the accommodations, special education, and related services that the school will provide to the student, and (2) a free appropriate public education (FAPE) in the least restrictive environment (LRE). This means specially designed instruction to meet students' needs, provided to the greatest extent possible with their general education peers and at no cost to their families. Beginning with its 1990 reauthorization, the IDEA has required that the IEPs of students who are 16 years old or older contain a statement of transition goals and services. Transition services are defined as: A coordinated set of activities for a child with a disability that— (A) is designed to be within a results-oriented process, that is focused on improving the academic and functional achievement of the child with a disability to facilitate the child's movement from school to post-school activities, including post-secondary education, vocational education, integrated employment (including supported employment), continuing and adult education, adult services, independent living, or community participation; (B) is based on the individual child's needs, taking into account the child's strengths, preferences, and interests; and (C) includes instruction, related services, community experiences, the development of employment and other post-school adult living objectives, and, when appropriate, acquisition of daily living skills and functional vocational evaluation. The 1997 and 2004 amendments to the IDEA have supported students with disabilities graduating with regular diplomas and transitioning to postsecondary education by increasing local education agencies' (LEAs) accountability for improving the performance of students with IEPs, emphasizing students' progress toward meaningful educational and postsecondary goals in the IEP process, and requiring states to develop IDEA performance goals and indicators, including dropout and graduation rates, and to report to the Secretary of Education (the Secretary) and the public on the progress of the state and of students with disabilities in the state toward these indicators at least every two years. The ESEA was originally enacted in 1965 (20 U.S.C. 6301 et seq.). It was most recently reauthorized by the Every Student Succeeds Act (ESSA; P.L. 114-95 ) in 2015. The ESEA is the largest source of federal aid to K-12 education, supporting educational and related services for low-achieving and other students attending elementary and secondary schools with high concentrations of students from low-income families. The largest grant program in the ESEA is Title I-A. There are a number of educational accountability requirements that states, LEAs, and schools must meet to receive Title I-A funds. For example, amendments to the ESEA enacted under the No Child Left Behind Act of 2001(NCLB; P.L. 107-110 ) included several educational accountability provisions that aimed to promote the educational progress of all students in schools served. These provisions have subsequently been amended through the ESSA. Over half of public elementary and secondary schools receive Title I-A funds. While students with disabilities benefit from this funding, they are not specifically targeted by it. However, many of the ESEA's educational accountability provisions do require that schools pay particular attention to students with disabilities and likely have an effect on them. For example, when the ESEA was amended through the NCLB in 2001, provisions were adopted requiring states to develop and implement a state accountability system to ensure that schools and LEAs made progress with respect to student achievement. Under the NCLB provisions, student progress was not only systematically measured and monitored for the broad population of K-12 students served under the ESEA but also for specific subgroups of students, of which "students with disabilities" was one. Under NCLB provisions, student proficiency in relation to academic performance standards was regularly tracked in selected subject areas, as were high school graduation rates. The NCLB contained high-stakes accountability provisions featuring varied consequences for schools in which a sufficient percentage of students or subgroups of students, such as students with disabilities, failed to make sufficient academic progress in relation to the academic achievement and high school graduation standards. The accountability provisions of the NCLB, and those in place after the ESEA was amended through the ESSA, emphasize holding all students and all subgroups of students (including students with disabilities) to the same standards and levels of academic achievement, and closing gaps between subgroups of students. To comply with these accountability provisions, schools and school districts are required to pay specific attention to the academic progress and graduation rates of students with disabilities. The HEA was originally enacted in 1965 (P.L. 89-329). It was most recently reauthorized in 2008 by the Higher Education Opportunity Act (HEOA; P.L. 110-315 ) in 2008, which authorized appropriations for most HEA programs through FY2014. Funding is still being provided for HEA programs through appropriations acts. The HEA authorizes student financial aid programs that help students and their families meet the costs of attending postsecondary institutions, a series of targeted grant programs that assist students transitioning into postsecondary education, and grants that support program and institutional development at some colleges and universities. While students with disabilities benefit from many of the HEA's student financial aid programs, the programs that specifically target support and assistance to students with disabilities are the TRIO Student Support Services (SSS) program and Comprehensive Transition and Postsecondary (CTP) programs for students with intellectual disabilities. The TRIO SSS program served over 200,000 students through grants to over 1,000 projects in SY2015-2016. The program, originally enacted in 1992 through amendments to the HEA, provides support services to primarily low-income first generation college students with the aim of improving their retention, graduation rates, financial and economic literacy, and transfers from two-year to four-year schools. TRIO SSS programs are also intended to foster an institutional climate supportive of potentially disconnected students. These include students with disabilities, students who are limited English proficient, students from groups that are traditionally underrepresented in postsecondary education, students who are homeless children and youths, and students who are in foster care or aging out of the foster care system. Under the TRIO SSS program, the U.S. Department of Education (ED) makes competitive grants to Institutions of Higher Education (IHEs) and combinations of IHEs. Grantees must provide statutorily defined services to an approved number of participants. At least two-thirds of participants must be either students with disabilities or low-income, first-generation college students. The remaining one-third of participants must be low-income students, students with disabilities, or first-generation college students. Also, at least one-third of the participating students with disabilities must be low-income. The CTP programs for students with intellectual disabilities served approximately 1,000 students through grants to 66 institutions in SY2015-2016. The programs, enacted through the HEOA, provide transition support for students with intellectual disabilities. Under provisions in the HEA, CTP programs for students with intellectual disabilities are not required to lead to a recognized credential (e.g., bachelor's or associate's degree, certificate) or adhere to the same durational requirements that regular postsecondary programs must meet (e.g., a certain number of credit-bearing clock hours). Instead, CTP programs require students with intellectual disabilities to receive curriculum advising, participate at least part-time in courses or training with students who do not have intellectual disabilities, and prepare for gainful employment. In addition to the education laws that fund programs for students with disabilities, there are two civil rights laws that protect them in secondary and postsecondary education from discrimination based on their disabilities: Section 504 of the Rehabilitation Act ( P.L. 93-112 ) and the Americans with Disabilities Act of 1990 (ADA; 42 U.S.C. §12101 et seq.). Section 504 prohibits discrimination on the basis of a disability by protecting the rights of people with disabilities to access programs receiving federal funding. Section 504 also provides for accommodations such as extended time on tests for students with learning disabilities, accessible classrooms for students with orthopedic impairments, and large print or braille materials for students who are visually impaired. These accommodations are available at all levels of schooling—preschool to postsecondary—in schools that receive any federal funding. All children with disabilities attending K-12 public schools who are served under Section 504 are entitled to a FAPE and an individualized accommodations plan, often called a "504 plan." At the postsecondary level, Section 504 requires IHEs to provide students with disabilities with appropriate academic adjustments and equitable access to educational programs and facilities. ED's Office for Civil Rights (OCR) reported that in SY2011-2012, more than 6 million K-12 students were served under the IDEA, and slightly less than three-quarters of a million K-12 students were served under Section 504. This means approximately 89% of children with disabilities served by K-12 public schools are served under the IDEA and approximately 11% of students with disabilities served by K-12 public schools are served solely by Section 504. At the postsecondary level, however, the IDEA no longer applies to students with disabilities; instead, all students with disabilities attending IHEs that receive federal funding are protected by Section 504. Most IHEs have a 504 coordinator or a disabled student services (DSS) office on campus that coordinates accommodations such as extended time on tests, early course registration, and physical accommodations and access to campus facilities for students with disabilities. The Americans with Disabilities Act of 1990, most recently amended by the ADA Amendments Act of 2008 (together, ADA), includes a conforming amendment to the Rehabilitation Act that broadens the meaning of the term "disability" in both the ADA and Section 504 to protect people who have or are regarded as having a physical or mental disability that impacts one or more major life activities. The ADA provides broad nondiscrimination protection in employment, public services, public accommodations and services operated by private entities, transportation, and telecommunications for individuals with disabilities. The ADA states that its purpose is "to provide a clear and comprehensive national mandate for the elimination of discrimination against individuals with disabilities." In 2008, in response to Supreme Court and lower court decisions that narrowly interpreted the term " disability , " Congress passed the ADA Amendments Act to, among other things, "carry out the ADA's objectives of providing 'a clear and comprehensive national mandate for the elimination of discrimination' and 'clear, strong, consistent, enforceable standards addressing discrimination' by reinstating a broad scope of protection to be available under the ADA." Both Section 504 and the ADA require that educational institutions at all levels provide equal access for people with disabilities. The ADA extends the requirements of Section 504 from only institutions receiving federal financial assistance to all institutions, with some exceptions for institutions controlled by religious organizations. The ADA impacts schools from pre-K to postsecondary because it extends the rights of people with disabilities to access facilities and receive accommodations, allowing them to participate in the activities of both public and private institutions. Federal data on students with disabilities transitioning from secondary to postsecondary education include both data reported from public high schools to ED, and federally funded studies and datasets examining students with disabilities transitioning from secondary to postsecondary education and enrolled in postsecondary education. This section will examine what is currently known about transition-aged students with disabilities from federal data, and the limitations of that data. As displayed in Figure 1 , the percentage of students with disabilities graduating with a regular high school diploma has increased substantially since SY1995-1996, when ED revised and expanded the categories of special education exiting data it tracked to those in use today. The rise in high school diploma attainment among high school-aged students receiving special education and related services, from less than 30% in the mid-1990s to over 70% two decades later, was mirrored by a decline in the dropout rate among secondary school-aged students served under the IDEA, from a high of nearly 46% in the mid-1990s to 18% in SY2014-2015. Currently, states report annually to ED the number of students ages 14 to 21 served under the IDEA who graduated from high school with a regular diploma during the past school year. To be included in the reported data, students with disabilities must graduate with a regular diploma, meaning they must meet the same academic standards required for students without disabilities. Students who receive certificates of attendance/completion, general educational development credentials (GED), or alternative degrees that are not fully aligned with the state's academic standards are not included in the data on students with disabilities graduating with a regular high school diploma. ED data on the averaged freshman graduation rate (AFGR), a measure of the percentage of all public school students who attain a regular high school diploma within four years of starting 9 th grade for the first time, has been collected as part of the data reporting requirements of the ESEA for decades. From SY1995-1996 through SY2014-2015, the AFGR increased from 71% to 83%. Recently, in addition to AFGR data for the general population of high school students, ED has begun releasing a more precise estimate called a four-year adjusted cohort graduation rate (ACGR). Because ACGRs use more precise student-level data, they can track the graduation rates of a variety of cohorts, including students with disabilities. The ACGR data on students with disabilities is comparable to the ACGR data used to examine the outcomes of all students in a particular cohort year (beginning in 9 th grade or the first year of high school). A four-year ACGR for students with disabilities has only been available for comparison to the general ACGR since SY2013-2014. In the two available years of comparison ACGR data shown in Figure 2 , the ACGR for students with disabilities increased more than the ACGR for the general student population (1.5% vs. 0.9%) from SY2013-2014 through SY2014-2015, but it remained nearly 20 percentage points lower overall. The exiting data on students with disabilities who graduate with a regular diploma shown in Figure 1 provides a more complete picture of the population of secondary students served by the IDEA, because it reports on all students with IEPs that graduate with a regular diploma whether they do so in four, five, six, or seven years. However, the ACGR data on students with disabilities shown in Figure 2 allows the graduation rates of students with and without disabilities to be compared. Further data on the two ACGR groups would be needed to determine any trends in their relative graduation rates. When the IDEA's original predecessor legislation was first reauthorized in 1983, Congress requested that ED conduct a national longitudinal study of youth with disabilities from ages 13 to 21 as they transitioned from high school to adult life to determine how they fared in terms of education, employment, and independent living. The result was the first National Longitudinal Transition Study (NLTS), a five-year study beginning in SY1985-1986 that tracked a nationally representative sample of more than 8,000 students representing each of the federal disabilities categories. The NLTS showed that secondary school-aged students with disabilities were more likely to be male, poor, and minorities than were their general education peers. It also showed that transition-aged students with disabilities often dropped out of or exited high school without attaining a regular diploma; had inconsistent access to transition planning; and often received insubstantial transition planning, which rarely included postsecondary education among students' transition goals, when planning was made available. In contrast to the original NLTS's finding that fewer than one in four 12 th graders reported postsecondary education as a goal, the National Longitudinal Transition Study-2 (NLTS2), which began 15 years after the first NLTS, found that more than four out of five secondary school-aged students with disabilities who had transition plans named postsecondary education as a primary post-high school goal. In addition, the NLTS2 found that a majority of secondary school-aged students with disabilities (60%) continued on to postsecondary education within eight years of leaving high school, and most of them began postsecondary studies within a year of leaving high school. The NLTS2 also found the following for postsecondary students with disabilities: They enrolled most frequently in two-year programs or community colleges (44%). They also enrolled in vocational, business, or technical schools (32%), and four-year colleges or universities (19%). They usually enrolled in postsecondary education programs on a consistent (77%), full-time (71%) basis, where they were working toward a diploma or certificate (90%). They were likely to stop self-identifying as disabled once in postsecondary education. A majority (63%) of students who had been identified as having disabilities by their secondary schools no longer considered themselves to have a disability by the time they transitioned to postsecondary school. Only 28% of postsecondary students continued to identify as students with disabilities and disclosed their disabilities to their IHEs, as required to receive accommodations or supports at the postsecondary level, and fewer than one in five students (19%) received accommodations for their disability from an IHE. When postsecondary students did request assistance because of their disabilities, they received a range of accommodations and supports from their schools, the most common of which was additional time to complete tests (79%). The NLTS2 findings generalize to students with disabilities nationally, but they are only representative of students in the early 2000s. The NLTS2 allows insight into the outcomes of students with disabilities transitioning from high school to postsecondary life that could not be arrived at through cross-sectional data such as high school graduation and college enrollment rates. However, because the study's sample is nationally representative of secondary students circa 2000, the NLTS2 results cannot be assumed to reflect the postsecondary outcomes of the current national population of young adults with disabilities. A new NLTS study began in 2012. Once it has collected additional waves of data, the NLTS 2012 will begin to provide some insight into the characteristics, experiences, and outcomes of a more recent nationally representative sample of students with disabilities transitioning from high school to postsecondary education and life. Until then, examining the NLTS2 findings along with more recent data on high school graduation and college enrollment rates helps to form a more accurate picture of students with disabilities currently transitioning between secondary and postsecondary education. The National Postsecondary Student Aid Study (NPSAS) is a federal study focused primarily on student aid at IHEs. However, the NPSAS also includes a survey designed to be nationally representative of students attending Title IV postsecondary institutions, which among other subjects asks students whether they have a disability. In the most recent administration of the NPSAS (SY2011-2012), 11% of undergraduates and 5% of post-baccalaureate students reported having a disability. Male and female undergraduates reported having disabilities at statistically similar rates. Other student characteristics such as veteran status, age, and dependency status showed significant differences between undergraduates who reported having a disability and those who did not. The largest of these differences was between the percentage of veterans (21%) and nonveterans (11%) reporting a disability. The percentage reporting a disability was also higher among older students: 16% among undergraduates age 30 and over compared to 11% among 24 to 29 year olds and 9% among 15 to 23 year olds. The results of NPSAS data collection cannot be compared across years because of changes in the relevant survey questions posed to students to determine if they had a disability and in the number and types of disabilities students were asked about across different administrations of the NPSAS. In addition, the use of students self-identifying as disabled on a survey is fundamentally different and more likely to result in lower reported rates of disability than data tracked by schools or pulled from student records. For example, the increase in postsecondary students self-identifying as disabled as they grow older may reflect more about the reluctance of students who have recently exited high school special education programs to adopt the disability label in their new postsecondary institution than it does about actual increases in the number of disabilities among older undergraduate students. High school graduation and college enrollment have increased considerably for all students in recent decades. The increased rates of students with disabilities graduating from high school with a regular diploma and continuing on to postsecondary education may be part of the trends seen in the general population of transition-aged students. The appeal of higher earnings or self-sufficiency may be a factor in the increasing educational attainment of students with and without disabilities. Relatedly, the increase in unemployment among 16 to 24 year olds in the years immediately after the 2007-2009 recession may have factored both in declining high school dropout rates and in increasing postsecondary enrollment rates during those years. In addition, changes in the postsecondary landscape, such as increased access to non-selective two-year and less than two-year programs, may have encouraged more students to pursue postsecondary education. In addition to the potential factors impacting the overall population of transition-aged students, several congressional actions may have contributed specifically to the increasing percentages of students with disabilities graduating from high school with a regular diploma ( Figure 1 ) and enrolling in postsecondary education. P.L. 101-476 (IDEA; 1990) introduced requirements that all students' IEPs contain a statement of needed transition services by the time those students turn 16 years old, and that the students be invited to attend and participate in all IEP meetings where their transition goals are discussed. P.L. 101-476 marked the first time that IEP teams were required to set goals for what students would do in their postsecondary lives and determine the services needed to help them attain those goals. P.L. 101-476 also included two new disability categories: autism and traumatic brain injury (TBI). Both categories have grown significantly in terms of raw numbers and the percentage of students with disabilities served, with the growth in the autism category being particularly pronounced. Autism is now the fourth largest category of children served under the IDEA, accounting for nearly 10% of all children with IEPs. According to ED data, more than two-thirds of students with autism (68%) and three-quarters of students with TBI (75%) graduated from high school with a regular diploma in SY2014-2015. P.L. 105-17 (IDEA; 1997) required children with IEPs to participate in statewide assessments and the general education curriculum. The bill required all students' IEPs to relate their IEP programming to their achievement in the general education curriculum. In addition, under this act states were required to establish performance goals and indicators for students with IEPs and include students with IEPs in statewide assessments and alternative assessments. P.L. 107-110 (NCLB; 2001) required states to implement accountability systems tracking the academic progress of different subgroups of students, including students with disabilities, toward meeting state developed educational standards. The NCLB contained high-stakes accountability provisions, which emphasized holding all students, including students with disabilities, to the same standards; closing gaps between different groups of students; and expecting all students to reach proficiency in reading and mathematics. The NCLB's accountability provisions required that specific attention be paid to academic progress and graduation rates of students with disabilities. P.L. 108-446 (IDEA; 2004) increased accountability requirements by revising state performance goals and requiring that students with disabilities be included in all state and district-wide assessments, including assessments required under the ESEA. In addition to the TRIO SSS program and CTP programs for students with intellectual disabilities, established in earlier amendments to the HEA, the HEOA established a new competitive CTP grant program, which operates on a limited scale, called Model Transition Programs for Students with Intellectual Disabilities into Higher Education (TPSID). TPSID grants fund IHEs in partnering with one or more LEAs and create model transition programs from secondary to postsecondary education for students with intellectual disabilities.
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In recent decades, many federal policies have attempted to help prepare students with disabilities to complete high school and to continue into postsecondary education. Corollary interest has arisen in being able to track the progress being made toward achieving these aims. This report offers a brief overview of what is currently known about the U.S. population of students with disabilities as they advance through secondary education and into postsecondary education. It devotes particular attention to high school graduation trends and data on postsecondary enrollment. Within the limitations of available data, some of the noteworthy information presented in the report includes the following: Roughly 70% of high-school aged students receiving services under the Individuals with Disabilities Education Act (IDEA), the primary federal act providing services to students with disabilities in elementary and secondary schools, graduated with a regular high school diploma in the 2014-2015 school year (SY), up substantially from the 27% receiving regular diplomas nearly 20 years earlier. A different measure of graduation rates, the four-year adjusted cohort graduation rate (ACGR), which captures those graduating within four years of entering high school, suggests that in SY2014-2015 roughly 65% of students with disabilities graduated high school within that time frame, compared to approximately 82% of the total population of students. Data on post-high school experiences of a nationally representative sample of 13 to 16 year old students receiving special education services in 2000 (who were followed for eight years through the National Longitudinal Transition Study-2) found that 60% enrolled in postsecondary education within eight years of leaving high school; two-year postsecondary programs were the most common destination. More recent data from the National Postsecondary Student Aid Study, examining a nationally representative sample of all students enrolled in postsecondary institutions in SY2011-2012, indicates that roughly 11% of all undergraduates and 5% of all post-baccalaureate students self-identify as having a disability, with higher percentages among older undergraduate students (16%) and veterans (21%); however, there are many known limitations associated with self-reported data of this nature.
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On October 21, 1998, President Clinton signed into law H.R. 4112 , the FY1999 Legislative BranchAppropriations bill ( P.L. 105-275 ). The actcontains $2.350 billion, a 2.7% increase over the FY1998 appropriation of $2.288 billion. Also on October 21, the President signed into law an omnibus consolidated and emergency supplemental appropriations bill that contains FY1999 emergencyfunding of $223.7 million for legislative branch activities. These funds were made available to three legislativeentities to cover expenses associated with theYear-2000 conversion of "information technology systems" ($16.9 million), to the Capitol Police Board forenhanced security of the Capitol complex and theLibrary of Congress ($106.8 million), and to the Architect of the Capitol for expenses of "planning, engineering,design, and construction" of a Capitol VisitorCenter ($100 million). On June 25, 1998, the House passed H.R. 4112 by a vote of 235-179. (1) The bill provided $1.8 billion, excluding fundsfor Senate internal activitiesand Senate activities funded in the Architect's budget. H.R. 4112 was a 1.68% increase over the FY1998comparable appropriation of $1.77billion. (2) Earlier, on June 23, the HouseCommittee on Appropriations reported H.R. 4112 ( H.Rept. 105-595 ). (3) On July 21, the Senate passed its version of H.R. 4112 , as amended, by a vote of 90-9. H.R. 4112 , as passed by the Senate, provided$1.6 billion for FY1999, excluding funds for House internal activities and House activities funded in the Architectof the Capitol's budget. This figurerepresented a 3.5 % increase over the FY1998 comparable appropriation of $1.5 billion. (4) Earlier, on June 5, 1998, the Senate Committeeon Appropriationsreported S. 2137 ( S.Rept. 105-204 ). (5) Conferees met and approved a final bill on October 18, and the House Appropriations Committee issued the conference report on October 22 ( H.Rept. 105-734 ).The House adopted the report on September 24, by a vote of 356-65; the Senate adopted it the following day, byvoice vote. In April 1998, both houses passed, and President Clinton signed into law, an FY1998 supplemental appropriations bill ( P.L. 105-174 ; H.R. 3579 )that provides $20 million for a perimeter security plan for the Capitol, Senate office buildings, and adjacent grounds,and $7.5 million to begin repair of theCapitol dome. Since the late 1970s, the legislative branch appropriations bill has been divided into two titles. Title I,Congressional Operations, contains budget authorities foractivities directly serving Congress. Included in this title are the budgets of the House, the Senate, Joint Items (jointHouse and Senate activities), theCongressional Budget Office, the Architect of the Capitol (except Library of Congress buildings and grounds), theCongressional Research Service within theLibrary of Congress, and congressional printing and binding done by the Government Printing Office. Title II, Related Agencies, contains budgets for activities not directly supporting Congress. Included in this title are the budgets of the Botanic Garden, Library ofCongress (except the Congressional Research Service), the Library buildings and grounds within the Architect ofthe Capitol, the Government Printing Office(except congressional printing and binding costs), and the General Accounting Office. Periodically since FY1978,the legislative bill has also contained additionaltitles for such purposes as capital improvements and special one-time functions. Title I budget authority was 70% of the total appropriation of $2.288 billion in the FY1998 Legislative Branch Appropriation Act. (6) Title II budget authority was30% of the total appropriation. In addition, there are legislative budget authorities that are not included in the annuallegislative branch appropriations act orsupplemental appropriations acts. These include permanent budget authorities, trust fund budget authorities, andother budget authorities. (7) Budget authorities appropriated permanently are available as the result of previously enacted legislation and do not require annual action. (8) Tables providingbudget authorities in recent bills appear at the end of this report. Trust funds are monies held in accounts that are credited with collections from specific sources earmarked by law for a defined purpose. Trust funds do not appearin the annual legislative branch bill since they are not budget authority. They are included in the U.S.Budget either as budget receipts or offsetting collections. (9) The Budget also shows some non-legislative entities within the legislative branch budget. These entities are funded in other appropriations bills. Thesenon-legislative entities are placed within the legislative budget section by the Office of Management and Budgetfor bookkeeping purposes. (10) Table 1. Status of Legislative Branch Appropriations, FY1999,H.R. 4112 a The Senate version was marked up by the full Committee on Appropriations. Submission of the FY1999 Budget Estimates. In February 1998, President Clinton submitted his FY1999budget of $2.263 billion for legislative activities funded in the legislative branch appropriations bill. This figure wassubsequently amended by individuallegislative branch agencies to $2.467 billion. (11) As amended, the request represented an increase of $218 million, or 9.7%, over the FY1998 appropriation of$2.249 billion, (12) before the FY1998 supplementaland a Government Printing Office transfer. The proposed FY1999 budget provided for an additional 122 FTEstaff positions (13) in the legislative branch (excluding the Senate). The number of FTEs would have been increased by 0.5%, from 23,045 to 23,166. (14) Consideration in the Senate. The Senate considered H.R. 4112 on July 17, 20, and July 21, whenit was passed, as amended. As passed, the bill contained $1.6 billion, excluding funds for House internal activitiesand House activities funded in the Architect ofthe Capitol's (AOCs) budget. This figure represented a 3.5% increase over the FY1998 comparable appropriationof $1.5 billion. (15) Among other provisions, theSenate bill: Appropriated 4.4% less than the FY1999 budget estimate, a decrease of $72.4 million. The FY1999 estimate was $1.657 billion; theFY1999 Senate bill was $1.59 billion; Appropriated a 3.5% increase, or $53.7 million, over the FY1998 budget. The FY1998 level is $1.5 billion; the FY1999 version was $1.59billion; Contained additional funds, mostly for employee cost-of-living pay adjustments and associated costs of those adjustments (3.1% of the total3.4% increase); (16) and, Provided for a 1.8% increase in the Senate's housekeeping budget, from $461.1 million in FY1998 to $469.4 million inFY1999. Five amendments were adopted by the Senate on July 20. These amendments contained language: (1) Amending the House bill to include appropriations for Senate internal operations and Senate activities funded under the Architect of the Capitol in H.R. 4112 ; (2) Increasing the appropriation for general expenses of the Capitol Police by $220,000 (from $6,077,000 to $6,297,000); (3) Creating a separate appropriations subaccount for the Committee on Appropriations, under the account, "Salaries, Officers, and Employees," deletingappropriations for the committee previously contained in the account, "Contingent Expenses of the Senate,"subaccount, "Inquiries and Investigations;" (4) Amending Title IV of the Senate bill establishing a Trade Deficit Review Commission; and, (5) Requiring certain legislative branch officials to submit to Congress lists of activities to be performed under their jurisdictions during FY2000, including thoseactivities "not inherently governmental functions." (17) Before passage on July 21, the Senate agreed, by a vote of 83-16, to invoke cloture, closing further debate on H.R. 4112 , as amended. Subsequently,an amendment to make reports of the Congressional Research Service available to the public on the Internet wasruled out of order as being non-germane whencloture was invoked. Earlier, on June 4, the Senate Committee on Appropriations marked up and ordered its version reported. On June 5, the committee reported S. 2137 . (18) Consideration in the House. On June 25, the House passed H.R. 4112 , by a vote of 235-179. (19) H.R. 4112 provided $1.8 billion, excluding funds for Senate internal activities and Senate activities fundedin the AOC's budget. Among other provisions, the House bill: Provided $1.8 billion, which is 1.68% over the FY1998 comparable appropriation of $1.77 billion. (20) The majority of the increase is formandatory cost-of-living pay adjustments and related costs; Provided an actual decrease of 0.52% from the FY1998 funding level, when allowing for inflation (based on a projected Consumer PriceIndex increase of 2.2%); Eliminated 438 FTE positions from the legislative branch; Made possible staff cuts, in addition to the 438 FTE reduction, by authorizing staff buy-outs by the Architect of the Capitol and theGovernment Printing Office; Was a 6.7% decrease from the FY1999 budget request; and, Was $555.3 million below the 302(b) allocation established by the House Committee on Appropriations. Two amendments were agreed to on the House floor: Providing that $100,000 of the amount appropriated for the item, House Office Buildings, within the heading, "Architect of the Capitol,"subheading, "Capitol Buildings and Grounds," be made available for House waste recycling programs (voice vote);and Mandating the establishment of an energy conservation plan by the Architect of the Capitol for all facilities administered by Congress (voicevote). Earlier, on June 18, the House Committee on Appropriations marked up and ordered its version reported, subsequent to markup by the House Subcommittee onLegislative Branch Appropriations on June 10. The full committee reported H.R. 4112 on June 23. (21) Three amendments were adopted in the full committee markup of June 18, none of which required new funds: They were (1) report language restating that theCongressional Budget Office be impartial and independent from political pressure (Representative David Obey);(2) language directing that Members beauthorized to make monthly payments to each employee to subsidize his/her transportation (Representative StenyHoyer); (22) and (3) report language thatencourages artwork in the Capitol to more fully represent women's contributions to society (Representative MarcyKaptur). (23) Consideration in Conference Committee. On September 18, 1998, conferees met and agreed to $2.350 million,a 2.7% increase over FY1998's $2.288 billion. Allowing for inflation, the increase is +0.5%. Among the agreements made in conference were: An increase in funding of 12.2% for the U.S. Capitol Police, from $74.1 million in FY1998 to $83.1 million in FY1999. The FYl999 figureincludes funds for 1,251 FTEs and funds of $2.4 million for pay parity, including night differentials, and $1.7million for an adjustment to the longevity schedule,subject to approval by the Committee on House Oversight and the Senate Committee on Rules andAdministration; Additional appropriations for the General Accounting Office (GAO) program changes including funds for 50 FTEs and language byconferees that they expected at least one-third of the program changes funding increase to be used "to supportinformation technology (IT) work, particularly insupport of issues related to the Year 2000 computing crisis." (24) Conferees directed that those funds in excess of those required for the additional FTEs beallocated to program contract support and directed the comptroller general to account for the use of these additionalfunds, including the number of FTEs and theamount of these additional funds used to acquire contract services; and, Deletion of a provision in the Senate bill containing funds for a Trade Deficit Review Commission. FY1998 Supplemental Appropriations Bill. On April 30, 1998, both houses agreed to the conference report on H.R. 3579 , an FY1998 supplemental appropriation bill, which provides $20 million for a perimeter securityplan for the Capitol building, Senateoffice buildings, and adjacent grounds, and $7.5 million to begin repairs on the Capitol dome. H.R. 3579 wassigned into law ( P.L. 105-174 ) on May1, 1998. The act also provides $270,300 for gratuities to the widows and heirs of two deceased House Members. With the supplemental appropriations, the totalappropriation for FY1998 legislative branch activities is $2.288 billion. (25) FY1999 Emergency Supplemental Appropriations. On October 21, the President signed into law an omnibusconsolidated and emergency supplemental appropriations bill with $223.7 million for legislative branch activities( P.L. 105-277 ). The act contained $16.9 millionfor expenses of Year-2000 conversion of "information technology systems" with $5.5 million for the Senate, $6.4million for the House, and $5 million for theGeneral Accounting Office to use for other legislative entities, except the Senate and House. In addition, the actcontained $106.8 million for securityenhancement of the Capitol complex and the Library of Congress by the Capitol Police Board, and $100 millionfor expenses of "planning, engineering, design,and construction" of a Capitol Visitor Center. Among the main issues that drove consideration of the FY1998 supplemental and the FY1999 legislative branchappropriations bill were the following. What additional staff and funds might be necessary to ensure that Congress makes its computers Year-2000compliant? Should U.S. Capitol Police pay be comparable to other public sector police? How much should funding be increased for security enhancement for the Capitol, other congressionalbuildings, and adjacent grounds? How much should be appropriated for the Architect of the Capitol's request to undertake variousimprovements to theCapitol? What are the appropriations needs for technology development, including online information, electronicdocument printing, and continueddevelopment of a legislative information system? What should be the funding levels for the congressional support agencies, including the GovernmentPrinting Office, the CongressionalBudget Office, the Library of Congress (including the Congressional Research Service), and the General AccountingOffice? The effort in recent years to trim the legislative budget also continued during consideration of the FY1999 budget in the House and Senate Subcommittees onLegislative Branch Appropriations. During opening remarks at hearings on the FY1999 budget, Chairman James Walsh of the House Subcommittee on Legislative Branch Appropriations indicated atight budget, stating that he "fully expects reductions along the way" from the pending budget requests. (26) Chairman Walsh continued by saying that hewouldgive "careful scrutiny" to agency funding requests and expects the subcommittee to be "responsible" and "ensurethat the legislative branch contributes its fairshare to balancing the budget." (27) During the first day of hearings by the Senate Subcommittee on Legislative Branch Appropriations on the FY1999 budget, Chairman Robert Bennett indicated that"while most agencies acted responsibly in submitting their FY1999 requests, cuts in the requests were likely." (28) He emphasized that one of the top priorities wasto ensure that Congress and its support agencies reprogram their computers, or purchase new ones, to meet theYear-2000 compliance deadline. (29) ChairmanBennett listed Capitol Hill security among other priorities of the Senate subcommittee. Each spring, as members of the House and Senate Subcommittees on Legislative Branch Appropriations consider funding requests from legislative agencies, theyare faced with three primary options: to maintain a flat budget; to provide a modest increase; or to approve a budgetdecrease. Statements by subcommitteemembers during February 1998 indicated support for a possible modest increase in the FY1999 budget. (30) The bills initially approved by the House andSenatecontained modest increases over the FY1998 appropriations level. The Senate bill provided for a 3.4% increase,but when accounting for the projected inflationfor 1998, the increase was 1.2%. The House bill, although providing a 1.68% increase, was actually a decrease of0.52% when accounting for inflation. The conference version of the FY1999 bill provides for a 2.7% increase over FY1998, from $2.288 billion to $2.359 billion. Allowing for inflation, the increaseis +0.5%. The legislative branch budget is not particularly large. It is 0.15% of the total federal budget. Flat Budget. A "flat" budget typically provides new funds for mandatory cost increases, but denies additionalfunding requests. (31) A flat budget can be difficultto achieve due to a number of factors, such as ongoing and emergency maintenance and repair needs and thecontinuing effort to keep legislative branch operations current with recent technology developments. Modest Increase Proposals. The versions of the FY1999 Legislative Branch Appropriations passed by theHouse and Senate allowed for modest increases, the option Congress also chose in FY1998. The conference versionof the FY1999 bill provides for a 2.7%increase over FY1998, from $2.288 billion to $2.350 billion. The increase is smaller when allowing for inflation,or +0.5%. Conferees on the FY1998 legislative funding bill approved a 2.1% increase in current dollars, from $2.203 billion in FY1997 to $2.249 billion in FY1998. Allowing for inflation, the FY1998 conference figures were actually a 0.1% decrease, from $2.251 billion inFY1997 to $2.249 billion in FY1998. Conferees onthe FY1998 bill compromised with the Senate version of the FY1998 bill that provided for a 3.5% increase, and theHouse version that provided for a 0.6%reduction, both percentages based on current dollars. Budget Decrease. Although the House passed an FY1999 legislative branch appropriations bill that contained a1.68% increase over FY1998, the bill was actually a reduction of 0.52% when accounting for inflation. As passed,the House bill contained an increase from$1.775 billion in FY1998 to $1.805 billion in FY1999. (32) Allowing for inflation, the bill contained a decrease from $1.814 billion in FY1998 to $1.805billion inFY1999. Even though the FY1999 conference version contains an increase, from $2.288 billion to $2.350 billion,the increase is small, +0.5%, when accountingfor inflation. Congress has approved other budget decreases in recent years. In the FY1996 bill, Congress approved a budget decrease of 8.2%, from an FY1995 budget of$2.378 billion to an FY1996 budget of $2.184 billion. When accounting for inflation, the decrease was 10.8%, from$2.559 billion in FY1995 to $2.283 billion inFY1996. Although the FY1997 and FY1998 bills contained increases, when adjusted for inflation, both billscontained actual decreases in the legislative budget. The FY1997 bill contained a 0.87% increase, from $2.184 billion in FY1996 to $2.203 billion in FY1997. Whenadjusted for inflation, the FY1997 bill was a1.4% decrease, from $2.283 in FY1996 to $2.251 in FY1997. The FY1998 budget contained a 2.1% increase overthe FY1997 budget, from $2.203 billion inFY1997 to $2.249 in FY1998, prior to an FY1998 subsequent supplemental and transfer. Allowing for inflation,the change was a decrease of 0.1%, from $2.251in FY1997 to $2.249 in FY1998. Congress continued to work toward ensuring that the legislative branch and other federal agencies achieve the computer reprogramming and other changesnecessary by the Year 2000. This is necessary because most computers use a two-digit year system for purposes ofdating. The system assumes "19" to be the firsttwo digits of any year. If not reprogrammed, computers using the two-digit system would interpret the year 2000- 00 - as 1900. The result would be data errorsand possibly computer shutdowns. Conferees included additional funding for GAO program changes including appropriations for 50 FTEs and inserted language that they expected at least one-thirdof the program funding increase to be used "to support information technology (IT) work, particularly in supportof issues related to the Year 2000 computingcrisis." (33) Conferees directed that those funds inexcess of those required for the additional FTEs be allocated to program contract support and directed thecomptroller general to account on the use of these additional funds, including the number of FTEs and the amountof the increase used to acquire contract services. In addition, Congress made available an emergency supplemental of $16.9 million to the legislative branch for Year-2000 compliance efforts in the FY1999Omnibus Consolidated and Emergency Supplemental Appropriations Act ( P.L. 105-277 ). The act makes availablethe following amounts: $5.5 million for theSenate, under Contingent Expenses of the Senate, Sergeant at Arms and Doorkeeper of the Senate; $6.4 millionfor the House of Representatives, under Salariesand Expenses, Salaries, Officers, and Employees; and $5 million for GAO, under Information Technology Systemsand Related Expenses. Funds transferred toGAO are to be available for transfer from GAO to "all entities of the legislative branch other than the 'Senate' and'House of Representatives' covered by theLegislative Branch Appropriations Act, 1998." Transfers by GAO are subject to approval of the House and SenateCommittees on Appropriations. According to the Office of Management and Budget (OMB), it will cost the federal government, including Congress, an estimated $2.3 billion to make theadjustments necessary. This figure is considered by Representative Steve Horn, chair of the House subcommitteewith oversight responsibility for the Year-2000conversion, to be underestimated. Mr. Horn believes the figure does not include all expected labor costs forcomputer programmers. (34) Some computer programs in the legislative branch have already encountered problems in projecting payroll data beyond 1999. The House Information ResourcesOffice and the House Inspector General estimate the cost of Year-2000 compliance in the House of Representativesalone to be somewhere between $1.2 millionand $3.6 million. During his opening remarks at the Senate hearings on the FY1999 legislative budget, Chairman Robert Bennett stated that dealing with the Year-2000 issue was ofmajor importance to the Senate Subcommittee on Legislative Branch Appropriations. (35) He noted that ramifications of the problem and possible solutions hadalready been discussed at five separate hearings held by the Subcommittee on Financial Services and Technology,which he also chairs. He stated that thelegislative branch needs to be as aggressive with its own compliance program as it is with these programs in theexecutive branch. Chairman Bennett's concern is shared by others in the Senate. In April 1998, the Senate majority and minority leaders announced the creation of a specialcongressional committee to oversee Year-2000 conversion efforts in the executive and judicial branches. TheSpecial Committee on the Year 2000 TechnologyProblem, chaired by Senator Bennett, will hold hearings on the progress of federal agencies in achieving Year-2000compliance. The select committee's budget is$575,000 through February 29, 2000. Funds for the committee are included in the FY1999 bill under the Senateaccount, "Contingent Fund of the Senate,"subaccount, "Inquiries and Investigations." In late June, the Speaker of the House also announced the establishment of a House task force on the Year-2000 problem as a counterpart to the Senate specialcommittee. The House task force consists of members of the Subcommittee on Government Management,Information, and Technology of the Committee onGovernment Reform and Oversight, and the Subcommittee on Technology of the Committee on Science. House and Senate Legislative Information Systems. Both houses continued to take steps to reduce duplicationof effort in tracking legislation, to upgrade legislative tracking systems, and to ensure that Congress achieves theneeded reprogramming of its computers by theYear 2000. (36) To accomplish this, both the Houseand Senate are continuing to develop information systems that create and manage legislative data files. The House legislative information system is administered by the House Clerk. The Senate system is administered by the Secretary of the Senate. The Clerk andthe Secretary continue to exchange information on development of their own systems. They also report, respectively,to the House Oversight Committee and theSenate Committee on Rules and Administration on their recommendations regarding the electronic transfer oflegislative data between the two houses and amongall legislative entities. In support of development of the House and Senate legislative information systems, both houses directed the Congressional Research Service (CRS) to develop adata retrieval system with the technical support of the Library of Congress (LOC) and in collaboration with otherlegislative branch agencies, such as theGovernment Printing Office (GPO). (37) The Houseand Senate legislative information systems are expected to reduce duplication through the consolidation ofexisting legislative retrieval systems. House System. In FY1996, the Committee on House Oversight directed the Clerk to study methods forincreasing the capacity of the House to manage its documents electronically. The committee further directed thatsubsequent proposals of the Clerk relating toprinting be coordinated with the GPO and all House entities requiring printing and storage of documents. The House requested funding for FY1999 to continue its development of a document management system (DMS) to provide a method for creating, tracking,editing, sharing, printing, and transmitting documents. The Clerk estimates that the DMS will be completed withinthe next three years. (38) The primary purpose ofthe system, according to the Clerk, is to allow the House to move from its dependency on the GPO for preparing,printing, and distributing House documents. (39) The DMS is designed to automate document preparation (using a PC-based system for print-on-demand and for electronic transmission to GPO). Althoughdevelopment of the DMS is costly, the Clerk anticipates savings to the House of approximately $1 million annuallyin administrative and printing costs. (40) The House report on the FY1998 legislative branch appropriations bill contained language that directed the Congressional Research Service and the Library ofCongress to: "....devote sufficient resources to accomplish the following during FY1998: (1) provide comparable functionality so that legacy retrieval systems can be retired by 12/31/98; (2) improve productivity of congressional staff by making significant progress in implementing previouslyidentified high-priority functionality; and (3) improve the accuracy, usability, and timeliness of legislative information retrieval." (41) Senate System. The FY1997 Legislative Branch Appropriations Act directed the Secretary of the Senate todevelop a legislative information system for the Senate. (42) The act directed that the Secretary oversee the system's development and implementation, subjecttoapproval of the Senate Committee on Rules and Administration. Like the House, the Senate system provides ameans for creating, tracking, editing, sharing, andtransmitting documents. The FY1997 Legislative Branch Appropriations Act funded the Senate system by authorizing the Secretary to use unspent FY1995 monies previously appropriatedfor the Office of the Secretary of the Senate; it remains available until September 30, 1998. The Secretary was alsoauthorized to transfer to the development ofthe legislative information system, as he determined to be necessary, funds already appropriated to the Secretary'soffice for the purpose of development of theSenate financial management system. Access to additional funding was provided in the FY1997 supplemental appropriations bill signed into law ( P.L. 105-18 ; H.R. 1871 ) June 12, 1997.The act authorized the transfer of $5 million from other Senate accounts to the account, "Contingent Expenses ofthe Senate," under the subaccount, "Secretary ofthe Senate." (43) The money was made availablethrough September 30, 2000. The transfer is subject to approval of the Senate Committee on Appropriations. Funds for FY1999 are pending in the Senate-passed FY1999 appropriations bill that contains funds for the Officeof the Secretary of the Senate. The FY1999 Senate report on S. 2137 also contains language that directs the Congressional Research Service and the Library "to continue theirdevelopment of the legislative retrieval system for the Senate and provide an annual report outlining the strategicobjective of this initiative." (44) Anticipated Expenses of Internet Use. The costs of technology advancement, including increased use of theInternet, in the House and Senate are factors in the pending budgets. Throughout the United States, Internet usagemore than doubled between July 1995 andMarch 1997. (45) It is anticipated that Congresscould face significant expenses in meeting the demands of increased constituent communications via the Internet. House Internet usage increased by 800% in 1995 and 1996. (46) Some expect, however, that some technology expenses will be offset by savings. For example, during the 105th Congress, savings to the House are estimated to bealmost $750,000, primarily for operating expenses and maintenance fees, accomplished by (1) replacement of anIBM mainframe by an IBM CMOS EnterpriseService (estimated $505,000 savings), and (2) installation of a "higher-reliability, direct-access storage system"(estimated $246,500 savings). (47) House Committee Funding. H.R. 4112 provides $109.1 million for House committee funding inFY1999. Committee funds were authorized by the House early in 1997, when the House adopted a resolutionauthorizing committee funds essentially for the 105thCongress (calendar years 1997 and 1998). Part of these funds were provided in the FY1998 legislative branchappropriations act. (48) The FY1998 act provided$104.5 million for committee funding. A funding resolution was reported by the Committee on House Oversight on March 17, 1997 ( H.Res. 91 ). The resolution authorized $178.3 millionfor House committees (except for the Appropriations Committee). On March 20, the rule for consideration of theresolution was defeated on the floor. On March 21, 1997, the House agreed to an interim funding authorization through May 2, 1997 ( H.Res. 91 ). The interim measure was neededbecause the existing funding authorization was set to expire on March 31, 1997. With one exception, this interimresolution continued funding for committees atthe same level as that for committees in January through March 1997 (9% per month of the previous session's totalfunding). The measure authorized funds forthe Committee on Government Reform and Oversight for the entire 105th Congress, and provided thecommittee a budget of $20 million. A new committee funding resolution was ordered reported by the Committee on House Oversight on April 28, 1997 ( H.Res. 129 ). The resolutionauthorized $177.8 million for committees, except Government Reform and Oversight and Appropriations, for the105th Congress. This figure was $550,740 lessthan the original funding resolution the House voted against considering on March 20. On May 1, 1997, the Houseagreed to the new resolution by a vote of262-157. The House Committee on Appropriations was authorized and appropriated $18.3 million for FY1998. The committee is authorized and appropriated $19.4million in H.R. 4112 , the FY1999 legislative branch appropriations bill. Senate Committee Funding. H.R. 4112 provides $66.8 million for Senate committee operations inFY1999. Senate committee funds were authorized early in 1997 by the Senate ( S.Res. 54 ). The Senatefunding resolution, adopted on February 13,1997, provided for 100% funding of the recurring 1996 level, plus cost-of-living adjustments for specific purposesand time periods. (49) The resolution was amended on March 11 to provide an additional $4.35 million for the Committee on Governmental Affairs. (50) Funds were providedfor aspecial investigation of illegal or improper actions related to the 1996 elections. A point of debate was whether toinclude both illegal and improper activities astargets of the committee's investigation. Ultimately, both were included. Abolishment of the Joint Committee on Printing. Conferees agreed to $352,000 for the Joint Committee onPrinting until December 31, 1998, when it is anticipated the joint committee will be terminated. Matters under itsjurisdiction are to be transferred to theCommittee on House Oversight, the Senate Committee on Rules and Administration, and the public printer. Thisfigure represents $202,000, which wascontained in both the House and Senate versions, plus $150,000 to be available to the Committee on HouseOversight. The $150,000 appropriation is availableonly if the legislative and oversight responsibilities of the joint committee are transferred by law to the Committeeon House Oversight and other committees andcongressional entities. (51) In such case, the $150,000is to be transferred to the Committee on House Oversight, effective January 1, 1999. The Senate provided $150,000 in additional funds to the Senate Committee on Rules and Administration for the committee's costs in assuming responsibilities ofthe joint committee. (52) The additional funding isincluded in FY1999 funding of $66.8 million for Senate committee expenses in the Senate subaccount,"Inquiries and Investigations," within the account, "Contingent Expenses of the Senate." Capitol Complex Security Plan. In his FY1999 budget proposal submitted to Congress, the Architect of theCapitol requested $20 million for a perimeter security plan for the Capitol, Senate office buildings, and adjacentgrounds. Congress then approved the funds aspart of an FY1998 supplemental appropriations bill ( H.R. 3579 ). The appropriation was included by theSenate in its version of H.R. 3579 . (53) On April 30, both houses agreed to theconference report on this bill, and it was signed into law ( P.L. 105-174 ) May 1, 1998. The relevant provision ofthe law reads: For necessary expenses for the design, installation and maintenance of the Capitol Square Perimeter Security Plan,$20,000,000 (of which not to exceed $4,000,000 shall be transferred upon request of the Capitol Police Board tothe Capitol Police Board, "Capitol Police,""General Expenses," for physical security measures associated with the Capitol Square perimeter security plan) toremain available until expended, subject to thereview and approval by the appropriate House and Senate authorities. The appropriation for the perimeter security plan was based on recommendations that a task force on perimeter security prepared for the U.S. Capitol PoliceBoard. Of the $20 million, $4 million would go to the Capitol Police Board, upon the Board's request, for expensesof design and installation of security systemsthat are part of the perimeter plan. The report of the Senate Appropriations Committee on S. 1768 states that funds provided for perimeter security of Senate office buildings are subjectto review and approval of the Senate Committee on Appropriations and the Senate Committee on Rules andAdministration. (54) It further states that fundsprovided for perimeter security of the "Capitol Square" are subject to review and approval of the House Committeeon Appropriations, Committee on HouseOversight, Speaker of the House, Senate Committee on Rules and Administration, and Senate Committee onAppropriations. A perimeter security plan for the Capitol Building and its grounds was approved by the Senate Committee on Rules and Administration October 30, 1997,subsequent to its presentation by the Architect of the Capitol at a committee hearing a month earlier. The same day,the Rules Committee also approved a plan thatauthorized the Architect of the Capitol to move forward immediately in developing perimeter security for the areaimmediately adjacent to the three Senate officebuildings. The House Oversight Committee would approve any plan for the House office buildings, while the HouseAppropriations Committee would make thefinal determination of funds needed. Funding for the Capitol Police Board. Conferees agreed to a 12.2% funding increase for the U.S. CapitolPolice, from $74.1 million in FY1998 to $83.1 million in FY1999. The conference figure contained $2.4 millionfor pay parity, including night differentials, and$1.7 million for an adjustment to the longevity schedule, pending approval by the Committee on House Oversightand the Senate Committee on Rules andAdministration. The FY1999 emergency supplemental ( P.L. 105-277 ) contained an additional $106.8 million forsecurity enhancements. The FY1999 budget estimate for the Capitol Police Board was $84.5 million, $76.1 million for Capitol Police salaries and benefits, and $8.4 million for generalexpenses. The House version contained $76.4 million for the Board, or 3.1% more than FY1998's budget of $74.1million. The Senate version contained $80.6million, an 8.8% increase over FY1998. The Senate increase reflected, among other activities, personnel costs, and$700,000 for expenses of computer andtelecommunications functions, which in prior years were funded in the budget of the Sergeant at Arms. Conferees agreed to a funding level allowing for 1,251 FTEs, as proposed by the Senate. The House proposed an FTE level of 1,247. Presently, the number ofauthorized FTE positions is 1,247 (596 on the House payroll and 651 on the Senate payroll). During consideration of its bill on July 20, the Senate adopted an amendment increasing by $220,000 the appropriation for general expenses of the Capitol Police. Capitol Visitor Center. Congress approved an emergency supplemental appropriation of $100 million to theArchitect of the Capitol "for planning, engineering, design, and construction" of a Capitol Visitor Center. Thefunding was added in conference on H.R. 4328 , FY1999 Omnibus Consolidated and Emergency Supplemental Appropriations bill ( P.L. 105-277 ). The conference report stipulates thatappropriated funds for the project are to be supplemented by private funds. The estimated cost of the Capitolvisitors' center is $125 million. (55) Constructionofthe visitors' center, conferees reasoned, would "provide greater security for all persons working in or visiting theUnited States Capitol and a more convenientplace in which to learn of the work of Congress." (56) The appropriation culminated nearly a decade of discussions over the feasibility of construction of a center. Planning for a center began in 1991, when theArchitect of the Capitol received approval to use previously appropriated security enhancement funds for the center'sconceptual planning and design. (57) Hearings on a proposal to construct a visitor center were held by the Senate Committee on Rules and Administration early in 1997. During the hearings, thecommittee chairman expressed concern over congressional encouragement of private funding at the same time thatCongress was investigating 1996 campaignfund-raising activities. (58) On September 24, 1998,the committee held hearings on Capitol complex security, including the role of the proposed visitor center. Architect of the Capitol Budget. The House and Senate consider separate budget requests for operations of theArchitect of the Capitol (AOC) in direct support of Congress, funded in Title I of the bill. They consider separaterequests because the House budget request doesnot include Senate office building funding (which is determined by the Senate), and the Senate considers the budgetrequest without House office building funding(which is determined by the House). The total Title I budget request, including House and Senate office buildings,was $221.9 million. Of the $221.9 million, $87.5 million was requested for costs of 228 projects identified by the AOC for a 5-year capital improvement program. More than $34million of the $87.5 million request is for projects requested by congressional agencies, for example, the Capitolpolice and Library of Congress. Two major expenses in the $87.5 million request were for the perimeter security project ($20 million) and for the beginning of repairs to the Capitol dome ($7.5million). (59) Subsequently, in April 1998, bothhouses approved the funds for the perimeter security project and Capitol dome repairs in H.R. 3579 , aspart of an FY1998 supplemental appropriations bill. H.R. 3579 was signed into law ( P.L. 105-174 ) May 1,1998. As considered by the Senate, the AOC's request was $178.1 million, which was a 14.5 % increase over the FY1998 appropriation of $155.5 million. The Senatebill provided $142.6 million, a decrease of 8.3% from FY1998. This figure did not include appropriations for HouseOffice Buildings of $42.1 million, asdetermined by the House. Including House Office Buildings appropriations, the Senate figure would have been$184.7 million. Senate report language directed the AOC to complete a master design project plan for the Capitol Police before the Senate provides funds for the design projectsrequested by the AOC. (60) A total of $475,000 wasmade available to the AOC for this purpose. The Senate report further directed that the master plan includeconsideration of the security needs of the Capitol complex, and the bill provided $1 million for security designs bythe U.S. Capitol Police. An additional $750,000 was provided to the AOC for support of the physical security installations of the Capitol Police Board. Language also requires the AOCto report to the Senate Committee on Rules and Administration and the Senate Committee on Appropriations onexpenses in support of Capitol police securityupgrades. As considered by the House, the AOC's request was $166.1 million, an 18.6% increase from FY1998. The House bill recommended $121.4 million, a decrease of13.3% from FY1998. The figure did not include appropriations for Senate Office Buildings of $53.6 million, asdetermined by the Senate. Including SenateOffice Buildings appropriations, the House figure would have been $175.1 million. House report language recognized that the AOC had limited funds to deal with a maintenance backlog and directed the AOC to use energy savings and excessproceeds from recycling to help defray costs in eliminating the backlog. In addition, the House report directed theHouse inspector general to audit thefire-protection systems in House office buildings and the House side of the Capitol, and to report his findings to theHouse Committee on Appropriations and theCommittee on House Oversight. Conferees agreed to $184.2 million and to House report language directing the AOC "to develop an energy savings plan that will use proceeds to fund neededmaintenance." (61) Conferees also agreed to increasethe appropriation for the Capitol Power Plant by $4 million for replacement of the East plant chiller. Conferees accepted House language appropriating $1 million to the AOC for the Congressional Cemetery, authorizing the AOC to make a grant of $1 million tothe National Trust for Historic Preservation. This grant is to be matched by private donations to the Associationfor the Preservation of Historic CongressionalCemetery to provide for the perpetual maintenance of the cemetery. Congress provided additional funding of $100 million to the Architect of the Capitol "for planning, engineering, design, and construction of a Capitol visitorcenter." The Architect is "directed not to expend any funds for this project without an obligation plan approved bythe House and Senate Committees onAppropriations which shall specify the purpose and amount of anticipated obligations." Congressional Budget Office Budget. Both the House and Senate versions contained an FY1999 budget of$25.7 million for the Congressional Budget Office (CBO), a 3.5% increase over the FY1998 budget of $24.8million. The proposals were 1.0% less than theFY1999 budget request of $25.9 million. Conferees agreed with House report language directing that, effective October 1, 1998, CBO post on the Internet CBO papers and publications that can be madeavailable to the public, along with an index, and language directing House Information Resources and the Libraryof Congress "to work out an acceptable solutionto the computer needs of CBO." (62) House report language also required that CBO provide information to Congress (63) on CBO revenue estimates (generated by tax law changes and the rate ofcapitalgains tax), assumptions underlying these estimates, explanations of any discrepancies between estimates andrevenues, explanations for deviations or more than$25 billion between the estimated federal deficit or surplus and the actual budget deficit or surplus (for last 5 years),and comparison of first year discretionaryoutlay estimates and expenditures for accounts in specified budget functions, among other information required. This information was to be submitted by August30, 1998, or the date the FY1999 Legislative Branch Appropriations Bill conference convenes (which wasSeptember 18, 1998), whichever was earlier. General Accounting Office Budget. Conferees agreed to $354.3 million for the General Accounting Office(GAO), a 4.4% increase over FY1998. The Senate bill contained $363.3 million, a 7.0% increase over the FY1998funding level and a 1.2% decrease from theFY1999 request. The House bill contained $354.2 million, a 4.3% increase over FY1998 and a 3.7% decrease fromthe FY1999 request. Conferees included additional funding for GAO program changes including appropriations for 50 FTEs and inserted language that they expected at least one-thirdof the program funding increase to be used "to support information technology (IT) work, particularly in supportof issues related to the Year 2000 computingcrisis." (64) Conferees directed that those funds inexcess of those required for the additional FTEs be allocated to program contract support and directed thecomptroller general to account on the use of these additional funds, including the number of FTEs and the amountof the increase used to acquire contract services. The Senate bill contained funding for 3,300 FTEs, including funds for 75 of the 100 additional FTEs requested by GAO. The House bill recommended funds for3,225 FTEs and stated its intention that GAO consider the use of consultants and other experts to provide the agencywith greater flexibility and to avoid aninternal, full-time staff increase. Additional funds were made available to GAO in H.R. 4328 , FY1999 Omnibus Consolidated and Emergency Supplemental Appropriations Act ( P.L.105-277 ) to assist the legislative branch in meeting the Year-2000 compliance. Conferees on the bill agreed to $5million to be available for transfer from GAO to"all entities of the legislative branch other than the 'Senate' and 'House of Representatives covered by the LegislativeBranch Appropriations Act, 1998." Transfersby GAO are subject to approval of the House and Senate Committees on Appropriations. Library of Congress Budget. The Library of Congress's budget is included in both titles of the legislativeappropriations bill. Title I includes funds for the Congressional Research Service (CRS), while Title II includesfunds for the majority of activities of the Libraryof Congress. Congressional Research Service. Conferees agreed to $67.1 million for FY1999. The House bill contained a 3.2%increase, to $66.7 million from an FY1998 level of $64.6 million. The Senate bill contained an increase of 5.1%,to $67.9 million. Conferees agreed to Housereport language directing "that the Congressional Research Service should replace departing staff with lower levelprofessionals to even out grade distribution"and that CRS "not increase its full-time equivalent (FTE) employment level above the current level." (65) Library of Congress, Except CRS. Conferees agreed to $296.5 million for FY1999. The House proposal forLibrary operations was $291.7 million, a 3.3% increase over FY1998. The Senate's recommendation of $298.1million was a 5.6% increase. Conferees agreed toSenate report language concerning FTE staff (see below) and directed that appropriations in the bill be spent withinthe LOC's current FTE level. The House bill funded 4,076 FTEs for all Library positions, including CRS, with other positions financed through reimbursable and gift and trust funds. Housereport language noted that the bill did not fund new staff positions and directed the Library to fund any newpositions through attrition or reprogramming. The Senate version contained funds for 4,070 FTEs, decreasing the positions from 4,083. The Senate bill contained funds for 8 FTEs in information technology.Senate report language states that the Library "has, and will continue to be, a significant resource for the Congressin addressing the year 2000 conversion." (66) Anadditional 10 FTEs were included for the succession plan of CRS, along with 13 FTEs for additional securitypersonnel, primarily to operate X-ray machines andmetal detectors at public entrances. Conferees also agreed to Senate language "urging the Library to continue efforts to assist the Senate with a legislative information retrieval system;" (67) providing$2 million to digitize materials from the LOC collections relating to "Meeting the Frontiers - Russia and Alaska;"and designating that $250,000 be used in thecommemoration of the Lewis and Clark expedition in 2003. Conferees agreed with House report language directing the LOC to determine the extent of its collections security problem. They further directed the LOC todevelop a plan to coordinate all aspects of the Library's interior and exterior physical security by January 15, 1999. The Library is directed to consult with theArchitect of the Capitol and to use the Capitol police as a source of information, and to consult with the Capitolpolice on industry practices. Language in theSenate report encouraged the Library to consult with the Capitol police on external security issues. Conferencelanguage regarding appropriations for Librarybuildings and grounds, funded under the Architect of the Capitol (AOC), directed the AOC to "obtain theconcurrence of the Capitol Police Board in thesubmission of budget requests regarding the physical security of the Library's buildings and grounds." (68) Senate language permanently authorizing the LOC's American Folklife Center was accepted in conference. Additional funds were made available to the Capitol Police Board for Capitol complex and Library of Congress security enhancements in H.R. 4328 ,FY1999 Omnibus Consolidated and Emergency Supplemental Appropriations Act ( P.L. 105-277 ). The conferencereport on H.R. 4328 containslanguage "to allow the transfer of funds to either the Architect of the Capitol or the Library of Congress, based uponplans approved by the Committee on HouseOversight of the House of Representatives, the Committee on Rules and Administration of the Senate, and theHouse and Senate Committees on Appropriations." Government Printing Office Budget. The Government Printing Office (GPO) is funded in both Title I (forcongressional printing and binding) and Title II (for other operations of GPO). For congressional printing andbinding, conferees agreed to the House figure of$74.5 million, an 8.8% decrease over the FY1998 level of $81.7 million. The $81.7 million House FY1998 figureincludes an $11 million transfer from the GPOrevolving fund. Language in the House report stated that the level of funding recommended was based on savingsdue to installation of the direct-to-platetechnology and an FTE level that is about 100 positions below the present ceiling. (69) The Senate bill contained $75.5 million for congressional printing and binding. This was a 6.9% increase overthe FY1998 level used in the Senate report of$70.6 million (which did not include an $11 million transfer). Conferees agreed to an administrative provision inthe House version that authorized up to $11million to be transferred from the GPO revolving fund in its FY1998 budget authority. Conferees also agreed to language in the House report that directed the Clerk of the House, in consultation with the Secretary of the Senate and the public printer,to study the present and future printing needs of the House and Senate to ascertain the most cost-effective printingprogram for House and Senate use. Confereesadded language requesting the Secretary of the Senate to work with the Clerk of the House on the project. Funding for GPO in Title II of the bill is $29.3 million, the House figure, for activities of the Office of the Superintendent of Documents. The Senate recommended $29.6 million. Title II also contains funding from time to time for the GPO revolving fund. Conferees agreed to language in Title II directing GPOto complete assessments, plan for their implementation, and complete action necessary to make the agencyYear-2000 compliant during FY1999. (70) Guide to Determining Legislative Budget Trends. Interpretation of budget trends is determined primarily bythree factors: (1) selection of current or constant dollars to express budget authority (constant dollars reflecting theimpact of inflation); (2) selection of budgetauthority contained in annual appropriations bills, with or without permanent budget authority (permanent budgetauthority not requiring annual approval byCongress); and (3) selection of fiscal years to be compared. Current-dollar data reflect actual budget authority appropriated each year. Constant-dollar data reflect the conversion of actual budget authority into equivalent1998 dollars. For example, Congress appropriated budget authority of $41,793,000 for the Senate in FY1968,excluding permanent budget authority. Convertedinto 1998 dollars, $41,793,000 is $196,955,517. When reviewing the 30-year growth of the Senate budget from FY1968-FY1998 in current dollars, the increase amounts to 1003.0%. In constant dollars, theincrease is 134.1%. The constant-dollar figure indicates budget growth after the effects of inflation are neutralized. Differences also appear based on the choice of fiscal years used to compare budget authority. For example, a comparison of budget growth between FY1968 andFY1998 shows the following changes in total legislative budgets after adjustment for inflation: FY1968-FY1998, +83.0%; FY1972-FY1998, +8.7%; andFY1978-FY1998, -12.3%. (71) Changes in the 1970s significantly affected Congress's budget. Implementation by Congress of the 1970 Legislative Reorganization Act increased the budgetsand staffs of congressional committees and support agencies from FY1971 through FY1978. For example, theincrease in total legislative budget authority,adjusted for inflation, from FY1969 (pre-1970 Reorganization Act) through FY1973 (a year of significantimplementation of the 1970 Reorganization Act) was64.5%. The legislative budget during the 1970s also reflected implementation of the 1974 Congressional Budget and Impoundment Control Act, which created the Houseand Senate Budget Committees and the Congressional Budget Office. Significant funding also began fordevelopment of House and Senate computer capabilities. This growth in the legislative budget stabilized by FY1978 and has remained fairly level since that time. Current Legislative Budget Trends. Between FY1978 and FY1998, the total legislative budget, when adjustedfor inflation, decreased by 12.3%. Budget authority for direct congressional operations in Title I decreased by 6.0%over this time. Throughout the 12 years following FY1978 (FY1979-FY1990), legislative budget funding remained lower than the FY1978 budget authority, when adjusted forinflation. The first increase over the FY1978 budget occurred in FY1991, a 1.1% increase from the FY1978 level. Funding increased again in FY1992 andFY1995 but decreased in FY1993, FY1994, FY1996, and FY1997. The change between FY1994 and FY1998 wasa decrease of 9.4% in total legislative budgetauthority. Using current dollars, the change between FY1994 and FY1998 was an increase of 0.3%. Table 2. Legislative Branch Appropriations, FY1994 to FY1998 (budget authority in billions of currentdollars) a a These figures represent current dollars, exclude permanent budget authorities, and reflect supplementals and rescissions. Permanent budget authorities are notincluded in the annual legislative branch appropriations bill but, rather, are automatically funded annually. Table 3. Legislative Branch Appropriations, FY1999 In H.R.4112 (Regular Annual Appropriations, P.L.105-275) and H.R. 4328 (Emergency Supplemental Appropriations, P.L. 105-277) (in thousandsof current dollars) Sources: Source for columns two through six is Rep. James Walsh, remarks in the House, Congressional Record , daily edition, vol. 144, Sept. 24, 1998, pp.H8549-H8552. In his remarks, Rep. Walsh inserted a table containing FY1998 and FY1999 request, House bill,Senate bill, and conference figures. The FY1998figure includes a supplemental in P.L. 105-174 , May 1, 1998, and a transfer of $11 million. Title III contains generalprovisions and does not contain new budgetauthority. Source for column seven is the House Appropriations Committee. aIncludes an FY1998 supplemental of $270,300 for payments to widows and heirs of deceased Members. b Includes an FY1998 supplemental of $7.5 million to begin Capitol dome repairs, and $20 million for aCapitol perimeter security plan, with $4 million of the$20 million transferable to the Capitol Police Board, upon the board's request. c Includes an $11 million transfer to the Government Printing Office from its revolving fund. dIn addition, the Library of Congress had authority in FY1998 to spend $30.3 million in receipts. e Includes $6 million for the Government Printing Office revolving fund. f The House column in the Congressional Record table on the FY1999 bill does not include $459.4million for Senate internal activities. g.The House column in the Congressional Record table on the FY1999 conference does not includebudget authority of $53.6 million for Senate Office Buildingsfunded under the Architect of the Capitol. h Includes $1 million for the congressional cemetery. I The House figures in the Congressional Record table on the FY1999 conference do not includebudget authorities for internal Senate operations or Senate OfficeBuildings, funded under the Architect of the Capitol. j Includes $5.5 million in emergency supplementals under the Sergeant at Arms for completion of Year-2000computer conversion. k Includes $6.373 million in emergency supplementals under Chief Administration Officer for completion ofYear-2000 computer conversion. l Includes $106.78 million for emergency supplementals for security enhancements under the Capitol PoliceBoard, General Expenses. The total Joint Items figurealso includes $2 million for the Trade Deficit Review Commission. m Includes $100 million in emergency supplementals under the Architect of the Capitol, Capitol Buildings,Salaries and Expenses, and for design andconstruction of a Capitol Visitors' Center. n In FY1999, the Library has authority to spend $28 million in receipts. o Includes $5 million in emergency supplementals under Salaries and Expenses for completion of the Year-2000computer conversion. p Funded under Joint Items for FY1999.. q Includes $223.655 million in emergency supplementals for FY1999. Table 4. Senate Items, FY1999 In H.R. 4112 (Regular Annual Appropriations, P.L. 105-275) andH.R. 4328 (Emergency Supplemental Appropriations, P.L. 105-277) (in thousands of currentdollars) Source: Source for columns two through six is Rep. James Walsh, remarks in the House, Congressional Record , daily edition, vol. 144, Sept. 24, 1998, pp.H8549-H8552. In his remarks, Rep. Walsh inserted a table containing FY1998 and FY1999 request, House bill,Senate bill, and conference figures. Source forcolumn seven is the House Appropriations Committee. a The Senate does not consider budget authority for internal House operations. b Office operations of the Secretary of the Senate also are funded under "Salaries, Officers, and Employees." c Activities of the Office of Sergeant at Arms and Doorkeeper are also funded under "Salaries, Officers, and Employees." d Includes emergency supplementals of $5.5 million for completion of the Year-2000 computer conversion forthe Sergeant at Arms. Table 5. House of Representatives Items, FY1999 In H.R.4112 (Regular Annual Appropriations, P.L.105-275) and H.R. 4328 (Emergency Supplemental Appropriations, P.L. 105-277) (in thousandsof current dollars) Sources : Source for columns two through six is Rep. James Walsh, remarks in the House, Congressional Record , daily edition, vol. 144, Sept. 24, 1998, pp.H8549-H8552. In his remarks, Rep. Walsh inserted a table containing FY1998 and FY1999 request, House bill,Senate bill, and conference figures. Source forcolumn seven is the House Appropriations Committee. a This figure represents an FY1998 supplemental appropriation ( P.L. 105-174 ). b The appropriations bill has two House accounts: (1) Payments to Widows and Heirs of Deceased Membersof Congress and (2) Salaries and Expenses. All theentries that follow Salaries and Expenses fall under that House account, Salaries and Expenses. c This appropriation heading was new in the FY1996 bill. The heading represents a consolidation of (1) theformer heading Members' Clerk Hire; (2) the formerheading Official Mail Costs; and (3) the former subheading Official Expenses of Members, under the headingAllowances and Expenses. d This appropriation heading was new in the FY1996 bill. The heading represents a consolidation of (1) theformer heading Committee Employees; (2) theformer heading Standing Committees, Special and Select; (3) the former heading Committee on Budget (studies);and (4) the former heading Committee onAppropriations (studies and investigations). e The House does not consider budget authority for internal Senate operations. F Includes $6.373 million inemergency supplementals for the ChiefAdministrative Officer for completion of Year-2000 computer conversion. Table 6. Legislative Branch Budget Authority Funded in Annual Appropriations Bills, FY1994-FY1998 (Does not include permanent budget authority; in thousands of current dollars) See notes at end of Table 7. Table 7. Legislative Branch Budget Authority Funded in Annual Appropriations Bills, FY1994-FY1998 (Does not include permanent budget authority; in thousands of constant 1998 dollars) Sources: Budget authorities for FY1994-FY1998 are from the House Appropriations Committee. FY1995 budget authorities reflect rescissions and asupplemental contained in P.L. 104-19 , 109 Stat. 219-221, July 27, 1995, FY1995 Supplemental and RescissionsAct ( H.R. 1944 ). FY1996 budgetauthorities reflect rescissions contained in P.L. 104-28 , Sept. 28, 1996, FY1997 Omnibus ConsolidatedAppropriations Act ( H.R. 3610 ). FY1998budget authorities represent supplementals contained in P.L. 105-174 , May 1, 1998, and an $11 million transfer tothe Government Printing Office (GPO) fromthe GPO revolving fund. Note: FY1994 budget authority reflects rescissions contained in P.L. 103-211 , Feb. 12, 1994, FY1994 Emergency Supplemental Appropriations Act( H.R. 3759 ). Excludes permanent appropriations are (in current dollars, in thousands): FY1994, $329,000; FY1995, $343,000; FY1996, $302,000; FY1997, $325,000; andFY1998, $333,000. Source is the U.S. Budget . Excludes trust funds are (in current dollars, in thousands): FY1994, $6,000; FY1995, $16,000; FY1996,$31,000; FY1997, $29,000. Source is the U.S. Budget. Formula for conversion to constant dollars is as follows: 1998 Consumer Price Index (CPI) number dividedby each year's CPI number multiplied by that year'sbudget authority. The CPI index numbers used were 148.2 (1994), 152.4 (1995), 156.9 (1996), 160.5 (1997), and164.0 (1998 est.). These numbers wereprovided by the Congressional Budget Office. a Prior to FY1978, the Legislative Branch Appropriations Act contained numerous titles. Effective in FY1978,Congress restructured the legislative bill so that itwould "more adequately reflect actual costs of operating the U.S. Congress than has been true in the past years"(H.Rept. 95-450, FY1978 LegislativeAppropriations). As a result, the act was divided into two titles. Title I, Congressional Operations, was establishedto contain appropriations for the actualoperation of Congress. Title II, Related Agencies, was established to contain the budgets for activities notconsidered as providing direct support to Congress. Periodically, the act has contained additional titles for such purposes as Capitol improvements and specialone-time functions, which are not shown as separateentities on these tables. One such example is the initial funding of $48 million for the newly established FederalEmployee Retirement System (FERS) as part ofthe FY1987 Supplemental Appropriations Act. OMB included this budget authority within the affected individuallegislative branch accounts for that year. b FY1996 figures reflect rescissions in the Omnibus Consolidated Appropriations Act, FY1997 ( P.L. 104-208 ,Sept. 28, 1996). Provisions applicable tolegislative branch budget authority in P.L. 104-208 appear in Congressional Record , daily edition, vol.142, Sept. 28, 1996, pp. H11778-H11779. c Grand totals reflect computer rounding and as a result may differ slightly from totals obtained by adding TitlesI and II in this table. CRS Report 97-212(pdf) . Legislative Branch Appropriations for FY1998 , by Paul Dwyer. CRS Report 96-201. Legislative Branch Budget Authority, FY1968-FY1996 , by Paul Dwyer and Lorraine Tong. CRS Report 97-112. Legislative Branch Employment, 1960-1997 , by Paul Dwyer and John Pontius. CRS Report 98-123. Supplemental Appropriations and Rescissions for FY1998, coordinated by [author name scrubbed]. House Committee on Appropriations http://www.house.gov/appropriations Senate Committee on Appropriations http://www.senate.gov/~appropriations/ CRS Appropriations Products Guide http://www.loc.gov/crs/products/apppage.html#la Congressional Budget Office http://www.cbo.gov General Accounting Office http://www.gao.gov Office of Management & Budget http://www.whitehouse.gov/WH/EOP/OMB/html/ombhome.html
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Summary On October 21, 1998, President Clinton signed H.R. 4112 , the FY1999 Legislative Branch Appropriations Bill, into P.L. 105-275 . The act contains$2.350 billion, a 2.7% increase over the FY1998 appropriation of $2.288 billion. Later the same day, the Presidentsigned into law an omnibus appropriations billthat contains FY1999 emergency funding of $223.7 million for legislative branch activities. These funds were madeavailable to cover expenses associated withthe Year-2000 conversion of "information technology systems" ($16.9 million), to the Capitol Police Board forsecurity of the Capitol complex and the Library ofCongress ($106.8 million), and to the Architect of the Capitol for expenses of "planning, engineering, design, andconstruction" of a Capitol Visitor Center ($100million). On June 5, 1998, the Senate Committee on Appropriations reported S. 2137 , its version of the FY1999 legislative branch budget ( S.Rept. 105-204 ). On June 23, the House Committee on Appropriations reported its version, H.R. 4112 ( H.Rept. 105-595 ). OnJune 25, the House passed H.R. 4112 (235-179), after agreeing to two amendments, and, on July 21, the Senate passed H.R. 4112 ,as amended (90-9). Confereesmet and cleared the bill on September 18, and the House Appropriations Committee issued the conference reporton September 22, 1998 ( H.Rept. 105-734 ). TheHouse adopted the report on September 24, by a vote of 356-65, and the Senate adopted it the following day, byvoice vote. Among the issues considered by both houses were the - (1) Number of additional staff and amount of funds necessary to ensure that Congress makes its computers Year-2000 compliant; (2) Funds for additional Capitol complex security, including construction of a Capitol Visitor Center; (3) Level of funding needed for capital improvements requested by the Architect of the Capitol; (4) Pay of the U.S. Capitol Police; (5) Appropriations needed for technology development, including online information, electronic documentprinting, and continued development of a legislativeinformation system; and (6) Funding levels for the congressional support agencies, including the Government Printing Office, theCongressional Budget Office, the Library of Congress(including the Congressional Research Service), and the General Accounting Office. The legislative budget is not particularly large, only 0.15% of the total federal budget. Key Policy Staff Division abbreviations: GOV = Government.
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On September 11, 2009, the White House announced that additional tariffs would be placed on imports of certain Chinese tires for three years under Section 421 of the Trade Act of 1974, 19 U.S.C. §2451, a trade remedy statute aimed at import surges from China. The action was based on earlier findings by the U.S. International Trade Commission (ITC) that Chinese tire imports into the United States were causing market disruption to domestic tire producers. The new tariffs took effect on September 26, 2009. Although six petitions had been filed under Section 421 in the past to remedy surges of other Chinese products and the ITC found that U.S. market disruption existed in four out of six of its Section 421 investigations, this was the first time that a President chose to grant import relief under the statute. Further, while President Obama was authorized to review the tariffs after six months and to modify, reduce, or terminate them, he allowed the tariffs to remain in place as originally imposed. Section 421, which was enacted as one element of an October 2000 statute addressing various issues involving the accession of China to the World Trade Organization (WTO), authorizes the President to impose safeguards—that is, temporary measures such as import surcharges or quotas—on Chinese products in the event that the ITC finds that these imports have resulted in market disruption in the United States. Market disruption occurs under Section 421 if an import surge of a Chinese product is a significant cause of material injury or threat of material injury to the domestic industry producing the like or directly competitive product. China's WTO Accession Protocol permits WTO members to impose safeguards to remedy domestic market disruption caused by imports of Chinese goods until December 2013. This provision is separate from XIX of the General Agreement on Tariffs and Trade 1994 (GATT 1994) and the WTO Agreement on Safeguards, which allow WTO members to respond to injurious import surges generally but on a stricter basis than provided for under China's Accession Protocol. China requested consultations with the United States under the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes on September 14, 2009, and requested a panel on December 21, 2009, claiming that the additional tariffs are inconsistent with U.S. GATT obligations to accord Chinese tires MFN tariff treatment and not to exceed negotiated tariff rates, that the United States imposed tariffs under the special safeguard mechanism in China's WTO Accession Protocol without first attempting to justify them under general GATT and WTO safeguard provisions, and that Section 421 and its application in this case are inconsistent with U.S. obligations under the Protocol. A dispute panel was established in January 2010, with panelists appointed the following March. In a report issued December 13, 2010, the WTO panel rejected all of China's claims. China appealed various panel findings as they related to China's Accession Protocol. In a report circulated September 5, 2011, the WTO Appellate Body upheld the challenged panel determinations and thus U.S. actions under the Protocol. The panel and Appellate Body reports were adopted by the WTO Dispute Settlement Body on October 5, 2011, terminating the dispute. This report discusses WTO safeguards provisions contained in Article XIX of the GATT and the Agreement on Safeguards; the WTO China-specific safeguard and how it differs from pre-existing WTO provisions; authorities and procedures set out in Section 421 of the Trade Act of 1974; the ITC determination and the President's decision to provide relief in the 2009 China tires case; and China's WTO case against the U.S. tire safeguard. Article XIX of the General Agreement on Tariffs and Trade 1994 (GATT 1994) and the WTO Agreement on Safeguards permit WTO members to apply safeguards—that is, to suspend temporarily GATT tariff concessions or other GATT obligations owed other WTO members—in order to remedy serious injury to domestic industries caused by surges of imported products from other WTO member countries. The China-specific safeguard contained in China's WTO Accession Protocol, discussed below, raises the possibility that a WTO member may impose safeguards under the stricter provisions of the GATT and the Safeguards Agreement instead of under the China-specific provision. Safeguard measures are generally authorized under U.S. law in Title II of the Trade Act of 1974, 19 U.S.C. §§2251-2254. Article XIX of the GATT 1994, captioned "Emergency Action on Imports of Particular Products" and referred to as the GATT "escape clause," was intended to provide GATT parties with a means of addressing temporary emergencies that might arise as a result of their GATT commitments to reduce tariffs and adopt other trade liberalizing laws and policies. Article XIX:1(a), which sets out the WTO legal foundation for safeguards, provides as follows: If, as a result of unforeseen developments and of the effect of the obligations incurred by a contracting party [i.e., WTO member] under this Agreement, including tariff concessions, any product is being imported into the territory of that contracting party in such increased quantities and under such conditions as to cause or threaten serious injury to domestic producers in that territory of like or directly competitive products, the contracting party shall be free, in respect of such product, and to the extent and for such time as may be necessary to prevent or remedy such injury, to suspend the obligation in whole or in part. A safeguard may take the form of a tariff surcharge, which involves the suspension of a negotiated tariff concession under Article II of the GATT, or an import quota, which involves the suspension of the obligation in GATT Article XI:1 not to impose quantitative restrictions on imports from other WTO members. Another option is a tariff-rate quota (TRQ), under which a specified volume of goods may be entered under a lower tariff rate, with out-of-quota items subject to higher rates. Article XIX safeguards are to be considered exceptional measures. As explained by the WTO Appellate Body: As part of the context of paragraph 1(a) of Article XIX, we note that the title of Article XIX is: " Emergency Action on Imports of Particular Products ". The words "emergency action" also appear in Article 11.1(a) of the Agreement on Safeguards. We note once again, that Article XIX:(1)(a) requires that a product be imported " in such increased quantities and under such conditions as to cause to threaten serious injury to domestic producers". (emphasis added). Clearly, this is not the language of ordinary events in routine commerce. In our view, the text of Article XIX:1(a) of the GATT 1994, read in its ordinary meaning and in its context, demonstrates that safeguard measures were intended by the drafters of the GATT to be matters out of the ordinary, to be matters of urgency, to be, in short, "emergency actions." And, such "emergency actions" are to be invoked only in situations when, as a result of obligations incurred under the GATT 1994, a member finds itself confronted with developments it had not "foreseen" or "expected" when it incurred that obligation. The remedy that Article XIX:1(a) allows in this situation is temporarily to "suspend the obligation in whole or in part or to withdraw or modify the concession". Thus, Article XIX is clearly, and in every way, an extraordinary remedy. The Agreement on Safeguards expands on Article XIX, providing that safeguards may only be imposed if the importing member has conducted an investigation to determine if the conditions for imposing a safeguard have been met and stating that a WTO member may not "take or seek any emergency action on particular products as set forth in Article XIX of the GATT 1994 unless such action conforms with the provisions of this Article as applied in accordance with this Agreement." It adds that the increased quantities of imports that are a prerequisite of a finding of serious injury may be "absolute or relative to domestic production." The Agreement also sets out requirements for domestic safeguards investigations and for determinations of serious injury made in the course of such investigations. In addition, a WTO member imposing a safeguard is subject to detailed obligations to notify the WTO Committee on Safeguards and the WTO Council on Trade in Goods and to consult with other affected WTO members. Although the Agreement on Safeguards does not contain language requiring the existence of "unforeseen developments," the WTO Appellate Body has determined that the requirement continues to apply. In a 1999 report (which also contains the paragraph quoted above), the Appellate Body found that a safeguard measure must comply with both Article XIX and the Safeguards Agreement, that Uruguay Round negotiators intended that the provisions of the GATT and the provisions of the Safeguards Agreements "would apply cumulatively except to the extent of a conflict between specific provisions," and that, there being no such conflict in this situation, "unforeseen developments" must exist in order to impose a safeguard measure. The "serious injury" standard contained in Article XIX and carried forward in the Safeguards Agreement is defined in the Agreement as meaning "a significant overall impairment in the position of a domestic industry." The WTO Appellate Body has found that this standard is "on its face, very high" or "exacting," particularly when contrasted with the "material injury" standard contained in the WTO Antidumping Agreement, the Agreement on Subsidies and Countervailing Measures, and Article VI of the GATT. According to the Appellate Body, this "much higher standard of injury" is consistent with the object and purpose of the Safeguards Agreement since the application of a safeguard is predicated on the existence of increased import volume and not on "'unfair' trade actions [i.e., dumping or subsidization], as is the case with anti-dumping or countervailing measures." The Safeguards Agreement makes clear that an Article XIX safeguard must be applied on a nondiscriminatory basis, that is, it must be applied to the product at issue regardless of its source. The Agreement also places a time limit on a safeguard measure, providing that it may not be initially applied for more than four years. The safeguard may be extended, however, so long as the full period of application does not exceed eight years. While WTO members may apply quantitative restrictions or quotas under the Safeguards Agreement, they may not "seek, take or maintain any voluntary export restraints, orderly marketing agreements or other similar measures on the export or the import side," whether such actions are taken by a single member or as actions under "agreements arrangements and understandings entered into by two or more members." Article XIX requires that the WTO member intending to impose the safeguard notify the WTO "as far in advance as may be practicable" before doing so and afford the WTO and WTO members having a substantial export interest in the subject product an opportunity to consult on the proposed action. These consultation requirements are expanded upon in the WTO Safeguards Agreement, which requires the member to notify the Committee on Safeguards immediately upon initiating an investigation relating to serious injury or threat as well as at other stages of the process. A member may apply a provisional safeguard in the event of "critical circumstances," that is, "where delay would cause damage which it would be difficult to repair," so long as the member has preliminarily determined that "there is clear evidence that increased imports have caused or are threatening to cause serious injury" and that it has notified the Safeguards Committee. Article 8 of the Safeguards Agreement requires that the member proposing to apply a safeguard measure "endeavour to maintain a substantially equivalent level of concessions and other obligations to that existing under GATT 1994 between it and the exporting members which would be affected by such a measure." To achieve this objective, the members may agree on "any adequate means of trade compensation for the adverse effects of the measures on their trade." GATT Article XIX:3(a) provides that if the importing member and the affected exporting members cannot reach an agreement regarding the safeguard, the importing member is "free to" impose or continue to impose the measure. If the member applies the safeguard, the affected exporting members have a conditional right to suspend "substantially equivalent concessions or other obligations" under the GATT owed that member. The Safeguards Agreement, at Article 8.2, provides that the right to suspend concessions owed the importing member, sometimes referred to as a "rebalancing" of concessions, may be invoked if no agreement is reached within 30 days of WTO consultations between or among the members concerned. If an affected exporting member invokes this right, it must first inform the WTO Council on Trade in Goods of its proposed measure. The member may then suspend concessions no later than 90 days after the safeguard is applied, provided 30 days have lapsed since the Council received the notification of the suspension and the Council has not disapproved (i.e., blocked) the proposed action. Notwithstanding the 90-day limitation described above, Article 8.3 of the Agreement prohibits members from exercising their "right of suspension" for the first three years that a safeguard measure is in effect, provided that the safeguard (1) is taken as a result of an absolute increase in imports and (2) is consistent with the Safeguards Agreement. Absent a mechanism in the Safeguards Agreement for establishing whether a safeguard conforms to the Agreement at this stage, affected WTO members have claimed that the three-year limitation did not apply based on unilateral determinations of WTO-consistency, but, more often, have waited or sought to wait until adverse panel and Appellate Body reports involving another member's safeguard were adopted by the WTO Dispute Settlement Body. Four U.S. safeguards have been successfully challenged in the WTO. Among other findings, the WTO Appellate Body determined that the United States had acted inconsistently with Article XIX of the GATT or the Safeguards Agreement, as the case may be, due to inadequate or improper analysis of one or more of the following: the existence of unforeseen developments, increased imports, serious injury or threat, and causation—that is, whether increased imports had caused or were causing serious injury—including issues related to non-attribution of injury to factors other than increased imports. When a country seeks to accede to the World Trade Organization (WTO), it negotiates its terms of accession both multilaterally with the WTO members as a whole, as well as bilaterally with individual WTO members. Bilateral negotiations involve market access concessions and commitments in goods as well as specific commitments in services. The terms of all bilateral agreements eventually become a part of the country's overall accession agreement with the WTO. In their bilateral negotiations, the United States and China agreed to a temporary China-specific safeguard that could be imposed in the event that import surges of Chinese products occurring after China became a WTO member resulted in material injury to domestic producers. The provision was later included as paragraph 16 of Part I of China's Protocol on Accession to the WTO (Accession Protocol) under the caption "Transitional Product-Specific Safeguard Mechanism." On November 10, 2001, WTO members agreed that China could accede to the WTO on the terms and conditions set out in its Accession Protocol. China became a WTO member 30 days later, on December 11, 2001. The China-specific safeguard provision will terminate 12 years after the date of China's accession, or December 10, 2013. The China-specific safeguard contains both substantive and procedural requirements. It may be invoked by a WTO member "in cases where products of Chinese origin are being imported into the territory of … [the] member in such increased quantities or under such condition as to cause or threaten to cause market disruption to the domestic producers of like or directly competitive products." The Accession Protocol provision defines "market disruption" as occurring: whenever imports of an article, like or directly competitive with an article produced by the domestic industry, are increasing rapidly, either absolutely or relatively, so as to be a significant cause of material injury, or threat of material injury to the domestic industry. In determining whether market disruption exists, the importing member must look at "objective factors," including import volume, the effect of imports on prices for like or directly competitive articles, and the effect of the imports on the domestic industry producing such articles. As explained earlier, a "material injury" standard is considered less onerous than the "serious injury" standard contained in the Article XIX of the GATT and the Agreement on Safeguards. Under paragraph 16.1 of the Accession Protocol, a WTO member that finds that the described market disruption exists may request consultations with China aimed at resolving the situation, including whether the member should instead pursue applying a measure under the Agreement on Safeguards. Any such request must be immediately notified to the WTO Committee on Safeguards. Further, if in the course of the consultations, "it is agreed" that Chinese imports are causing or threatening to cause market disruption and that remedial action is "necessary," China must take "such action as to prevent or remedy the market disruption." If consultations do not lead to such an agreement within 60 days after China receives the request for consultation, the importing member "shall be free, in respect of such products, to withdraw concessions or otherwise to limit imports only to the extent necessary to prevent or remedy such market disruption." The safeguard may be applied only to goods of Chinese origin, a significant difference from the WTO Safeguards Agreement, which requires that a safeguard be imposed on the subject product regardless of its source. In addition, the China-specific safeguard does not contain the prohibition contained in Article 11.1(b) of the Safeguards Agreement against utilizing "voluntary export restraints, orderly marketing agreements or other similar measures on the export or the import side" as forms of safeguard measures, nor does it otherwise expressly limit the type of safeguard measure that may be applied. Although paragraph 16.6 of the Accession Protocol allows a safeguard to be imposed "only for such period of time as may be necessary to prevent or remedy the market disruption," the Accession Protocol differs from the Safeguards Agreement in that it does not limit the duration of the measure. Paragraph 16.6 does state, however, that China "has the right" to suspend the application of "substantially equivalent" GATT concessions or obligations to the trade of the WTO member imposing the safeguard if the safeguard is still in effect after two years where the safeguard was taken as a result of a relative increase in imports, or after three years where the increase was absolute. Similar to Article XIX of the GATT and the Safeguards Agreement, paragraph 16.7 of the China-specific safeguard permits the importing WTO member to apply a provisional safeguard measure, after it makes a preliminary determination that market disruption exists, where there are "critical circumstances," that is, where "delay would cause damage which it would be difficult to repair." A member may impose a provisional safeguard for no more than 200 days and, once it takes the action, it must immediately notify the Committee on Safeguards and request bilateral consultations with China. In addition, paragraph 16.8 provides a remedy for WTO members who have suffered significant trade diversion from China, that is, increased imports of Chinese product into their own territory, due to another member's transitional safeguard measure. At the time the U.S.-China bilateral WTO agreement was concluded, a White House summary addressed differences between the China-specific safeguard and the Agreement on Safeguards, stating that the former was "in addition to" the latter and that it "differs from traditional safeguards in that it permits China to address imports that are a significant cause of material injury through measures such as voluntary export restraints." The statement said that the United States would in addition "be able to apply restraints unilaterally based on standards that are lower than those in the WTO Safeguards Agreement." This nature of the standard and other features of the safeguard were described in congressional testimony of U.S. Trade Representative Barshefsky, who stated that the China-specific safeguard "applies to all industries, permits us to act based on lower showing of injury, and act specifically against imports from China." Section 421 of the Trade Act of 1974, 19 U.S.C. §2451, which implements the China-specific safeguard in U.S. law, was enacted in P.L. 106-286 as part of a package of provisions addressing various issues arising from the accession of China to the WTO. The statute, which also permitted the President to grant most-favored-nation (MFN) tariff treatment to Chinese goods upon China's accession to the WTO, was enacted in October 2000, a little more than a year before China became a WTO member. Section 421 is described in legislative history as "a temporary, extraordinary trade remedy specifically designed to address concerns about potential increased import competition from China in the future." Section 421, related provisions on trade diversion and regulatory action, as well as any regulations issued under these provisions, will expire 12 years after the date that China's WTO Accession Protocol enters into force, or December 10, 2013. Section 421 is modeled on Section 406 of the Trade Act, 19 U.S.C. §2436, which authorizes import relief for U.S. market disruption caused by products of "Communist countries." Section 406 in turn was adapted from Section 201 of the Trade Act of 1974, 19 U.S.C. §2251, the general U.S. safeguard statute, which authorizes the President to impose import restrictions or take other action if the U.S. International Trade Commission (ITC) finds that a surge in imports of a product regardless of origin is a "substantial cause of serious injury, or threat" to a domestic industry producing a like or directly competitive product. Among the differences between the two was an intent that the market disruption test in Section 406, under which an import surge of a product must be "a significant cause of material injury or threat" to a domestic industry (a definition that is replicated in Section 421), would be met more "more easily" than the serious injury test contained in Section 201. Section 421 provides domestic legal authority for the President to respond to injurious import surges as follows: If a product of the People's Republic of China is being imported into the United States in such increased quantities or under such conditions as to cause or threaten to cause market disruption to the domestic producers of a like or directly competitive product, the President shall, in accordance with the provisions of this section, proclaim increased duties or other import restrictions with respect to such product, to the extent and for such period as the President considers necessary to prevent or remedy the market disruption. The statute incorporates the definition of "market disruption" contained in paragraph 16 of China's WTO Accession Protocol, but adds that the term "significant cause," a term that is not defined in paragraph 16, means a cause "which contributes significantly to the material injury of the domestic injury, but need not be equal to or greater than any other cause." The Section 421 process involves (1) initiation of the process by private petition or governmental action; (2) an investigation by the ITC of the import concerned; (3) an ITC vote on its market disruption determination and, if affirmative, recommendations to the President on a remedy; (4) submission of a report by the ITC to the President and to the United States Trade Representative (USTR); (5) if the determination is affirmative, negotiations between the USTR and China seeking agreement by China to take action to prevent or remedy the market disruption; (6) a public hearing on remedies and a USTR recommendation to the President regarding what responsive action, if any, should be taken; (7) assuming a bilateral agreement has not been reached, a presidential determination as to whether to take action and, if so, what the action will be; and (8) if a remedy will be applied, a presidential proclamation increasing tariffs or imposing the chosen import restriction. The entire process from petition or other invocation of the section to any proclamation of relief should be completed within 150 days. Section 421 investigation may be instituted in one of four ways: (1) by petition; (2) upon the President's request; (3) upon resolution of either the House Ways and Means or Senate Finance Committee; or (4) on the ITC's own motion. A petition may be filed by "an entity, including a trade association, firm, certified or recognized union, or group of workers, which is representative of an industry." Unlike antidumping and countervailing duty investigations, there is no industry support requirement for investigations initiated by petition. Once an investigation is requested or otherwise initiated, the ITC must "promptly make an investigation" to determine whether the Chinese products at issue are causing the requisite market disruption. To determine whether "market disruption" exists, the ITC must look at "objective factors, including (1) the volume of imports of the products which is the subject of the investigation; (2) the effect of imports of such products on prices in the United States for like or directly competitive article; and (3) the effect of imports of such product on the domestic industry producing like or directly competitive articles." The presence or absence of any of these factors "is not necessarily dispositive of whether market disruption exists." The ITC must make its determination and transmit it to the President generally no later than 60 days after the date the petition is filed, the request or resolution is received, or the ITC motion is adopted. If the commissioners are evenly divided on their determination, then the determination agreed upon by either group may be considered by the President and the USTR as the ITC determination. In the event of an affirmative determination, the ITC must propose "the amount of increase in, or imposition of, any duty or other import restrictions necessary to prevent or remedy the market disruption." Only those commissions that agreed to the affirmative determination may vote on the proposed action to prevent or remedy market disruption. Members who did not agree to an affirmative determination may, however, submit separate reviews regarding what action, if any, should be taken to prevent or remedy the market disruption that was found. Within 20 days after its determination, the ITC must submit a report on the investigation to the President and the U.S. Trade Representative (USTR). The report must include (1) the commission's determination and an explanation of its basis; (2) in the event of an affirmative determination, ITC recommendations for proposed remedies and the reasons for them; (3) any separate and dissenting views; (4) a description of the short-term and long-term effects that implementation of the recommended action is likely to have on the petitioning domestic industry, on other domestic industries, and on consumers; and (5) a description of the short-term and long-term effects of not taking the recommended action on the petitioning domestic industry, its workers, and the communities where production facilities of the industry are located, and on other domestic industries. Within 20 days after receiving the ITC report, the USTR must publish a notice in the Federal Register of any safeguard measure that the USTR proposes should be taken under the Section 421(a) and of an opportunity for the submission of public views and evidence on "the appropriateness of the proposed measure and whether it would be in the public interest." Within 55 days after receiving the ITC report, the USTR, taking into account the views and evidence submitted, must make a recommendation to the President "concerning what action, if any to take to prevent or remedy market disruption." The statute does not require that the USTR's recommendation or a summary of the recommendation be made public. In addition, the USTR is authorized "to enter into agreements for the People's Republic of China to take such action as necessary to prevent or remedy market disruption" and "should seek to conclude" such agreements before the end of the 60-day consultation period provided for in paragraph 16 of China's WTO Accession Protocol. Any such negotiations are to begin no later than five days after the USTR receives an affirmative ITC determination. In order to carry out any agreement that is concluded, the President is authorized to prescribe regulations governing the entry or withdrawal from warehouse of goods covered by the agreement. If no agreement is reached with China, or if the President determines that a concluded agreement "is not preventing or remedying the market disruption at issue," the President is to provide import relief "in accordance with" Section 421(a). Within 15 days after receiving a recommendation by the USTR regarding what action, if any, the President should take, the President is to provide import relief for the industry concerned "unless the President determines that the provision of such relief is not in the national economic interest of the United States or, in extraordinary cases, that the taking of action ... would cause serious harm to the national security of the United States." The President may make a negative economic interest determination "only if the President finds that the taking of such action would have an adverse impact on the United States economy clearly greater than the benefits of such action." As noted earlier, Section 421(a) authorizes the President "to proclaim increased duties or other import restrictions" on the product concerned. The President's decision, including his reasons for his decision and the scope and duration of any action taken, must be published in the Federal Register . Import relief must take effect no later than 15 days after the President's determination to provide such relief. If import relief is provided, the President must, by regulation, provide for "the efficient and fair administration" of any restriction that he proclaims under the statute and for "effective monitoring of imports under [421(a)]." Once a safeguard is in effect for six months, the President may request that the ITC provide a report on the probable effect on the relevant industry were the safeguard to be modified, reduced, or terminated. The ITC must transmit the report to the President within 60 days after the report is requested. The President may then "take such action to modify, reduce, or terminate relief that the President determines is necessary to continue to prevent or remedy the market disruption at issue." The statute also authorizes the President to extend the safeguard if certain conditions are met. Upon a presidential request or a "petition of the industry concerned" filed with the ITC between six to nine months before the safeguard is set to expire, the ITC must investigate whether a safeguard continues to be necessary to prevent or remedy the market disruption involved. The ITC must provide for a public hearing and transmit a report on its investigation and its determination within 60 days before the safeguard expires. If the ITC's determination is affirmative, the President may extend the safeguard if he also determines that the action "continues to be necessary to prevent or remedy the market disruption." Six ITC investigations were conducted under Section 421 prior to the 2009 investigation of Chinese tire imports. These covered the following products: pedestal actuators, wire hangers, brake drums and rotors, ductile water works fittings, uncovered innerspring mattress units, and circular welded non-alloy steel pipe. The ITC made affirmative market disruption determinations with regard to imports of pedestal actuators, wire hangers, ductile water works fittings, and circular welded non-alloy steel pipe. Negative determinations were made with regard to imports of brake drums and rotors and innerspring mattress units. President George W. Bush declined to provide relief in each of the cases in which an affirmative determination was rendered on the ground that providing import relief was not in the U.S. economic interest. The President's decision not to provide relief under Section 421 has been held to be a discretionary act and thus not reviewable by a court. In Motion Systems Corp. v. Bush , an en banc decision of the U.S. Court of Appeals for the Federal Circuit (CAFC) affirming a decision of the U.S. Court of International Trade, the industry plaintiff argued that the President had acted outside the scope of his statutory authority following a recommendation by the ITC that import quotas were required to remedy the market disruption that had been found to adversely affect the domestic pedestal actuator industry, the first industry to have filed a petition under Section 421. The plaintiff also argued that the United States Trade Representative, inter alia, committed procedural violations involving the public hearing that must be held following the ITC's determination and recommendation, which was focused on the ITC's recommendations regarding import relief. Noting that there exists "no explicit statutory cause of relief granting a petitioner who is denied import relief under Section 421 the right to sue the President and the Trade Representative in the Court of International Trade," the CAFC stated that there were only two options left to the plaintiff to seek relief: (1) judicial review provisions of the Administrative Procedure Act (APA), 5 U.S.C. §701-706, or (2) "some form of nonstatutory review." The plaintiff had conceded that it could not proceed under the APA given the Supreme Court's 2002 decision in Franklin v. Massachusetts, 505 U.S. 788 (1992), that the President is not an "agency" for purposes of APA provisions providing a right of judicial review for those adversely affected by "agency action." The court described the plaintiff's remaining source of relief (i.e., nonstatutory review) as reducing itself to a question whether plaintiff could "challenge the President's discretionary actions under 19 U.S.C. §2451 as outside the scope of authority of delegated to him by Congress." The court relied on the Supreme Court's decision in Dalton v. Specter , 511 U.S. 462 (1994), which it viewed as acknowledging that a suit against the President could proceed where the presidential action alleged to exceed the scope of delegated statutory authority was claimed to constitute a constitutional violation (e.g., a violation of the separation-of-powers doctrine), but holding that, where there is no constitutional issue and assuming that a statutory basis for suit exists, judicial review of presidential action is not available where a statute commits a decision to the President's discretion. The court concluded that Section 421, in giving the President "broad discretion" to determine that providing relief is "not in the national economic interest" and that taking action would cause "serious harm" to U.S. national security, "accords the President the same discretion found to remove Presidential action from judicial review" in Dalton as well as in other Supreme Court cases. The court further held that the acts of the USTR under Section 421 were not final actions for purposes of the APA, but only recommendations to the President, and thus not subject to judicial review. On April 20, 2009, the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union filed a petition with the U.S. International Trade Commission requesting that it institute a Section 421 investigation involving certain passenger vehicle and light truck tires from China. As Section 421 permits an investigation to be requested by a union or group of workers, the absence of an industry petitioner does not foreclose the initiation of an investigation under the statute. The ITC instituted the investigation (TA-421-7) on April 24, 2009. As a result of its investigation, the ITC in June 2009 voted 4-2 that imports of the subject tires were causing market disruption to domestic producers and recommended that the President impose an addition duty on the imported tires for three years, beginning with an additional 55% ad valorem duty in the first year, 45% ad valorem in the second year, and 35% ad valorem in the third year. The ITC also recommended expedited consideration of trade adjustment assistance if applications for such assistance were filed by affected firms or workers. The agency submitted its report to the President and the U.S. Trade Representative on July 9, 2009. The President subsequently decided to provide import relief regarding the subject tires and on September 11, 2009, proclaimed increased tariffs for three years, albeit at lower rates than those recommended by the ITC, effective September 26, 2009. The President also directed the Secretaries of Labor and Commerce to expedite applications for trade adjustment assistance and to provide other available economic assistance to affected workers, firms, and communities. The products subject to the ITC investigation and the domestic like product were determined to be rubber tires used on passenger vehicles (with the exception of racing cars) and on-the-highway light trucks, vans, and sport utility vehicles. The ITC also found that various sizes and types of domestic passenger vehicle and light truck tires, including tires produced for the replacement and original equipment manufacturer [OEM] markets are "part of a continuum of products, with no clear dividing line between them." The ITC determined that the period of investigation for the Section 421 proceeding was 2004-2008. It found that the imports of the subject tires were increasing rapidly in both relative and absolute terms during this period, summarizing its conclusions as follows: In absolute terms, imports of the subject tires from China increased throughout the period of investigation and were the highest, in terms of both quantity and value, in 2008, at the end of the period. The quantity of subject imports rose by 215.5 percent between 2004 and 2008, by 53.7 percent between 2006 and 2007, and by 10.8 percent between 2007 and 2008. The value of subject imports rose even more rapidly, increasing by 294.5 percent between 2004 and 2008, by 60.2 percent between 2006 and 2007, and by 19.8 percent between 2007 and 2008. Both the ratio of subject imports to U.S. production and the ration of subject imports to U.S. apparent consumption rose throughout the period examined, and both ratios were at their highest levels of the period in 2008. The ratio of subject imports to U.S. production increased by 22.0 percentage points between 2004 and 2008, with the two largest year-to-year increases occurring at the end of the period in 2007 and 2008. The ratio of subject imports to U.S. apparent consumption increased by 12.0 percentage points during the period examined, with the two largest year-to-year increases also occurring at the end of the period in 2007 and 2008. We do not agree with respondents that the increases in subject imports from China during the period examined were "gradual" or "small," or that the subject imports had "abated" by the end of the period. Rather, we find that the subject imports increased, both absolutely and relatively, throughout the period by significant amounts in each year and, as stated above, were at their highest levels at the end of the period in 2008. Whether viewed in absolute or relative terms, and whether viewed in terms of the increase from 2007 to 2008 alone or the increase in the last two full years (or even the last three years), the increase were large, rapid, and continuing at the end of the period—and from an increasingly large base. The domestic injury producing passenger vehicle and light truck tires was found by the ITC to consist of 10 U.S. producers "ranging from large multinational companies with global production and sales and varying levels of vertical integration to smaller producers with only domestic operations." It found that in 2008, "U.S. producers manufactured such tires in 28 plants, with most of these plants producing the tires with dedicated equipment, machinery, and workers." It further found that during the same period "approximately 82 percent of the domestic shipment of U.S. producers went to the replacement market, and the remaining shipments went to original equipment (new cars and like truck) manufacturers (OEMs)." These domestic producers were found to "collectively manufacture a full range of styles and sizes of passenger vehicle and light truck tires, which are sold in various price ranges." The ITC determined that the domestic industry was materially injured, having found that "[v]irtually all industry indicators declined during the period examined": U.S. producers' capacity, production, shipments, number of U.S. PRWs [production and related workers] and hours worked, productivity, and financial performance were all at their lowest levels of the period in 2008. U.S. producers' capacity utilization, which was at its lowers in 2006, nearly equaled that level in 2008. Four plants were closed during the period examined, and in light of the current conditions, U.S. producers have announced plans to close three more plants in 2009. Only two indicators, R&D expenses and capital expenditures, appear to have increased toward the end of the period. Virtually all the industry indicators declined during the period. In determining whether the rapidly increasing tire imports were a significant cause of material injury, the ITC looked to the three statutory factors relating to a causation analysis: (1) the volume of subject imports, (2) the effect of the subject imports on prices, and (3) the effect of subject imports on the domestic industry. The ITC referenced its earlier finding of a large and rapid increase in tire imports, an increase that it found "is also reflected in those imports' large and growing share of the U.S. market." Regarding the effect of the imports on prices of U.S. tires, the ITC stated that the "close substitutability of the domestic product and the subject imports combined with pervasive underselling by significant and growing margins enhanced the ability of subject imports to displace domestically produced tires in the U.S. market." The ITC then found that "there is a direct and significant connection between the rapidly increasing imports of subject tires from China and the domestic tire industry's deteriorating financial performance and declining capacity, production, shipments, and employment," with the "large and rapidly increasing volumes of subject tires from China having greatly displaced U.S. producers" in the lower-priced end of the U.S. market, the area in which Chinese producers were found to primarily compete. The ITC also found that "significant and continuous" underselling by "large and rapidly increasing volume" of Chinese tires during the period of investigation "eroded the domestic industry's market share, leading to a substantial reduction since 2004 in domestic, capacity, production, shipments, and employment during the period examined." The ITC further found that "[a]s imports of low-priced Chinese tires increased, U.S. producers were forced to reduce capacity so as to focus on the parts of their business in which they could expect to remain profitable despite the impact of subject imports from China." As a result, the ITC found that the "substantial reduction in domestic capacity and the closures of U.S. plants during the period examined were largely in reaction to the significant and increasing volume of subject imports from China, and were not, as respondents argue, part of a strategy by domestic tire producers to voluntarily abandon the low-priced 'value' segment of the U.S. market." Petitioners had recommended that the ITC propose a three-year quota on Chinese tires in the amount of 21 million in the first year, with increases of 5% in each subsequent year due to its concern that "Chinese government policies might undermine the effect of a duty." Respondents argued that no remedy was appropriate for several reasons including that "any restriction would contravene the domestic industry's strategy of moving away from the economy segment of the market" and that "a remedy would only result in the U.S. market being supplied by third countries." Instead, the ITC proposed a three-year duty increase, declining from 55% ad valorem in the first year, to 45% ad valorem in the second year, and 35% ad valorem in the final year. The ITC explained its recommendation as follows: This increase in the tariff would significantly improve the competitive position of the domestic industry, increasing domestic production, shipments, and employment and restoring the domestic industry to at least a modest level of profitability. The increase should accomplish this by reducing the quantity of subject imports and raising their price in the U.S. market. In proposing this remedy, we are mindful of record evidence that domestic producers have already significantly reduced their capacity to produce for the lower-priced end market of the market in which imports from China compete most extensively. Nevertheless, there is substantial competition between U.S.-produced tires and imports from China in all segments of the market, and the imposition of higher duties will increase prices and permit U.S. producers to utilize their available capacity to increase production, sales, and employment. Additional revenue from increased process and sales will improve the profitability. We have recommended that the increased duties be phased down in annual 10 percentage-point increments over the three-year remedy period. This recommendation recognizes that the remedy is only temporary in nature and is designed to give the domestic industry and its workers breathing space in which to adjust to import competition, which will be encouraged by the phasing down of the duties. In addition, reducing the size of the duty each year is likely to limit the extent to which non-subject suppliers may increase their exports to the United States in response to the relief on imports from China. We also expect the level of tariff protection that is necessary to offset market disruption to decrease as new investments and other adjustments are implemented. The action we are recommending is not intended to address the effects of the current recession or to restore the domestic industry to a level of shipments and profitability that might prevail in a healthier national economy, but only to address the market disruption caused by the subject tires. We expect this remedy to have little or no effect on the U.S. automobile and light truck industry because tires account for a very small part of the cost of manufacturing a car or light truck. We recommend that the remedy remain in place for a three-year period because we believe that a remedy of such duration is needed to give firms and workers in the industry the time to identify and implement needed adjustments in their questionnaire responses. Other information in the record indicates that domestic producers have put plant and equipment upgrades on hold pending more favorable market opportunities. Moreover, we anticipate that the relief may encourage certain domestic producers to reconsidered planned plant closures. The two dissenting commissioners suggested that a "trade-restricting remedy" would not provide relief to the domestic industry, stating that "[i]n an industry where domestic producers have already taken positive steps to adjust to global competition, we find that not only will trade restrictions not provide effective relief to the tire industry workers but will risk disrupting the U.S. market by creating an adverse impact on U.S. producers." Noting the worker displacement that occurred during the period of investigation and the adverse effect on workers of announced plant closings, the commissioners "respectfully urge[d] the President to focus on providing economic adjustment assistance to displaced tire workers through continued use of Trade Adjustment Assistance or other programs that might be available to suppliers of the battered U.S. automobile industry." If a trade measure were to be chosen, they suggested that it be a tariff-rate quota with a quota of 41.5 million tires and an over quota rate of 55% in the first year, 45% in the second year, and 35% in the third year. The commissioners stated that this approach "avoids a large increase in the base cost of the tires purchased by the poorest customers, and provides greater stability in pricing in the U.S. market." As noted earlier, the President decided to utilize the overall remedy proposed by the ITC, that is, increased tariffs for three years to decline annually, but decided to apply lower annual tariff rates than those recommended by the agency. The President proclaimed the increased tariffs on September 9, 2009, directing that they enter into effect on September 26, 2009. Under the President's proclamation, Chinese passenger and light truck tires are subject to additional tariffs of 35% ad valorem above the current most-favored-nation rate for the first year, 30% ad valorem above this rate for the second year, and 25% ad valorem above this rate for the third year. The President also followed recommendations made by commissioners for the provision of economic assistance by directing the Secretary of Commerce and the Secretary of Labor to expedite the consideration of any applications for trade adjustment assistance "from domestic passenger vehicle and light truck producers, their workers, or communities and to provide such other requested assistance or relief as they deem appropriate, consistent with their statutory mandates." After the tariffs were in effect for six months (i.e., after March 25, 2010), the President was authorized to request the ITC to report on "the probable effect" of modifying, reducing, or terminating them, and, after receiving the report, to take any of these three actions. The President did not exercise these authorities. No formal requests have been made under section 421(o) for the ITC to investigate whether it is necessary to extend the tariffs, which are scheduled to expire on September 25, 2012. On September 14, 2009, China requested consultations with the United States under the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes (Dispute Settlement Understanding or DSU) over the additional tariffs imposed on Chinese tire imports by the President under Section 421 "and any other measures the US may announce to implement" the President's decision. Consultations not having resolved the issue, China requested a dispute settlement panel on December 21, 2009. The WTO Dispute Settlement Body (DSB) established a panel on January 19, 2010. Absent an agreement on panelists by the disputing parties, China requested the WTO Director-General to appoint the panelists in the case. Panelists were appointed on March 12, 2010. Although other WTO members had invoked the China-specific safeguard, China did not challenge these other actions and, thus, this was the first panel to review a special safeguard action taken against Chinese goods. China claimed in its panel request that the higher tariffs, "not having been justified as emergency action under relevant WTO rules, are inconsistent with Article I:1 of the GATT 1994 because the US does not accord the same treatment it grants to passenger and light truck tires originating in other countries to the like products originating in China, and Article II of the GATT 1994, since these higher tariffs consist of unjustified modifications of US concessions thereunder." Article I:1, the general most-favored-nation obligation of the GATT, provides, in pertinent part, that, where customs duties are concerned, any advantage that a WTO member grants to any product originating in one country must be accorded "immediately and unconditionally" to the like product originating in all other WTO members. As discussed above, the China-specific safeguard permits a safeguard to be applied only to Chinese products. Article II of the GATT 1994 prohibits WTO members from imposing tariffs on products imported from other WTO members in excess of negotiated rates. China further maintained that the United States "has not even attempted to justify these restrictions as a safeguard action pursuant to GATT Article XIX and the Agreement on Safeguards ," justifying them only under the China-specific safeguard contained in paragraph 16 of China's Accession Protocol. In such case, China challenged both the statutory basis of the safeguard as well as its specific application in the case of Chinese tires as inconsistent with the Protocol provision. First, China argued that the statutory basis of the safeguard is inconsistent "on its face" with the Protocol in that the Section 421 "impermissibly weakens the standard of 'significant cause' by imposing a definition of the term that contradicts Article 16.4 of the Protocol of Accession." Second, China claimed that imposition of the tire tariffs is inconsistent with the following elements of the China-specific safeguard: (1) "Articles 16.1 and 16.4, because imports from China in this case were not occurring 'in such increased quantities' and were not 'increasing rapidly,' and instead had begun to decline in response to changing US demand conditions"; (2) "Articles 16.1 and 16.4, because imports from China were not a 'significant cause' of material injury or threat of material injury, and are being improperly blamed by the US for the condition of the industry that, in fact, reflected other factors in the market"; (3) "Articles 16.3, because the restrictions are not necessary, and are being imposed beyond the 'extent necessary to prevent or remedy' any alleged market disruption, and should not have been set at the high tariff levels being imposed"; and (4) "Article 16.6, because the restrictions in this case are being imposed for a period of time longer than 'necessary to prevent or remedy' any alleged market disruption, and need not have been imposed for three years." By beginning its legal argument with a reference to Article I:1 of the GATT, China highlighted an element of the China-specific safeguard provision that distinguishes it from safeguards permitted under GATT Article XIX and the WTO Agreement on Safeguards, namely, the absence of a requirement that the safeguard be applied to all imports of the product involved regardless of their source. The reference to GATT Article II seemingly emphasizes that WTO members may impose safeguard tariffs on injurious imports and thereby temporarily escape their Article II obligations to maintain tariff concessions owed other members only if requirements in GATT Article XIX and the Safeguards Agreement are met. The China-specific provision was agreed to, however, by China and all other WTO members and thus the fact that it does not require global application does not in itself appear to provide a legal basis for complaint. Further, while China's request sought to raise questions regarding the relationship between the China-specific safeguard and GATT Article XIX and the Safeguards Agreement, the major focus of the request appeared to be the consistency of the U.S. statute and its application to Chinese tires with paragraph 16 of China's Accession Protocol. In a report issued December 13, 2010, the WTO panel rejected all of China's claims. Before proceeding with its analysis, the panel set out context for the case, including that the case raised questions that had not yet been dealt with in a WTO dispute settlement proceeding, such as the relationship of the China-specific safeguard to the WTO global safeguard mechanisms; that the U.S. International Trade Commission causation determination was not unanimous, warranting "very careful consideration" by the panel of this aspect of the determination; that the unanimous ITC material injury finding was not before the panel, thus making causation a crucial issue, though complicated by the fact that the ITC's period of investigation had "involved in part a period of massive global economic downturn or recession"; that the Section 421 petition had been filed by a labor union concerned with job losses and not by the domestic tire industry, which had reduced investment in the United States and increased investment in China, arguably precipitating the increase in Chinese tire imports that resulted in the safeguard; and that the domestic industry indicated that it would not make adjustments even though a safeguard was put in place. Notwithstanding this context, the panel emphasized that its task was to interpret the China-specific safeguard and "not to seek to recalibrate what the WTO members had agreed to in the negotiations that led to the accession of China to the WTO in the light of what the Panel might perceive as changing economic circumstances that perhaps had not been considered when the Protocol was negotiated." In considering the proper standard of review under Paragraph 16, the panel agreed with the disputing parties that in trade remedy cases the panel "should neither conduct a de novo review, nor grant total deference to an investigation authority" and added that "it is also well established that the Panel's standard of review 'must be understood in the light of the obligations of the particular covered agreement at issue.'" In this case, the panel stated that it would consider whether the ITC had "evaluated 'objective factors', as required by Paragraph 16.4," whether the ITC had "provided a reasoned and adequate explanation of its determination, in line with its obligation under Paragraph 16.5," and, regarding the latter, whether the ITC's reasoning "seems adequate in light of plausible explanations of the record evidence or data advanced by China in this proceeding." Further, in interpreting the phrases "increasing rapidly" and "significant cause," the panel stated that it would take into account the provisions of GATT Article XIX and the Safeguards Agreement to the extent they were "relevant." Regarding the ITC's determination that imports were "increasing rapidly" as required under Paragraph 16.4, the panel rejected China's contention that the phrase requires that the investigating authority focus on imports in the most recent past and that there also be "a quick progression in the rate of increase of the volume of imports." Citing panel and appellate decisions under the WTO Safeguards Agreement, the panel found that while some retrospective analysis is required, focus on the "movements of imports during the most recent past, or during the period immediately preceding the authority's decision" is not. The panel further found that the Protocol does not require a rapid increase in the rate of increase of imports and instead demands only the rapid increase in imports be on an absolute or relative basis. Among other panel findings involving the rapidity of increase, the panel dismissed China's argument that a "low base" existed at the beginning of the ITC's period of investigation and that the agency did not put this figure into context. The panel found instead that "[h]aving five percent of the market at a value of 450 million dollars, and being the fourth largest import source are far from humble beginnings" and that "gaining 12 percentage points in market share at a value of 1.7 billion dollars, and becoming the largest import source over the period of investigation means subject imports were a large and significant presence in the market at the end of the period." Regarding the causation standard in the U.S. statute, the panel found that the "contributes significantly" standard in Section 421(c)(2), which, as explained by the United States, demands the existence of a "direct and significant causal link" between the rapidly increasing imports and the market disruption, does not require the United States to establish causation inconsistently with Paragraph 16. The panel also considered arguments on the nature of the causation analysis required under Paragraph 16 itself, specifically (1) whether the investigating authority must consider conditions of competition and correlation, that is, a coincidence of trends between increasing imports and declines in the relevant injury factors and (2) how the investigating authority should evaluate injury factors other than the subject imports. First, the panel found that Paragraph 16.4 does not obligate the importing member to apply any particular methodology for establishing market disruption, including causation, requiring only that it consider "objective factors." The panel stated, however, that "an analysis of the conditions of competition and correlation will often be relevant, and may on the facts of a given case prove essential, to a consideration of 'significant cause'" and, as the ITC had considered both of these factors in this case, the panel would consider these analyses as part of its task to objectively assess the ITC's overall determination of significant cause. Second, the panel found that Paragraph 16.4 does not require the strict "non-attribution" analysis demanded under the WTO Safeguards Agreement—that is, that the injurious effects of all of the different causal factors at play be distinguished and separated from the injurious effects caused by increased imports—but that "this does not mean that the obligation to demonstrate that rapidly increasing imports are a significant cause of material injury should not entail some form of analysis of the injurious effects of other factors." The panel thus found that "the causal link between rapidly increasing imports and material injury must be assessed 'within the context of other possible causal factors'" and that, in particular, "a finding of causation for purposes of Paragraph 16.4 should only be made if it is properly established that rapidly increasing imports have injurious effects that cannot be explained by the existence of other causal factors." The panel upheld the ITC's analysis of the conditions of competition between Chinese and domestic tires, as well as the ITC's approach to correlation. Responding to China's argument that the ITC had failed to properly establish correlation between rapidly increasing imports and material injury, the panel noted that Paragraph 16.4 did not require a showing of correlation between the two, that correlation is instead a investigative tool that may be used to demonstrate causation, and that it was not necessary that causation be based on correlation "only if the varying degrees of increase in imports over the period of investigation are reflected in the varying degrees, or rates of decline, in injury indicators." The panel stated: While a more precise degree of correlation between the upward movements in imports and the downward movements in injury factors might result in a more robust finding of causation, and might indeed suffice on its own to demonstrate causation, a finding of "significant cause" is not excluded simply because an investigative authority relies on an overall coincidence between the upward movement in imports and the downward movement in injury factors, especially if that finding of overall coincidence is combined—as it was in the present case—with other analyses indicative of causation. China had also argued that material injury was attributable to a number of factors other than increased imports, including the domestic industry's relocation strategy, and that the ITC did not fully assess these factors or establish that any injury that they caused was not instead attributed to the subject imports. The panel noted that the majority and dissenting ITC Commissioners drew opposite conclusions regarding industry strategy from the same evidence, the majority finding that the strategy to reduce U.S. production and relocate in China was a response to increased imports and thus not an alternative cause that prevented increasing imports from China from constituting a significant cause of injury and the dissenting commissioners finding that the relocation strategy was an independent business strategy that began before imports were increasing. The panel stated that it would be inappropriate for it to choose between these views and instead found that its own assessment "indicates that it is difficult to separate out the business strategy from the increasing imports." The panel continued: It may well be, as the dissenting commissioners say, that the strategy of relocating to China began before 2004 and before the substantial increases in subject imports. It is also true that plant closures occurred after the increase in imports and may well have been linked to the competition from imports. Indeed, the decision to locate production in China might have been the result of an independent business strategy, but the decision to close plants might well have been a response to imports. In light of these considerations, the panel could not find that the ITC's analysis of the alternative business strategy was in error, a prima facie case of which China had failed to make. The panel also rejected China's non-attribution arguments relating to other factors, such as changes in demand and imports of tires from countries other than China. The panel also dismissed China's claims regarding the scope and duration of the U.S. remedy. China had argued (1) that the U.S. safeguard addressed all market disruption including that caused by factors other than rapidly increasing imports and thus was imposed beyond the "extent necessary" as required under Paragraph 16.3 and (2) that the three-year duration of the safeguard exceeded the period of time necessary to prevent or remedy the market disruption. Regarding the scope of the remedy, the panel found that since the Protocol did not require a "full-blown" non-attribution analysis, it did not contain a benchmark by which to measure the scope of the remedy, but that, even so, China had failed to show that the measure was excessive. The panel found that a measure was not necessarily excessive simply because it seeks to improve the condition of the domestic industry, the deterioration of which is to some extent due to increased imports. It further determined that because the ITC had found that "the domestic industry suffered market disruption as a result of rapidly increasing subject imports that were underselling domestic production, a measure that is aimed at 'reducing the quantity of subject imports and raising their price in the U.S. market' can be justified." The panel noted, however, that such a remedy "does allow for the possibility of the expansion of non-subject imports rather than the improvement of the condition of the domestic industry" and that "that is a consequence of a country-specific safeguard and not a defect of the remedy in this case." The panel similarly found that China had failed to make a prima facie case that a three-year safeguard was excessive, noting that the United States was under no obligation to explain why a measure of this length was needed nor to quantify the injury caused by increasing imports or separate and distinguish that injury from injury caused by other factors. Finally, the panel quickly disposed of China's claims under GATT Articles I and II. The panel found that China's GATT claims were "entirely dependent" on Paragraph 16 of the Protocol and because it had rejected the Paragraph 16 claims, it similarly did not accept the claims under the GATT. China appealed the panel report in May 2011, claiming that the panel had misinterpreted and misapplied the phrases "increasing rapidly" and "significant cause" contained in Paragraph 16.4 of the Accession Protocol, as they related to the U.S. International Trade Commission determination. China did not pursue its GATT–related arguments in its appeal. In a report circulated on September 5, 2011, the WTO Appellate Body upheld all of the panel findings appealed by China. The Dispute Settlement Understanding requires that, once issued, the Appellate Body report must be unconditionally accepted by the disputing parties. Regarding whether tire imports were " increasing rapidly " within the meaning of Paragraph 16.4 of the Accession Protocol, the AB rejected China's claims the USITC was required to focus on imports in the most recent past and on the rates of increase in imports from China. The AB found instead that the "increasing rapidly" standard requires investigating agencies to examine import trends over a period of time that is sufficiently recent to provide a reasonable indication of current trends, and to determine whether imports are increasing significantly, either in absolute or relative terms, within a short period of time. The AB further found that "a decline in the rates of increase at the end of the period of investigation does not detract from the USITC's conclusion that imports were 'increasing rapidly' particularly when import increases remained significant both in relative and absolute terms." Because of these findings, the AB also rejected China's claim that the panel erred in not requiring that the USITC focus on the rate of increase in imported tires in 2008, and to compare that rate with the rates of increase earlier in the period of investigation. The AB found that contrary to China's claim, "the Panel's analysis demonstrates that the USITC provided a reasoned and adequate explanation for its conclusion that subject imports continued to increase rapidly at the end of the period of investigation." Regarding Paragraph 16.4's causation standard, the AB first considered the meaning of the term " significant cause ," finding that, in the context of the current case, the term "requires that rapidly increasing imports from China make an important contribution in bringing about material injury to the domestic industry" and that any causation determination "be made on the basis of objective criteria, including the volume of imports, the effects of rapidly increasing imports on prices, and the effects of rapidly increasing imports on the domestic industry." China had argued that causal link between increasing imports and serious injury must be "particularly strong, substantial and important" and that investigating authorities must thus "conduct a differentiated, more searching analysis of both the conditions of competition and the declining injury indicators." In China's view, "analysis of the conditions of competition must examine the degree of competitive overlap between imported and domestic products, and the analysis of correlation must identify a coincidence both in the 'year-by-year changes' and in the 'degree of magnitude' between subject imports and injury factors." Absent specific guidance in the Protocol as to methodologies that may be used to determine causation, the AB agreed with the panel that investigating authorities have "a certain degree of discretion" in selecting the methodology to be used for this purpose, provided that the methodology properly establishes a causal link, and that analysis of the conditions of competition and correlation "may prove 'essential'" in order to do so. Using its earlier-determined meaning of the term "significant cause," the AB rejected China's more stringent standard. While it found that the USITC could choose to rely, as it did, on both an analysis of competition conditions and an analysis of correlation and that a "careful analysis of degrees of competitive overlap and a greater coincidence in the magnitude of import increase vis-à-vis decreases in injury factors may provide a more robust basis for a finding of causation," the AB also concluded that investigating authorities "may calibrate their analysis to the particular circumstances of the case at hand, as long as the analysis provides a sufficiently reasoned and adequate explanation" for an affirmative causation determination. Regarding whether other causes of injury should be considered in order to determine whether rapidly increasing imports are in fact a significant cause of material injury, both parties had agreed that some form of non-attribution analysis may be required under Paragraph 16.4 even though it does not expressly require the consideration of other causal factors. The AB agreed that non-attribution analysis was needed, finding that an investigating agency can make a causal determination "only if it properly ensures that effects of other known causes are not improperly attributed to subject imports and do not suggest that subject imports are in fact only a 'remote' or 'minimal' cause, rather than a 'significant' cause of material injury to the domestic industry." The AB thus found that "the significance of the effects of rapidly increasing imports needs to be assessed in the context of other known causal factors," with the extent of the analysis required dependent on "the impact of other causes that are alleged to be relevant and the facts and circumstance of the particular case." Looking at specific aspects of the USITC's affirmative causation determination, the AB found that the panel properly upheld the Commission's assessment of conditions in the overall U.S. tire market. The AB upheld the panel's determination that the USITC had properly found that competition between imported and domestic tires in the replacement market was significant rather than "attenuated," as China had argued. China also maintained that, with regard to the original equipment manufacturer (OEM) market, the panel should have focused on whether competition was significant rather than on increasing trends in Chinese imports to that market, with the United States responding that "it was reasonable for the USITC to rely on China's growing presence in the OEM market to support its finding that competition in the overall US market was significant." China further argued that the Panel "had failed to grasp the significance of the combined effect of attenuated competition in the OEM and replacement markets for its review of the USITC's assessment of the conditions of competition in the overall US market." While the AB found that the Panel "could have provided a more thorough analysis" of the conditions of competition in OEM market, the AB also found that even if there were more limited competition in this market, the resulting degree of competition between domestic and Chinese tires in the larger replacement market "would have sufficed to establish that competition in the overall US market was significant" and that, moreover, the "significant presence" of Chinese tires in two tiers of the replacement market "combined with their limited—but growing presence" in the third tier of that market, as well as in the OEM market, "supports the Panel's endorsement of the USITC's conclusion that there was 'significant competition between the subject imports and domestic tires in the U.S. market.'" Regarding correlation, the AB upheld the Panel's finding that "the USITC's reliance on an overall coincidence between an upward movement in subject imports and a downward movement in injury factors reasonably supports" the USITC's causation determination, finding that the stricter correlation called for by China was not required. The AB also upheld the Panel's rejection of China's argument that the USITC had improperly attributed injury caused by other factors, such as the domestic industry's business strategy, changes in demand, and the competitive significance of tires imported from other countries, to imports from China. The panel and Appellate Body reports were adopted by the WTO Dispute Settlement Body on October 5, 2011. With the reports adopted, the dispute is effectively terminated and China has no further recourse under WTO dispute settlement rules on the matters involved. Protocol on the Accession of the People's Republic of China (Part I, General Provisions) 16. Transitional Product-Specific Safeguard Mechanism 1. In cases where products of Chinese origin are being imported into the territory of any WTO member in such increased quantities or under such conditions as to cause or threaten to cause market disruption to the domestic producers of like or directly competitive products, the WTO member so affected may request consultations with China with a view to seeking a mutually satisfactory solution, including whether the affected WTO member should pursue application of a measure under the Agreement on Safeguards. Any such request shall be notified immediately to the Committee on Safeguards. 2. If, in the course of these bilateral consultations, it is agreed that imports of Chinese origin are such a cause and that action is necessary, China shall take such action as to prevent or remedy the market disruption. Any such action shall be notified immediately to the Committee on Safeguards. 3. If consultations do not lead to an agreement between China and the WTO member concerned within 60 days of the receipt of a request for consultations, the WTO member affected shall be free, in respect of such products, to withdraw concessions or otherwise to limit imports only to the extent necessary to prevent or remedy such market disruption. Any such action shall be notified immediately to the Committee on Safeguards. 4. Market disruption shall exist whenever imports of an article, like or directly competitive with an article produced by the domestic industry, are increasing rapidly, either absolutely or relatively, so as to be a significant cause of material injury, or threat of material injury to the domestic industry. In determining if market disruption exists, the affected WTO member shall consider objective factors, including the volume of imports, the effect of imports on prices for like or directly competitive articles, and the effect of such imports on the domestic industry producing like or directly competitive products. 5. Prior to application of a measure pursuant to paragraph 3, the WTO member taking such action shall provide reasonable public notice to all interested parties and provide adequate opportunity for importers, exporters and other interested parties to submit their views and evidence on the appropriateness of the proposed measure and whether it would be in the public interest. The WTO member shall provide written notice of the decision to apply a measure, including the reasons for such measure and its scope and duration. 6. A WTO member shall apply a measure pursuant to this Section only for such period of time as may be necessary to prevent or remedy the market disruption. If a measure is taken as a result of a relative increase in the level of imports, China has the right to suspend the application of substantially equivalent concessions or obligations under the GATT 1994 to the trade of the WTO member applying the measure, if such measure remains in effect more than two years. However, if a measure is taken as a result of an absolute increase in imports, China has a right to suspend the application of substantially equivalent concessions or obligations under the GATT 1994 to the trade of the WTO member applying the measure, if such measure remains in effect more than three years. Any such action by China shall be notified immediately to the Committee on Safeguards. 7. In critical circumstances, where delay would cause damage which it would be difficult to repair, the WTO member so affected may take a provisional safeguard measure pursuant to a preliminary determination that imports have caused or threatened to cause market disruption. In this case, notification of the measures taken to the Committee on Safeguards and a request for bilateral consultations shall be effected immediately thereafter. The duration of the provisional measure shall not exceed 200 days during which the pertinent requirements of paragraphs 1, 2 and 5 shall be met. The duration of any provisional measure shall be counted toward the period provided for under paragraph 6. 8. If a WTO member considers that an action taken under paragraphs 2, 3 or 7 causes or threatens to cause significant diversions of trade into its market, it may request consultations with China and/or the WTO member concerned. Such consultations shall be held within 30 days after the request is notified to the Committee on Safeguards. If such consultations fail to lead to an agreement between China and the WTO member or members concerned within 60 days after the notification, the requesting WTO member shall be free, in respect of such product, to withdraw concessions accorded to or otherwise limit imports from China, to the extent necessary to prevent or remedy such diversions. Such action shall be notified immediately to the Committee on Safeguards. 9. Application of this Section shall be terminated 12 years after the date of accession.
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On April 20, 2009, the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union filed a petition with the U.S. International Trade Commission (ITC) requesting an investigation under Section 421 of the Trade Act of 1974, 19 U.S.C. §2451, a trade remedy statute addressing import surges from China, to examine whether Chinese passenger vehicle and light truck tires were causing market disruption to U.S. tire producers. Market disruption will be found to occur under Section 421 whenever imports of a Chinese product that is "like or directly competitive with" a domestic product "are increasing rapidly ... so as to be a significant cause of material injury, or threat of material injury, to the domestic industry." The ITC initiated the investigation (TA-421-7) on April 24, 2009. As a result of its investigation, the ITC in June 2009 voted 4-2 that Chinese tire imports were causing domestic market disruption and recommended that the President impose an added duty on these items for three years at an annually declining rate. The ITC also recommended expedited consideration of trade adjustment assistance (TAA) applications filed by affected firms or workers. On September 11, 2009, President Obama proclaimed increased tariffs on Chinese tires for three years effective September 26, 2009, albeit at lower rates than recommended by the ITC. The proclaimed increase was 35% ad valorem in the first year, 30% in the second, and 25% in the third year. The President also directed the Secretaries of Labor and Commerce to expedite TAA applications and to provide other assistance to affected workers, firms, and communities. While the President was authorized to review the tariffs after six months and to modify, reduce, or terminate them, he did not take any of these actions. No formal requests have been made to extend the tire tariffs, which are scheduled to expire on September 25, 2012. Six petitions had been previously filed under Section 421, with the ITC finding market disruption in four out of six of its investigations. President Bush decided not to provide import relief in these earlier cases. Section 421 was enacted as part of an October 2000 statute that also permitted the President to grant most-favored-nation (MFN) tariff treatment to Chinese products upon China's accession to the World Trade Organization (WTO). Section 421 authorizes the President to impose safeguards—that is, temporary measures such as import surcharges or quotas—on Chinese goods if domestic market disruption is found. The statute implements a China-specific safeguard mechanism in China's WTO Accession Protocol that may be utilized by WTO members through December 2013. The provision is separate from Article XIX of the General Agreement on Tariffs and Trade (GATT) 1994 and the WTO Agreement on Safeguards, which allow WTO members to respond to injurious import surges but on a stricter basis than under the Protocol. A major difference is that the Protocol allows a safeguard to be applied only to Chinese products while the Safeguards Agreement requires that any safeguard be applied to a product regardless of its source. China filed a WTO complaint against the United States in September 2009, claiming that the Section 421 tariffs violate U.S. GATT obligations to accord Chinese tires MFN tariff treatment and not to exceed negotiated tariff rates, that the United States imposed tariffs under the safeguard mechanism in China's Accession Protocol without first attempting to justify them under GATT and WTO safeguard provisions, and that Section 421 and its application in this case violate U.S. obligations under the Protocol. In a December 2010 report, the WTO panel rejected all of China's claims. China later appealed panel findings related to the Accession Protocol. The WTO Appellate Body upheld the panel, and thus U.S. actions under the Protocol, in a September 2011 report. The panel and Appellate Body reports were adopted by the WTO Dispute Settlement Body on October 5, 2011, ending the WTO dispute.
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Science and technology (S&T) play an increasingly important role in our society. Advances in science and technology can help drive economic growth, improve human health, increase agricultural productivity, and help meet national priorities. Federal policies affect scientific and technological advancement on several levels. The federal government directly funds research and development activities to achieve national goals or support national priorities such as funding basic life science research through the National Institutes of Health (NIH) or new weapons of mass destruction detectors through the Department of Homeland Security (DHS). The federal government establishes and maintains the legal and regulatory framework that affects science and technology activities in the private sector. Federal tax, intellectual property, and education policies can have large effects on private sector S&T activity performance. The federal government also directly regulates certain aspects of science and technology such as limiting who is allowed to perform research with certain dangerous biological pathogens through the select agent program or who is allowed to use portions of the radio frequency spectrum for commercial purposes. Many science and technology policy issues may come before the 113 th Congress. This report is designed to serve as a brief introduction to many of these issues. Each issue section provides some background information and outlines the policy issues that may be considered. Each issue includes a heading entitled "For Further Information" that provides the author's contact information and the titles of relevant CRS reports to pursue more detailed policy analysis and information. Several issues of potential congressional interest apply to federal science and technology policy in general. This section begins with a brief introduction to the roles each branch of the federal government plays in S&T policymaking, then discusses overall federal funding of research and development and its effect on innovation. Additional sections address issues in intellectual property, tax policy, and public access to federally supported research results. The federal science and technology (S&T) policymaking enterprise is composed of an extensive and diverse array of stakeholders in the executive, legislative, and judicial branches. The enterprise fosters, among other things: the advancement of scientific and technical knowledge; science, technology, engineering, and mathematics (STEM) education; the application of S&T to achieve economic, national security, and other societal benefits; and the use of S&T to improve federal decision making. Federal responsibilities for S&T policymaking are highly decentralized. Congress enacts laws to establish, refine, and eliminate S&T-related programs and policies, as well as regulations, regulatory agencies, and regulatory processes that rely on S&T data and analysis. Congress' authorities related to S&T policymaking are diffuse. While the primary congressional committees for S&T policy are the House Committee on Science, Space, and Technology and the Senate Committee on Commerce, Science, and Transportation, other House and Senate committees also have jurisdiction over important elements of S&T policy. In addition, there are dozens of informal congressional caucuses in areas of S&T policy such as research and development, specific S&T disciplines, and STEM education. The President formulates annual budgets, policies, and programs for consideration by Congress; issues executive orders and directives; and directs the executive branch departments and agencies responsible for implementing S&T policies and programs. The Office of Science and Technology Policy, in the Executive Office of the President, advises the President and other Administration officials on S&T issues. Executive agency responsibilities for S&T policymaking are also diffuse. Some agencies have broad S&T responsibilities (e.g., the National Science Foundation). Others use S&T to meet a specific federal mission (e.g., defense, energy, health, space). Regulatory agencies have S&T responsibilities in areas such as nuclear energy, food and drug safety, and environmental protection. Federal court decisions often affect U.S. science and technology policy. Decisions can have an impact on the development of science and technology (e.g., decisions regarding the U.S. patent system); S&T-intensive industries (e.g., the break-up of AT&T in the 1980s); and the admissibility of S&T-related evidence (e.g., DNA evidence). For Further Information [author name scrubbed], Specialist in Science and Technology Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report RL34736, The President's Office of Science and Technology Policy (OSTP): Issues for Congress , by [author name scrubbed] and [author name scrubbed] The federal government has long supported the advancement of scientific knowledge and technological development through investments in research and development (R&D). Federal R&D funding seeks to address a broad range of national interests, including national defense, health, safety, the environment, and energy security; advancing knowledge generally; developing the scientific and engineering workforce; and strengthening U.S. innovation and competitiveness. The federal government has played an important role in supporting R&D efforts that have led to scientific breakthroughs and new technologies, from jet aircraft and the Internet to communications satellites and defenses against disease. Between FY2009 and FY2012, federal R&D funding fell from $147.3 billion to $140.9 billion, a decline of 4.3% in current dollars (8.7% in constant dollars). This decline is a reversal of sustained growth in federal R&D funding for more than half a century, and has stirred debate about the potential long-term effects on U.S. technological leadership, innovation, competitiveness, economic growth, and job creation. Concerns about reductions in federal R&D funding have been exacerbated by increases in the R&D investments of other nations (China, in particular); globalization of R&D and manufacturing activities; and trade deficits in advanced technology products, an area in which the United States previously ran trade surpluses. At the same time, some Members of Congress have expressed concerns about the level of federal funding in light of the current federal fiscal condition, deficit, and debt. In addition, R&D funding decisions may be affected by differing perspectives on the appropriate role of the federal government in advancing science and technology. As Congress undertakes the FY2015 appropriations process it faces two overarching issues: the direction in which the federal R&D investment will move in the context of increased pressure on discretionary spending and how available funding will be prioritized and allocated. Low or negative growth in the overall R&D investment may require movement of resources across disciplines, programs, or agencies to address priorities. Congress will play a central role in defining the nation's R&D priorities as it makes decisions with respect to the size and distribution of aggregate, agency, and programmatic R&D funding. For Further Information [author name scrubbed], Specialist in Science and Technology Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report R43086, Federal Research and Development Funding: FY2014 , coordinated by [author name scrubbed] CRS Report R43080, Commerce, Justice, Science, and Related Agencies: FY2014 Appropriations , coordinated by [author name scrubbed], [author name scrubbed], and [author name scrubbed] CRS Report R41951, An Analysis of Efforts to Double Federal Funding for Physical Sciences and Engineering Research , by [author name scrubbed] P.L. 110-69 , the America "Creating Opportunities to Meaningfully Promote Excellence in Technology, Education, and Science" (COMPETES) Act, was first enacted in 2007. The act, a response to concerns about U.S. competitiveness, authorized certain federal research, education, and related activities. In 2010 Congress passed the America COMPETES Reauthorization Act of 2010 ( P.L. 111-358 ), extending and modifying provisions of the 2007 law. Certain appropriations authorizations in the 2010 act expired in FY2013. In the fall of 2013, House and Senate committees with jurisdiction over the COMPETES acts held hearings designed to help develop one or more bills to reauthorize, amend, establish, or repeal the acts' provisions and closely related policies. Many economists assert that economic, defense, and social benefits accrue preferentially to nations that lead in scientific and technological (S&T) advancement and commercialization. However, some analysts suggest that historical U.S. leadership in these areas may be slipping. They note that other countries are increasingly able to attract S&T jobs and industry while traditional U.S. strengths appear to be weakening. In particular, some stakeholders have questioned the adequacy of federal funding for physical sciences and engineering research and the domestic production of scientists and engineers. The COMPETES acts were designed to respond to these challenges by increasing funding authorizations for targeted federal physical science and engineering research activities—i.e., the so-called "doubling path" accounts at the National Science Foundation, Department of Energy's Office of Science, and National Institute of Standards and Technology's laboratories and construction accounts—and by authorizing certain federal science, technology, engineering, and mathematics (STEM) education activities. The acts also authorize the Advanced Research Projects Agency-Energy (ARPA-E) and prize competitions at federal agencies, among other provisions. Implementation of COMPETES acts' provisions has varied and congressional appropriations have generally been below authorized levels. Those who express opposition to the COMPETES Acts do so from several perspectives. Some critics question the existence of a STEM labor shortage. Other critics agree with the assertion of a shortage, but question whether the federal government should address it. Some critics of the COMPETES Act prefer alternative approaches to improving U.S. competitiveness such as research tax credits or reducing regulatory costs. Also, some oppose increasing funding for research and development and STEM education given the federal budget deficit, national debt, and U.S. fiscal situation. Yet others express concerns about the use of competitiveness as a rationale for economic and education policy. For Further Information [author name scrubbed], Specialist in Science and Technology Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report R42779, America COMPETES Acts: FY2008-FY2013 Funding Tables , by [author name scrubbed] CRS Report R42642, Science, Technology, Engineering, and Mathematics (STEM) Education: A Primer , by [author name scrubbed] and [author name scrubbed] CRS Report R41951, An Analysis of Efforts to Double Federal Funding for Physical Sciences and Engineering Research , by [author name scrubbed] CRS Report R43061, The U.S. Science and Engineering Workforce: Recent, Current, and Projected Employment, Wages, and Unemployment , by [author name scrubbed] Experts widely accept that technological progress is responsible for up to one-half the growth of the U.S. economy and is one principal driving force for increases in our standard of living. Technology contributes to the creation of new goods and services, new industries, new jobs, and new capital. The application of technologies also can contribute to the resolution of those national problems that are amenable to technological solutions. Technological progress is achieved through innovation, the process by which industry provides new and improved products, manufacturing processes, and services. Research and development (R&D) contribute to economic growth by their impact on productivity. Some analysts maintain that innovations arising from R&D are the most important ones. Traditionally, the government funds R&D to meet the mission requirements of the federal departments and agencies. The government also supports work in areas where there is an identified need for research, primarily basic research, not being performed in the private sector. While basic research can be the foundation for important new innovations, the results generally are long term, may prove to be unmarketable, and the benefits may not accrue solely to the organization funding the work. Federal funding reflects a consensus that while basic research is important for innovation, the rate of return to society as a whole generated by investments in this activity is significantly larger than the benefits that can be captured by any one firm performing it. It is estimated that the social rate of return on R&D spending is over twice that of the rate of return to the inventor. Because the knowledge associated with an innovation can be dispersed and adapted to other products and processes, experts argue there tends to be private sector underinvestment in research, thus necessitating federal funding. Economic analysis has shown the importance of federally funded R&D to advancements in innovation. Studies demonstrate that collaboration with publicly funded research organizations increases private sector productivity in many industries, findings that parallel additional work showing the importance of public science to innovation and technological advancement across industrial sectors. Federal R&D can stimulate the additional and often substantial private investment necessary to bring new and improved technologies to the marketplace. While the development of new products, processes, and services for the marketplace is primarily a private sector activity, government plays a role in structuring the environment in which business decisions are made and thereby influences private sector behavior. Choices made by the 113 th Congress related to financing the research endeavor may have immediate impacts on current federal programs as well as long term effects on the nation's technological progress. For Further Information [author name scrubbed], Specialist in Science and Technology Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report RL33528, Industrial Competitiveness and Technological Advancement: Debate Over Government Policy , by [author name scrubbed] CRS Report RL32324, Federal R&D, Drug Discovery, and Pricing: Insights from the NIH-University-Industry Relationship , by [author name scrubbed] CRS Report RL32076, The Bayh-Dole Act: Selected Issues in Patent Policy and the Commercialization of Technology , by [author name scrubbed] CRS Report 96-402, Small Business Innovation Research (SBIR) Program , by [author name scrubbed] Most experts agree that patent ownership is an incentive to innovation. The award of a patent is intended to stimulate the often substantial investment necessary to develop an idea and bring it to the marketplace embodied in a product or process. Patent title provides the recipient with a limited-time monopoly over the use of his discovery in exchange for the public dissemination of information contained in the patent application. Congressional interest in patent reform was evidenced by sustained legislative activity that led to enactment of P.L. 112-29 , the Leahy-Smith America Invents Act, or AIA. This legislation arguably made the most significant changes to the patent statute since the 19 th century. Among other provisions, the statute introduced into U.S. law a first-inventor-to-file priority rule, an infringement defense based upon prior commercial use, and assignee filing. The legislation prevented patents from claiming or encompassing human organisms, limited the availability of patents claiming tax strategies, and restricted the best mode requirement. The AIA also made notable reforms to administrative patent challenge proceedings at the U.S. Patent and Trademark Office (USPTO) and to the law of patent marking. While the AIA was the product of years of discussion and debate, some observers believe that the legislation did not reflect all the issues that were the subject of congressional discussion including the assessment of damages during infringement litigation, the publication of all pending patent applications prior to grant, and "fee diversion" during the appropriations process. While the reforms introduced by the legislation, intended to improve, update, and adopt global best practices, will bring immediate changes to patent practice by the USPTO, the private bar, and innovative firms, experience will show whether the legislation meets its intended goals of increasing patent quality, making patent dispute resolution more fair and efficient, improving the environment for innovation, and enhancing the economic growth of the United States. For Further Information [author name scrubbed], Specialist in Science and Technology Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report R42014, The Leahy-Smith America Invents Act: Innovation Issues , by [author name scrubbed] and [author name scrubbed] CRS Report RS20906, U.S. Patent and Trademark Office Appropriations Process: A Brief Explanation , by [author name scrubbed] CRS Report R42668, An Overview of the "Patent Trolls" Debate , by [author name scrubbed] CRS Report RL33367, Patent Reform: Issues in the Biomedical and Software Industries , by [author name scrubbed] Congressional interest in the value of intellectual property has grown as technology becomes increasingly important to the United States. Similarly, the role of patents has changed as the use of cooperative research and development (R&D) expands to facilitate technological advancement and generate new products, processes, and services for the marketplace. Various laws, including the Stevenson-Wydler National Technology Innovation Act ( P.L. 96-418 ) and the "Bayh-Dole" Act ( P.L. 96-517 ), as amended, have included patent-related incentives to create an environment conducive to joint ventures between government and industry, or between industry and universities, as well as among companies. Patents are widely believed to encourage innovation by simultaneously protecting the inventor and fostering competition. Patents provide the inventor with a right to exclude others, temporarily, from use of the invention without compensation. They give the owner an exclusive right for 20 years (from date of filing) to further develop the idea, commercialize a product or process, and potentially realize a return on the initial investment. In an academic setting, the possession of title to inventions is expected to provide motivation for the university to license the technology to companies for commercialization in expectation of royalty payments. Concurrently, the process of obtaining a patent places the concept in the public arena. As a disclosure system, the patent can, and often does, stimulate other firms or individuals to invent "around" existing patents to provide for parallel technical developments or meet similar market needs. As such cooperative efforts become more widespread, additional issues have emerged. Concerns have been expressed regarding the cost of drugs developed in part with federal funding or in conjunction with federal agencies. Conflicts have surfaced over federal laboratories patenting inventions that collaborating parties believe to be their own. In some agencies, delays continue in negotiating cooperative research and development agreements (CRADAs) because of disagreements over the dispensation of intellectual property. Policymakers have raised questions regarding the effects of patenting early stage discoveries (e.g., research tools) on additional innovation. The National Institutes of Health has encountered difficulties obtaining for government-sponsored research new experimental compounds developed and patented by drug companies because of concerns over diminished effectiveness of the intellectual property if additional applications are discovered. Given these issues, the 113 th Congress may make additional decisions regarding the way to maintain a balance between bringing new products and processes to the marketplace and protecting the public investment in R&D. For Further Information [author name scrubbed], Specialist in Science and Technology Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report RL33526, Cooperative R&D: Federal Efforts to Promote Industrial Competitiveness , by [author name scrubbed] CRS Report RL33527, Technology Transfer: Use of Federally Funded Research and Development , by [author name scrubbed] CRS Report RL32076, The Bayh-Dole Act: Selected Issues in Patent Policy and the Commercialization of Technology , by [author name scrubbed] CRS Report RL32324, Federal R&D, Drug Discovery, and Pricing: Insights from the NIH-University-Industry Relationship , by [author name scrubbed] The 113 th Congress is considering ways to improve the domestic climate for technological innovation. Among the concerns fueling this interest is the sluggish growth in domestic high-paying jobs in a range of industries in recent decades. Two pathways to accelerating growth in these jobs are faster rates of entrepreneurial business formation and increased business investment in domestic research and development (R&D) and domestic production of products and services derived from that research. One way Congress can influence those sources of high-wage job creation is tax incentives. Under current federal tax law, three provisions directly affect new business formation and business investment in R&D. They are: (1) an expensing allowance for qualified research expenditures under Section 174 of the tax code, (2) a non-refundable tax credit for increases in qualified research expenditures above a base amount under Section 41, and (3) a partial exclusion for capital gains from the sale or exchange of qualified small business stock held for five or more years under Section 1202. The credit and expensing allowance encourage companies to invest more in qualified research than they otherwise would by lowering their after-tax cost. R&D serves as the lifeblood of innovation. Some argue that the current credit's incentive effect is weaker than it should be, mainly because of several problems with the credit's design, including a lack of permanence and refundability. The credit expired at the end of 2013, while the expensing allowance is a permanent tax provision. The Section 1202 gains exclusion is 100% for eligible stock acquired in 2013 and 50% for stock acquired in 2014 and thereafter. It is intended to boost equity investment in qualified small startup firms by reducing the tax burden on the returns to that investment. Recent research indicates that young startup firms account for most net U.S. job growth over time but that access to capital remains a significant barrier to the formation of small startup companies. Congress may wish to examine the need for new tax incentives intended to increase the rate of growth in domestic high-paying jobs. For Further Information [author name scrubbed], Analyst in Public Finance ( [email address scrubbed] , [phone number scrubbed]) CRS Report RL31181, Research Tax Credit: Current Law and Policy Issues for the 113 th Congress , by [author name scrubbed] "Open access" or "public access" publishing generally refers to when the entity that holds the copyright to an article grants all users unlimited, free access to the article. In traditional scientific publishing, authors and readers pay fees to fund the costs of journal publication and distribution. This contrasts with open access publishers, which typically charge only authors fees to fund the costs of journal publication and distribution and give readers free online access to the full text of articles. Some traditional publishers have implemented a hybrid model where authors may choose to provide their articles free to readers in exchange for increased author fees. Since 2008, Congress has authorized the National Institutes of Health (NIH) to require recipients of NIH grants to submit an electronic version of their final, peer-reviewed articles to NIH. The NIH places these articles in a public repository no later than 12 months after publication. This congressionally authorized policy has raised issues regarding protection of intellectual property and government competition with the private sector. Supporters of federal open-access publishing policies have a variety of motivations, including avoiding rising traditional journal subscription fees; beliefs regarding improved scientific collaboration and utilization from free information access; and wishes for the public to access the results of research and development funded by their taxes. These supporters urge increased federal support for open access publishing. In contrast, traditional publishers and some scholarly associations object to federal open access policies because they believe it may weaken the publishing industry, erode profits, and consequently restrict the activities of associations whose main source of income is publishing. Opponents of federal open-access publishing policies cite issues such as long-term maintenance of electronic archives, increased publication costs for researchers, and the perceptions of the academic community and the academic reward system which appear to give more status to articles published in traditional journals. The America Competes Reauthorization Act of 2010 ( P.L. 111-358 ) required the OSTP Director to establish a working group to coordinate agency policies on public access to the results of federally funded R&D. The OSTP Director convened such a group and solicited public comment on the issue. Respondents generally stated support for increasing public access to such research results. In February 2013, the OSTP Director directed federal agencies annually funding over $100 million of research and development to develop plans to make the published results of federally funded research freely available to the public within one year of publication. The OSTP has identified 20 agencies from which it expects draft public access plans and OSTP and Office of Management and Budget review of submitted plans is ongoing. For Further Information [author name scrubbed], Specialist in Science and Technology Policy ( [email address scrubbed] , [phone number scrubbed]) Maintaining a rapid pace of scientific and technological advancement requires a sufficient workforce of scientists and engineers. This section discusses some workforce-related issues that may come before the 113 th Congress, including the adequacy of the current workforce and efforts to develop the future workforce. The adequacy of the U.S. science and engineering (S&E) workforce has been an ongoing concern of Congress for more than 60 years. Scientists and engineers are widely believed to be essential to U.S. technological leadership, innovation, manufacturing, and services, and thus vital to U.S. economic strength, national defense, and other societal needs. Congress has enacted many programs to support the education and development of scientists and engineers. Congress has also undertaken broad efforts to improve science, technology, engineering, and math (STEM) skills to prepare a greater number of students to pursue S&E degrees. In addition, some policymakers have sought to increase the number of foreign scientists and engineers working in the United States through changes in visa and immigration policies. Most experts agree that there is no authoritative definition of which occupations comprise the S&E workforce. Rather, the selection of occupations included in any particular analysis of the S&E workforce may vary. The policy debate about the adequacy of the U.S. S&E workforce has focused largely on professional-level computer occupations, mathematical occupations, engineers, and physical scientists. Accordingly, much of the analytical focus has been on these occupations. However, some analyses may use a definition that includes some or all of these occupations, as well as life scientists, S&E managers, S&E technicians, social scientists, and related occupations. Many policymakers, business leaders, academicians, S&E professional society analysts, economists, and others hold diverse views with respect to the adequacy of the S&E workforce and related policy issues. These issues include the question of the existence of a shortage of scientists and engineers in the United States, what the nature of any such shortage might be (e.g., too few people with S&E degrees, mismatches between skills and needs), and whether the federal government should undertake policy interventions to address such a putative shortage or to allow market forces to work in this labor market. Among the key indicators used by labor economists to assess occupational labor shortages are employment growth, wage growth, and unemployment rates. For Further Information [author name scrubbed], Specialist in Science and Technology Policy ( [email address scrubbed] , [phone number scrubbed]) The term "STEM education" refers to teaching and learning in the fields of science, technology, engineering, and mathematics. Policymakers have an enduring interest in STEM education and raise the topic in a variety of national policy debates. Popular opinion generally holds that U.S. students perform poorly in STEM education—especially when compared to students in certain foreign education systems—however the data paint a complicated picture. Over time U.S. students appear to have made gains in some areas but may be perceived as falling behind in others. Estimates of the federal STEM education effort vary. Various analyses have identified between 105 and 252 STEM education activities at 13 to 15 federal agencies, with annual federal appropriations totaling around $3.0 billion. The national conversation about STEM education frequently develops from concerns about the U.S. science and engineering workforce. Some advocates assert that the United States faces a shortage of STEM workers; others dispute this claim. Although opinions about whether such shortages exist vary, most observers agree that a general increase in STEM abilities among the U.S. workforce would benefit the nation's economy, defense, and health and welfare. Analysts differ, however, in their conclusions about the scope, scale, and emphasis of federal STEM education policy. Many analysts prefer comprehensive policies aimed at lifting the STEM achievement of all students—such as STEM content education for K-12 teachers or changes in the teaching of STEM subjects across all grade levels (e.g., more hands-on learning). Other advocates emphasize targeted policies designed to meet specific needs—such as scholarships for the "best and brightest," training for the federal workforce, or programs for underrepresented groups. However, some scholars oppose using education policy to increase the supply of STEM workers, either because they perceive such policies as corporatizing education at the expense of other values (e.g., personal development) or because they perceive the market as the more efficient lever in signaling demand for STEM skills. Federal STEM education activities are closely watched—due in part to perceived duplication and incoherence in the portfolio. Concerns about the dissemination of STEM education research and best practices also recur periodically. The Obama Administration proposed a reorganization of the federal STEM education effort as part of the FY2014 budget request. The stated goal of the reorganization was to target federal resources towards certain STEM education priorities while reducing perceived fragmentation in the federal STEM education effort. The Administration's proposal received a mixed response in Congress. Many legislators expressed general support for reorganization as a means to reduce perceived duplication. However, some critics expressed concern about the perceived dearth of stakeholder input in the development of the proposal. Others questioned the degree to which the reorganization aligned with a congressionally mandated federal STEM education strategy. (That strategy was not yet published when the FY2014 budget request was released.) Some congressional appropriations and authorizations committees have moved to prohibit implementation of the Administration's FY2014 STEM education reorganization plan in whole or part. Other committees appear to have endorsed changes or remained silent. For Further Information [author name scrubbed], Specialist in Science and Technology Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report R42642, Science, Technology, Engineering, and Mathematics (STEM) Education: A Primer , by [author name scrubbed] and [author name scrubbed] CRS Report R42470, An Analysis of STEM Education Funding at the NSF: Trends and Policy Discussion , by [author name scrubbed] CRS Report R43061, The U.S. Science and Engineering Workforce: Recent, Current, and Projected Employment, Wages, and Unemployment , by [author name scrubbed] CRS Report R42530, Immigration of Foreign Nationals with Science, Technology, Engineering, and Mathematics (STEM) Degrees , by [author name scrubbed] The federal government supports billions of dollars of agricultural research annually. The 113 th Congress is likely to face issues related to the budget for this research and specific issues arising from advances in agricultural biotechnology. Public investment in agricultural research has been linked to productivity gains, and subsequently to increased agricultural and economic growth. The U.S. Department of Agriculture (USDA) is authorized under various laws to conduct agricultural research at the federal level, and provides support for cooperative research, extension, and post-secondary agricultural education programs in the states. USDA's research program is funded with about $2.5 billion per year of discretionary funding. Congress traditionally considers reauthorization of agricultural research in periodic omnibus farm bills that cover virtually all USDA programs and policies. The 2008 farm bill ( P.L. 110-246 ) authorized agricultural research (and many other provisions) through September 30, 2012, and the American Taxpayer Relief Act of 2012 ( P.L. 112-240 ) extended the 2008 farm bill for one additional year, through September 30, 2013. While discretionary research funding continues under the FY2014 continuing resolution, ATRA did not provide funding for mandatory programs that were authorized in the 2008 farm bill but did not have a budget baseline beyond the original end of the 2008 farm bill. For agricultural research, these include initiatives for specialty crops and organic agriculture that provided about $70 million per year. The 113 th Congress has been working on a 2013 farm bill to reauthorize agricultural research and many other farm bill provisions. The Senate approved its version of an omnibus 2013 farm bill ( S. 954 ) on June 10, 2013. The House approved its version of the farm bill ( H.R. 2642 ) on July 11, 2013, and a nutrition title for the farm bill ( H.R. 3102 ) on September 19, 2013. Conference committee proceedings on the farm bill began in October 2013. Both bills would reauthorize funding for agricultural research and related activities through FY2018, subject to annual appropriations, and amended authority so that only competitive grants can be awarded under certain programs. Also in both bills, mandatory funding would increase for the Specialty Crop Research Initiative and the Organic Agricultural Research and Extension Initiative. To supplement USDA's basic and applied research activities, S. 954 would provide mandatory funding of $200 million to establish the Foundation for Food and Agriculture Research, a nonprofit corporation. The entity would solicit and accept private donations (matching federal funds) to award grants for collaborative public/private partnerships with scientists at USDA and in academia, nonprofits, and the private sector. For Further Information [author name scrubbed], Specialist in Agricultural Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report R40819, USDA's Research, Education, and Economics (REE) Mission Area: Issues and Background , by [author name scrubbed] CRS Report R43076, The 2013 Farm Bill: A Comparison of the Senate-Passed (S. 954) and House-Passed (H.R. 2642, H.R. 3102) Bills with Current Law , coordinated by [author name scrubbed] The second session of the 113 th Congress may address issues regarding the commercialization of bioengineered animals for human consumption, and the issue of labeling bioengineered foods, or foods containing bioengineered ingredients. The Food and Drug Administration (FDA) is considering approving the first bioengineered animal for human consumption. Two bills addressing bioengineered fish were introduced in the first session of the 113 th Congress, and three bills were introduced that would require mandatory labeling of genetically engineered foods. The FDA's review of an application by a Massachusetts biotechnology firm for approval of a bioengineered salmon is nearing completion. The salmon is engineered to grow to market size in half the time as non-bioengineered salmon. If approved, the salmon would be the first bioengineered animal approved for human consumption. The agency had previously determined that the bioengineered salmon is safe for human consumption, and is nearing completion of its Environmental Assessment (EA) on potential ecological impacts of commercially producing the salmon. The EA was made available to the public in December 2012. The comment period on the EA ended on April 26, 2013. The agency is addressing these comments, and plans to issue a final decision. Potential approval of the bioengineered salmon has been widely covered in the popular press, and has been strongly opposed by environmental groups and food safety advocates. FDA is considering approval under its New Animal Drug Application (NADA) regulatory process. Opponents of the bioengineered fish regard the NADA structure as inadequate to support the precedent-setting approval of the first bioengineered animal for human consumption. Senator Begich of Alaska introduced a bill ( S. 246 ) in February 2013 to prevent the escape of bioengineered salmon into the wild. Senator Begich and Representative Young also introduced bills ( S. 248 and H.R. 584 ) that would amend the Food, Drug, and Cosmetic Act to require labeling of bioengineered fish. Representative DeFazio introduced a labeling bill in April 2013 ( H.R. 1699 ) that would require that any bioengineered food or food containing bioengineered ingredients be labeled accordingly. An amendment that would permit states to require labeling of bioengineered foods was introduced in the Senate farm bill ( S. 954 ), but defeated. Consideration of the FDA regulatory process and food labeling for bioengineered animals could also lead to further legislative action in the second session of the 113 th Congress. For Further Information [author name scrubbed], Analyst in Natural Resources and Rural Development ( [email address scrubbed] , [phone number scrubbed]) CRS Report RL32809, Agricultural Biotechnology: Background, Regulation, and Policy Issues , by [author name scrubbed] CRS Report RL33334, Biotechnology in Animal Agriculture: Status and Current Issues , by [author name scrubbed] CRS Report R41395, Deregulating Genetically Engineered Alfalfa and Sugar Beets: Legal and Administrative Responses , by [author name scrubbed] and [author name scrubbed] and Sugar Beets: Legal and Administrative Responses, by [author name scrubbed] and [author name scrubbed] CRS Report R43100, Unapproved Genetically Modified Wheat Discovered in Oregon: Status and Implications , by [author name scrubbed] Congress has long supported biomedical research and development. Some of the biomedical research and development issues that the 113 th Congress may face include the budget and oversight of the National Institutes of Health and the relationship of federal R&D to the cost and availability of prescription drugs. NIH is the lead federal agency conducting and supporting biomedical research. Its FY2013 budget of $29.3 billion funds basic, clinical, and translational research in NIH's laboratories and in universities and research institutions nationwide. The extramural research program (83% of the NIH budget) provides grants, contracts, and training awards to support over 300,000 scientists and research personnel affiliated with 2,500 universities, academic health centers, hospitals, and independent research institutions. In constant dollars, NIH funding was 22% lower in FY2013 than it was at its peak in FY2003 (not counting FY2009 stimulus funding). The NIH budget doubled over five years (FY1999-FY2003), but since FY2004, constraints on discretionary spending have decreased budget growth below the rate of inflation. Between FY2010 and FY2013, nominal program levels for NIH have been reduced from $30.9 billion to $29.3 billion. As access to grant funding tightens, NIH is working to improve research training, including assisting young scientists with career paths outside academia. Another goal is greater diversity in the biomedical research workforce and improved career advancement for minorities. Budget constraints have caused reevaluations of programs like the Institutional Development Awards (IDeA), which supports grants at institutions in 23 states with a historically low success rate in competing for NIH grants. NIH contends that funds targeted for IDeA could be better spent on other research needs. In FY2012, Congress approved an NIH reorganization focused on translational medicine, the science of converting basic research discoveries into clinical applications that benefit patients. The new National Center for Advancing Translational Sciences (NCATS) works on more rapid and reliable ways to test promising therapeutic products and fosters partnerships between researchers, industry, and health care entities to speed commercialization. Some in Congress may have concerns about government overlap with private sector product development activities and whether NIH is expanding its mission beyond basic and applied research into drug development. Additional oversight topics include rules for financial conflict of interest, the Physician Payments Sunshine Act, and human research subject protection. For Further Information [author name scrubbed], Specialist in Biomedical Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report R43086, Federal Research and Development Funding: FY2014 , coordinated by [author name scrubbed] CRS Report R43304, Public Health Service Agencies: Overview and Funding , coordinated by [author name scrubbed] and [author name scrubbed] Congress has exhibited a strong and ongoing interest in facilitating the development of new, innovative pharmaceuticals for the marketplace while reducing the cost of drugs to consumers. Policies pertaining to funding for R&D, intellectual property protection, and cooperative ventures have played an important role in the economic success of the pharmaceutical sector. Industry-specific legislation also works to encourage innovation in the pharmaceutical sector while facilitating the entry of lower cost generic competition. A critical component of many of these federal efforts concerns patents. Patent ownership can provide an economic incentive for companies to take the results of research and make the often substantial investment necessary to bring new goods and services to the marketplace. In the pharmaceutical industry, patents are perceived as particularly important to innovation due, in part, to the ease of duplicating the invention. Many factors contribute to innovation in the pharmaceutical industry and its ability to bring new and inventive products to the marketplace. However, this sector is facing issues associated with the loss of revenue available for additional R&D due to generic competition and patent expirations. While generic versions of brand pharmaceuticals benefit the public due to their lower cost, some observers assert that without the research, development, and testing performed by the brand name pharmaceutical companies, generic drugs would not exist. Recently, patents on a significant number of "blockbuster" drugs have expired. Brand firms often use funds from these sales to invest in additional R&D. The effect of blockbuster patent expirations on pharmaceutical companies can be significant, particularly when there are insufficient products in the development pipeline to replace these drugs. Some experts point to indications that productivity is declining in this sector as revenues available for additional investment appear to be decreasing. Some Members of Congress have expressed concern over whether the current legislative approach to encouraging innovation, particularly with respect to drug discovery, is appropriate. Other experts argue that the government's financial, scientific, or clinical support of biomedical research entitles the public to commensurate considerations in the prices charged for any resulting drugs. Critics of the current situation maintain that the need for incentives in the pharmaceutical and biotechnology sectors is mitigated by industry access to government-supported work, monopoly power through patent protection, as well as regulatory and tax advantages. However, other commentators view government intervention in price decisions as contrary to a long-term trend of government promotion of innovation in the private sector. Supporters of existing incentives for technology development argue that they have given rise to robust domestic pharmaceutical and biotechnology industries. At issue is what initiative, if any, can effectively reduce the cost of safe and effective prescription drugs and what may be the long-term impact of these efforts on innovation in the pharmaceutical industry. For Further Information [author name scrubbed], Specialist in Science and Technology Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report R42399, Drug Patent Expirations: Potential Effects on Pharmaceutical Innovation , by [author name scrubbed] CRS Report RL33605, Authorized Generic Pharmaceuticals: Effects on Innovation , by [author name scrubbed] CRS Report RL33717, Pharmaceutical Patent Litigation Settlements: Implications for Competition and Innovation , by [author name scrubbed] CRS Report R41483, Follow-On Biologics: The Law and Intellectual Property Issues , by [author name scrubbed] and [author name scrubbed] CRS Report R42815, Mayo v. Prometheus: Implications for Patents, Biotechnology, and Personalized Medicine , by [author name scrubbed] This section focuses on policy issues relating to federal efforts supporting research and development in the physical and material sciences. Some of the policy issues in this area that the 113 th Congress may address include funding and oversight of the National Science Foundation and the multiagency initiative supporting the research and development in the emerging field of nanotechnology. Issues relating to the Department of Energy Office of Science and ARPA-E, both of which support science and technology in physical and material sciences, are discussed in the "Energy" section of this report. The National Science Foundation (NSF) supports basic research and education in the non-medical sciences and engineering. Congress established the foundation as an independent federal agency in 1950 and directed it to "promote the progress of science; to advance the national health, prosperity, and welfare; to secure the national defense; and for other purposes." The NSF is a primary source of federal support for U.S. university research, especially in certain fields such as mathematics and computer science. It is also responsible for significant shares of the federal science, technology, engineering, and mathematics (STEM) education program portfolio and federal STEM student aid and support. Arguably, the foremost NSF policy concern for the 113 th Congress centers on the foundation's funding levels and the so-called "doubling path" policy. (This issue is also discussed in the section on the "America COMPETES Act".) The central question for the NSF is whether Congress wishes to continue to pursue a policy of authorizing large increases in the NSF budget over a short period of time (e.g., 100% increase over seven years). Advocates of the doubling path policy assert that steep and fast increases in funding are necessary to ensure U.S. competitiveness; while other analysts argue that steady, reliable funding increases, over longer periods of time, would be less disruptive to the U.S. scientific and technological enterprise and easier to manage. Some observers prefer to direct any increases in federal funding for research to more purpose- or mission-oriented research than that which is typically funded at NSF; while others favor increasing research tax credits for private industry. Some policymakers seek a reduction in NSF funding in light of the federal fiscal condition, deficit, and debt. Other enduring federal policy issues for the NSF focus on the balance between scientific independence and accountability to taxpayers at the foundation; funding for behavioral and social sciences; the geographic distribution of grants; the selection, funding, and management of instruments, construction projects, and facilities; the foundation's grant-making process; its role in broadening participation in STEM fields; the shape and scope of the foundation's investments in STEM education research and programs, as well as its support for various STEM scholarships and fellowships; and the production of data about the U.S. scientific and technological enterprise. For Further Information [author name scrubbed], Specialist in Science and Technology Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report R42470, An Analysis of STEM Education Funding at the NSF: Trends and Policy Discussion , by [author name scrubbed] Nanoscale science, engineering, and technology—commonly referred to collectively as nanotechnology—is believed by many to offer extraordinary economic and societal benefits. Nanotechnology R&D is directed toward the understanding and control of matter at dimensions of roughly 1 to 100 nanometers (a nanometer is one-billionth of a meter). At this size, the properties of matter can differ in fundamental and potentially useful ways from the properties of individual atoms and molecules and of bulk matter. Most current applications of nanotechnology are evolutionary in nature, offering incremental improvements in existing products and generally modest economic and societal benefits. For example, nanotechnology is being used in automobile bumpers, cargo beds, and step-assists to reduce weight, increase resistance to dents and scratches, and eliminate rust; in clothes to increase stain- and wrinkle-resistance; and in sporting goods to improve performance. In the longer term, some believe that nanotechnology may deliver revolutionary advances with profound economic and societal implications, such as detection and treatment of cancer and other diseases; clean, inexpensive, renewable power through energy creation, storage, and transmission technologies; affordable, scalable, and portable water filtration systems; self-healing materials; and high-density memory devices. The development of this emerging field has been fostered by significant and sustained public investments in nanotechnology R&D. In 2001, President Clinton launched the multi-agency National Nanotechnology Initiative (NNI) to accelerate and focus nanotechnology R&D to achieve scientific breakthroughs and to enable the development of new materials, tools, and products. More than 60 nations subsequently established programs similar to the NNI. Through FY2012, Congress has appropriated approximately $16.1 billion for nanotechnology R&D; FY2013 funding is estimated to be $1.7 billion. In 2003, Congress enacted the 21 st Century Nanotechnology Research and Development Act ( P.L. 108-153 ), providing a legislative foundation for some of the activities of the NNI, establishing programs, assigning agency responsibilities, and setting authorization levels through FY2008. Legislation has been introduced in successive Congresses to amend and reauthorize the act though none has been enacted into law. Congress has directed its attention primarily to three topics that may affect the realization of nanotechnology's hoped-for potential: R&D funding; U.S. competitiveness; and environmental, health, and safety (EHS) concerns. For Further Information [author name scrubbed], Specialist in Science and Technology Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report RL34511, Nanotechnology: A Policy Primer , by [author name scrubbed] CRS Report RL34401, The National Nanotechnology Initiative: Overview, Reauthorization, and Appropriations Issues , by [author name scrubbed] CRS Report RL34614, Nanotechnology and Environmental, Health, and Safety: Issues for Consideration , by [author name scrubbed] Science and technology play an important role in national defense. The Department of Defense relies on a robust research and development effort to develop new military systems and improve existing systems. Issues that may come before the 113 th Congress regarding the Department of Defense's science and technology include budgetary concerns and the effectiveness of programs to transition S&T findings into fielded products. At roughly $68 billion ($67.520 billion requested for FY2014), the Research, Development, Test, and Evaluation program at the Department of Defense is the single largest research and development program in the federal government. A majority share of the program, in dollar terms (>80%), is devoted to the development of new and the improvement of existing military systems. The remainder, $11 billion to $12 billion per year, goes toward basic research, applied research, and the development of a technology base with potential application to future military systems. This latter investment is referred to as the Department's Science and Technology (S&T) program. One area of concern for some in the science and technology community is maintaining the S&T portion of the budget as the Department's overall spending is expected to decline. Some experts contend that maintaining a robust S&T program now is necessary to maintain or improve the country's military advantage in the future. However, advances in knowledge and technology supported by the S&T budget may take years to develop. The immediate value may be low and the future value unknown. The FY2014 budget request for S&T was $11.983 billion. This represents a slight increase of $316 million (<3%) above the actual amount available in FY2012. The request is $610 million below what was provided in the FY2013 continuing resolution, before factoring in the sequestration. While there is concern about the overall S&T budget, there is also concern among some experts regarding the level of funding for the Department's basic research activities. The Department is not the largest federal supporter of basic research ($2.165 billion requested in FY2014). However, it is a major supporter in certain fields (e.g., mathematics, materials). Much of this support goes to universities and supports the development of graduate and undergraduate students. Another area of concern is the efficient and effective transition of technology from the laboratory to the field. While many new military systems can trace the origins of their fundamental technologies back to earlier S&T programs, the transition is not automatic. In some cases well developed technologies are not utilized. In other cases, systems being developed for acquisition try to incorporate technologies that are not yet fully developed. In the first case, the technologies may reside in small companies not able or willing to manage the complexities of the military acquisition process, or the acquisition community may find the new technologies unfamiliar or that they require changes in operations. In the second case, system developers may be overly optimistic about what can be accomplished in a given amount of time and with a given amount of funds. Congress has established a number of programs over the last few years to address these concerns (e.g., Rapid Reaction Fund, the Rapid Innovation Fund, the Defense Acquisition Challenge). Congress may choose to examine how effectively these programs achieve their objectives. For Further Information John Moteff, Specialist in Science and Technology Policy, ( [email address scrubbed] , [phone number scrubbed]) Congress has historically had a strong interest in space policy issues. Two space topics that may come before the 113 th Congress include the reauthorization of the National Aeronautics and Space Administration (NASA) and issues related to earth observing satellites. Spaceflight has been an issue of strong congressional interest since the establishment of NASA in 1958. The 113 th Congress is expected to consider legislation to reauthorize NASA. Issues include the direction of NASA's human spaceflight program and the impact of constrained budgets on NASA's other missions, such as unmanned science satellites. With the last flight of the space shuttle in July 2011, the United States lost the capability to launch astronauts into space and to deliver cargo to the International Space Station (ISS). Since that time, NASA has relied on Russian spacecraft for ISS crew transport. For ISS cargo transport, NASA regained a U.S. capability in October 2012, when a NASA-contracted commercial flight successfully delivered a payload of supplies and equipment. As directed by the NASA Authorization Act of 2010 ( P.L. 111-267 ), NASA is pursuing a two-track strategy for human spaceflight. First, for transport to low Earth orbit (including the ISS) NASA is supporting commercial development of a crew capability like the commercial cargo capability achieved in 2012. NASA expects commercial crew transportation services to be available by 2017. Second, for human exploration beyond Earth orbit, NASA is developing a new crew capsule (Orion) and a new heavy-lift rocket to launch it. NASA expects the first crewed test flight of this system in 2021. Under current plans, an asteroid will be Orion's first destination for human exploration, but many details of the first mission remain to be determined. The 2010 authorization act projected funding increases for NASA that have not occurred. In considering reauthorization, the 113 th Congress may examine whether reduced budget expectations require corresponding changes to planned programs. One common concern is that the cost of planned human spaceflight activities may mean less funding for other NASA missions, such as science, aeronautics research, and technology development. Some of those other missions have their own issues, however, such as the cost and schedule of the James Webb Space Telescope, future plans for unmanned Mars exploration following the landing of the Curiosity rover in August 2012, and the establishment in February 2013 of a new NASA directorate for space technology. For Further Information [author name scrubbed], Specialist in Science and Technology Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report R43144, NASA: Issues for Authorization, Appropriations, and Oversight in the 113 th Congress , by [author name scrubbed] The constellation of earth-observing satellites launched and operated by the United States government performs a wide range of observational and data collecting activities, such as measuring the change in mass of polar ice sheets, wind speeds over the oceans, land cover change, as well as the more familiar daily measurements of key atmospheric parameters that enable modern weather forecasts and storm prediction. Satellite observations of the Earth's oceans and land surface help with short-term seasonal forecasts of El Nino and La Nina conditions, which are valuable to U.S. agriculture and commodity interests, identification of the location and size of wildfires which can assist firefighting crews and mitigation activities, as well as long-term observational data of the global climate which are used in predictive models that help assess the degree and magnitude of current and future climate change. Congress continues to be interested in the performance of NASA, NOAA, and the U.S. Geological Survey in building and operating U.S. earth-observing satellites. Congress has been particularly interested in the agencies meeting budgets and time schedules so that critical space-based observations are not missed due to delays and cost overruns. Congressional scrutiny has focused recently on one specific satellite—the Joint Polar Satellite System (JPSS)—designed to provide daily measurements from polar orbit that inform weather forecasts and storm predictions. JPSS was formerly known as NPOESS (National Polar-orbiting Operational Environmental Satellite). It has experienced delays and higher costs than originally projected by the administration. Originally expected to have been launched into orbit by now, JPSS is currently scheduled to launch in 2017. A potential problem resulting from a 2017 launch of the JPSS satellite is the possibility of a gap in coverage from the polar-orbiting weather satellite system. The current system of polar-orbiting weather satellites includes the Suomi NPP (formerly known as the NPOESS Preparatory Project); its mission life extends to 2016. The Suomi-NPP satellite is now filling the operational gap until the JPSS spacecraft is launched and operational. If the Suomi-NPP instruments fail prior to the end of its five-year mission life there is a risk of a gap in polar-orbiting weather satellite coverage. For Further Information [author name scrubbed], Specialist in Energy and Natural Resources Policy ( [email address scrubbed] , [phone number scrubbed]) Science and technology play an increasingly large role in environmental issues. Science- and technology-related environmental issues that may come before the 113 th Congress include climate change science, carbon sequestration, and national ocean policy. Climate change, including the policy questions of whether and how the federal government might address it, will be on the agenda of the 113 th Congress. Science and technology considerations will underpin virtually all congressional deliberations on the topic. Most notable among them may be the feasibility and costs of new greenhouse gas (GHG) regulations of the Environmental Protection Agency (EPA), which may largely depend on the commercial availability of Carbon Capture and Sequestration (CCS) technology for power plants. For FY2014, the President requested $7.9 billion for clean energy programs and $2.7 billion for the U.S. Global Change Research Program, the federal program that coordinates and integrates global change research across 13 government agencies. Additionally, the federal government provides tax and other incentives to deploy technologies in the United States that variously lead to GHG emissions (e.g., fossil fuel extraction and utilization technologies) or would lower GHG emissions (e.g., more efficient and renewable energy technologies). The magnitude of federal expenditures for climate change, their effectiveness, and priorities may be topics for Congress, particularly in light of budget pressures. In 2013, several bills have been introduced in Congress. They variously would: prohibit the Administration from regulating greenhouse gas (GHG) emissions; establish new federal programs to reduce GHG emissions; tax carbon in fossil fuels; reduce existing incentives for production of fossil fuels; or support planning for and adaptation to expected climate change. In addition, sector- or technology-specific issues are likely to come before Congress, such as control of GHG emissions from international aviation; incentives for biofuel production, or abatement from existing power plants and refineries; and the value of investments to lessen damages from future extreme weather events. Debate on appropriate federal policies is fueled by differing levels of confidence in climate change science among Members and the public, as well as views about the prospects and costs of technologies to address climate change. Few scientists dispute that the climate is changing. Increasingly, private and public decision-makers recognize that the Earth's climate is not fixed, but shifts in ways both predictable and unpredictable, on multiple time scales. Over the long run, not addressing human contributions to the causes of climate fluctuations and their consequences could set up costly, even catastrophic risks and challenges. Most experts conclude from evidence and computer modeling that human activities have driven most of the global warming observed since the1970s, although solar variations and other natural oscillations contribute on some time scales. The most important human contribution to climate change is carbon dioxide, along with other so-called "greenhouse gases" and black carbon aerosols. They are emitted by fossil fuel combustion, land clearing and degradation, and some industrial activities. Effectively reducing GHG emissions to levels that could stabilize climate change would require, over the long run, radical technological change in the United States and in rapidly growing economies. Technologies to support adaptation to future climate change have also been proposed in legislation. Because it is virtually certain that the climate will continue to change, due to both natural and human-related causes, Congress may address the federal role in facilitating effective private decision-making to anticipate and be resilient to changes. It may also consider incorporation of climate change projections into agency management of federal resources and infrastructure, and requirements and incentives in federal programs that may encourage or impede adaptation. Effective decisions would all depend on the adequacy and appropriate use of scientific information and available technologies. In 2013, two major scientific assessments regarding climate change were released sparking heightened public and policy discussion. First was the fifth scientific assessment of climate change (Working Group 1 of the AR5) under the Intergovernmental Panel on Climate Change (IPCC). Second was the National Climate Assessment (NCA), required under the Global Change Research Act of 1990 ( P.L. 101-606 ), was released for public comment, will be reviewed by the National Academy of Sciences, and is be due for finalization in 2013. According to the U.S. Global Change Research Project, it "present[s] a comprehensive picture of the changes in regions and sectors that occur in response to climate variability and change, including effects on public health and human well-being, the economy, infrastructure, and the environment." Looking forward in 2014, the IPCC will release two additional reports—one on climate change impacts, vulnerabilities, and adaptation; and one on GHG control and policy options. For Further Information [author name scrubbed], Specialist in Energy and Environmental Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report R43229, Climate Change Science: Key Points , by [author name scrubbed] CRS Report R43227, Federal Climate Change Funding from FY2008 to FY2014 , by [author name scrubbed], [author name scrubbed], and [author name scrubbed] CRS Report R41153, Changes in the Arctic: Background and Issues for Congress , coordinated by [author name scrubbed] Reliable water quantity and quality is essential for the U.S. population, ecosystems, and economy, including agriculture and energy production (both traditional and alternative sources). Recent droughts and flood disasters and their significant social and economic impacts, as well as climate change impacts and adaptation concerns, also have increased attention to the quality and quantity of water science that is available to inform decision-making and to improve water technologies. Water science and R&D is spread across more than twenty agencies. No single water research strategy or formal coordination or prioritization mechanism exists. The most recent estimate of federal water R&D and science spending was $700 million in FY2004, which was less than 0.5% of federal R&D in that year. The National Research Council in its 2004 report, Confronting the Nation's Water Problems: The Role of Research , found the distribution of water research funding inconsistent with the nation's priority water research needs and favoring short-term research. For example, it found that some legacy monitoring systems had been cutback or eliminated, and that much of the funding was directed at supporting federal regulatory activities. The report supported renewed funding of research on water use, water institutions, conservation, and augmentation (e.g., desalination, reuse). A 2012 GAO report, Energy-Water Nexus: Coordinated Federal Approach Needed to Better Manage Energy and Water Tradeoffs, found that effective energy and water policies will continue to be a challenge without more comprehensive data and research. In recent Congresses, water research, its coordination, and federal funding have received attention in hearings and in legislation. This attention in part has been driven by concerns that current research is insufficient to prepare the United States to confront domestic and international water challenges. At issue for the 113 th Congress are several topics, including whether to provide additional direction and funding for the federal water research portfolio, to support specific research topics (e.g., energy-water research), and/or to reauthorize appropriations for existing efforts (e.g., S. 376 for the National Integrated Drought Information System, H.R. 745 for federal desalination research, and S. 970 for federal support of state water resources research institutes). For Further Information [author name scrubbed], Specialist in Natural Resources Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report R40477, Desalination and Membrane Technologies: Federal Research and Adoption Issues , by [author name scrubbed] CRS Report RL34580, Drought in the United States: Causes and Issues for Congress , by [author name scrubbed], [author name scrubbed], and [author name scrubbed] CRS Report R42653, Selected Federal Water Activities: Agencies, Authorities, and Congressional Committees , by [author name scrubbed] et al. Carbon capture and sequestration (or storage)—known as CCS—has attracted congressional interest as a measure for mitigating global climate change because large amounts of carbon dioxide (CO 2 ) emitted from fossil fuel use in the United States are potentially available to be captured and stored underground and prevented from reaching the atmosphere. Large, industrial sources of CO 2 , such as electric power plants, are likely initial candidates for CCS because they are predominantly stationary, single-point sources. On September 20, 2013, the U.S. Environmental Protection Agency (EPA) re-proposed standards for carbon dioxide (CO 2 ) from new fossil-fueled power plants. As re-proposed, the standards would limit emissions of CO 2 from new coal-fired power plants to no more than 1,100 pounds per megawatt-hour of production and between 1,000 and 1,100 for new natural gas-fired plants. As a reference point, existing coal-fired plants currently emit over 2,000 pounds of CO 2 per megawatt-hour. According to EPA, new natural gas-fired stationary power plants should be able to meet the proposed standards without the development of new control technologies. However, new coal-fired plants only would be able to meet the standards by installing CCS technology. Given the pending EPA rule, congressional interest in the future of coal as a domestic energy source appears directly linked to the future of CCS. Currently, U.S. power plants do not capture large volumes of CO 2 for CCS. Several projects in the United States and abroad—typically associated with oil and gas production—are successfully capturing, injecting, and storing CO 2 underground, albeit at relatively small scales. According to the U.S. Department of Energy (DOE), the United States has the potential to store billions of tons of CO 2 underground and keep the gas trapped there indefinitely. Capturing and storing the equivalent of decades or even centuries of CO 2 emissions from power plants (at current levels of emissions) suggests that CCS has the potential to reduce U.S. greenhouse gas emissions substantially while allowing the continued use of fossil fuels. However, the additional cost of installing CCS on CO 2 -emitting facilities is a primary challenge to the adoption and deployment of CCS in the United States. In addition, liability, ownership, and long-term stewardship for CO 2 sequestered underground are issues that would need to be resolved before CCS is deployed commercially. In 2009, Congress appropriated $3.4 billion from the American Recovery and Reinvestment Act (Recovery Act) for CCS RD&D at DOE's Office of Fossil Energy in addition to annual appropriations for CCS. To date, there are no commercial ventures in the United States that capture, transport, and inject industrial-scale quantities of CO 2 solely for the purposes of carbon sequestration. However, CCS RD&D has embarked on commercial-scale demonstration projects for CO 2 capture, injection, and storage. The success of these projects will likely influence the future outlook for widespread deployment of CCS technologies as a strategy for preventing large quantities of CO 2 from reaching the atmosphere while U.S. power plants continue to burn fossil fuels, mainly coal. For Further Information [author name scrubbed], Specialist in Energy and Natural Resources Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report R42532, Carbon Capture and Sequestration (CCS): A Primer , by [author name scrubbed] CRS Report R43127, EPA Standards for Greenhouse Gas Emissions from Power Plants: Many Questions, Some Answers , by [author name scrubbed] "Geoengineering" refers to a suite of technologies and/or activities that have been offered by some as a potential response to global climate change. Unlike mitigation activities, which seek to reduce man-made emissions of greenhouse gases, or adaptation activities, which look to improve an individual's or institution's ability to cope with the impacts of climate change, geoengineering aims to achieve a deliberate and large-scale modification to the Earth's energy balance in order to reduce global mean temperatures (e.g., by blocking incoming solar radiation or removing greenhouse gases from the atmosphere). To date, little research has been done on most geoengineering methods, and deployment of the technologies—either through controlled field tests or commercial enterprises—has been minimal. A few foreign governments, including the United Kingdom's, as well as scientists from Germany and India, have engaged in some research. Many have expressed reservations about the effectiveness and appropriateness of geoengineering as a tool to address climate change. Others see the need for continued research due to concerns over the slow progress of emissions reductions, the uncertainties of climate sensitivity, the possible existence of climate thresholds (or "tipping points"), and the political, social, and economic impact of pursuing aggressive mitigation strategies. Further, some warn that the method's perceived advantages (e.g., low cost, low technology requirements, quick results) may provoke hasty deployment by an individual or country, which could result in an array of unanticipated consequences. Despite several hearings held by the House Committee on Science and Technology in the 111 th Congress, there has been limited federal involvement in, or oversight of, geoengineering. Congressional interest has focused primarily on whether the activity is a realistic, effective, and appropriate strategy for the United States and whether funding may be required for potential research and development. With the possibility that climate change will remain an issue of global concern, Congress may determine whether geoengineering warrants attention at either the federal or international level. If so, policymakers may need to consider whether geoengineering can be addressed effectively by existing laws and international agreements or, alternatively, whether new laws and treaties would need to be developed. For Further Information [author name scrubbed], Specialist in Agricultural Conservation and Natural Resources Policy ( [email address scrubbed] , [phone number scrubbed]) [author name scrubbed], Analyst in Environmental Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report R41371, Geoengineering: Governance and Technology Policy , by [author name scrubbed] and [author name scrubbed] In August 2000, legislation to create a U.S. Commission on Ocean Policy was enacted, and in September 2004, the commission published An Ocean Blueprint for the 21 st Century . This report included 212 recommendations for a coordinated and comprehensive national ocean policy spanning a broad range of topics including ocean science and technology. Earlier in 2000, the Pew Oceans Commission, an independent group, was established to develop policies to restore and protect living marine resources, and in June 2003, it published America's Living Oceans: Charting a Course for Sea Change . In 2005, the commissions identified complementary recommendations for a number of areas and established the Joint Ocean Commission Initiative (JOCI). Both the George W. Bush and Obama administrations responded to the U.S. Commission's recommendations with executive actions which focused on improving coordination across federal agencies. The Obama Administration also established an Interagency Ocean Policy Task Force, which published recommendations that focused on coordination of federal activities, stewardship of marine resources, and coastal and marine spatial planning. In response, in July 2010, President Obama signed Executive Order 13547 which adopted the task force's recommendations and established a National Ocean Council. The administration has stressed that the national ocean policy as stated in E.O. 13547 is a planning framework that will operate within existing authorities. Some in Congress have questioned whether the administration's national ocean policy, especially marine spatial planning, is a new regulatory program and whether the administration has the statutory authority to implement the policy. During the 113 th Congress, several bills have included provisions to prohibit actions based on the national ocean policy or to prohibit the use of funding to implement, administer, or enforce the national ocean policy. Since the release of the U.S. Commission's recommendations in 2004, legislation has focused on specific activities or environmental issues such as marine debris, coral reef conservation, marine fisheries, ocean exploration, and ocean observation systems. Although these efforts have addressed specific recommendations of the commissions, comprehensive approaches to federal organization and administrative structure, regional ecosystem management, and marine spatial planning have not been introduced during the 113 th Congress. Furthermore, under current budgetary constraints some investments in ocean-related technology and research have been reduced. See " Ocean Energy Technologies " for additional ocean-related policy issues. For Further Information [author name scrubbed], Analyst in Natural Resources Policy ( [email address scrubbed] , [phone number scrubbed]) The science and technology related-energy issues that may come before the 113 th Congress include the funding and role of the Advanced Research Projects Agency-Energy and the Department of Energy Office of Science, reprocessing of spent nuclear fuel, and the development of biofuels and of ocean energy technology. The Advanced Research Projects Agency-Energy, or ARPA-E, was established to "over-come the long-term and high-risk technological barriers in the development of energy technologies" ( P.L. 110-69 , Sec. 5012). ARPA-E is patterned after the widely lauded Defense Advanced Research Projects Agency (DARPA), which played a key role in the development of critical technologies like satellite navigation and the Internet. ARPA-E has supported over 285 energy technology research projects since Congress first funded it in FY2009. ARPA-E's appropriations authorization expired at the end of FY2013. Critical questions for the 113 th Congress include whether (and at what level) to continue providing specific funding and policy authorizations for ARPA-E. For FY2014, there was a $329 million gap between House ($50 million) and Senate ($379 million) appropriations committee recommendations for ARPA-E. House members later added another $20 million to the ARPA-E account during floor debate over passage of H.R. 2609 (Energy and Water Development and Related Agencies Appropriations Act, 2014). However, two minority members of the House Appropriations Committee asserted that the initially passed $50 million funding level would "effectively end" ARPA-E ( H.Rept. 113-135 ). It can be difficult for congressional policymakers to assess the optimal level of funding for agencies like ARPA-E. There is no firm consensus among policymakers regarding the optimal level of federal funding for R&D in general; or in regards to the balance of federal investments in various types of research (e.g., transformative and incremental, basic and applied). ARPA-E seeks to fund research that is transformative, but this type of research is typically associated with a higher failure rate. Some analysts may consider the higher failure rate (and therefore greater risk) as an argument for increasing the energy agency's budget because the private sector is widely perceived as unwilling to fund high-risk research. Others question the assumption that the private sector is unwilling to support ARPA-E-type projects, noting that some early ARPA-E grantees had received previous private sector funding. A 2012 Government Accountability Office report on this question concluded, "most ARPA-E projects could not have been funded solely by private investors" (GAO-12-112). Given the long-term nature of the type of research ARPA-E funds, it may be many more years before policy analysts can confidently assess the agency's impact. For Further Information [author name scrubbed], Specialist in Science and Technology Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report R42779, America COMPETES Acts: FY2008-FY2013 Funding Tables , by [author name scrubbed] CRS Report R42430, America COMPETES 2010 and the FY2013 Budget , by [author name scrubbed] The Department of Energy's Office of Science, whose origins trace to the Manhattan Project, conducts basic research in six program areas: basic energy sciences, high-energy physics, biological and environmental research, nuclear physics, advanced scientific computing research, and fusion energy sciences. Through these programs, DOE is the third-largest federal funder of basic research and the largest federal funder of research in the physical sciences. The Office of Science also stewards 10 of DOE's 17 national laboratories, including the Oak Ridge National Laboratory in Tennessee and Lawrence Berkeley National Laboratory in California. Typically, about 70% of the office's budget supports the national laboratories while about 15% is granted to university researchers. The remainder goes to industry, nonprofit, and other recipients. As with many other federal research agencies, funding levels are a perennial policy concern for the Office of Science. In recent years, authorized increases in appropriations for the Office of Science have been driven, at least in part, by a broader effort to increase federal funding for federal physical sciences and engineering research. However, actual appropriations have not increased at the authorized rates, and provisions that allowed for increased appropriations to the Office of Science expired in FY2013. One policy question before the 113 th Congress, therefore, is whether (and at what level) to reauthorize funding for the Office of Science. (For more information, see section on the " America COMPETES Act .") A second Office of Science policy question centers on the ITER project. ITER (formerly known as the "International Thermonuclear Experimental Reactor") is an international project to design and build a fusion reactor. Advocates assert that the ITER project is a reasonable next step toward the design of a demonstration fusion power plant. However, funding for the project has increased budget pressure on the domestic fusion activities of the Office of Science. Some analysts assert that grants for U.S. fusion researchers have been cut in order to maintain funding for ITER. Others question the reliability of ITER's cost and schedule, which have changed significantly since the ITER agreement was established in 2006. The U.S. ITER program notes that "over 80% of U.S. ITER project funding is spent in the [United States]," and that for this investment, "the United States has access to all ITER technology and scientific data, the right to propose/conduct experiments, and the opportunity for U.S. universities, laboratories and industries to design and construct parts." (U.S. ITER web page at https://www.usiter.org/index.shtml ). Other Office of Science topics that the 113 th Congress may consider relate to technology transfer, laboratory management, and exascale computing. For More Information [author name scrubbed], Specialist in Science and Technology Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report R43121, Energy and Water Development: FY2014 Appropriations , coordinated by [author name scrubbed] Biofuels—liquid transportation fuels produced from biomass feedstock—are often touted as an alternative to conventional fuels. Some see promise in producing liquid fuels from a domestic feedstock that may reduce dependence on foreign sources of oil, contribute to improving rural economies, and lower greenhouse gas emissions. Others regard biofuels as potentially causing more harm to the environment (e.g., air and water quality concerns), encouraging land owners to put more land into production, and being prohibitively expensive to produce. The debate about the feasibility of biofuels is complex, as policymakers consider a multitude of factors. These factors (e.g., feedstock costs) sometimes overlap with the needs of other industries (e.g., livestock). The debate can be even more complicated when one considers that biofuels may be produced using numerous biomass feedstocks and conversion technologies. Thus, for each specific biofuel, a thorough assessment of the costs and benefits requires specific knowledge of the various factors involved. Further, certain aspects of U.S. energy policy (e.g., infrastructure, increased use of natural gas, and the role of alternatives) may impact the level of investment in biofuel research, development, and commercial-scale production. Congress has expressed interest in biofuels for decades, with most of its attention on the production of "first-generation" biofuels (e.g., cornstarch ethanol). Farm bills have had a significant effect on biofuel research and development. Starting in 2002, the farm bills have contained an energy title with several programs focused on assisting biofuel production (see " Agriculture " for additional farm bill related research). While commercial-scale production of "first-generation" biofuels is well established, commercial scale production of advanced biofuels (e.g., cellulosic ethanol) is in its infancy. In 2007, Congress expanded one policy that may increase advanced biofuel production—the Renewable Fuel Standard (RFS). The RFS requires U.S. transportation fuel to contain a minimum volume of biofuel, a significant percentage of which will gradually come from advanced biofuels. However, the RFS has been under scrutiny for various reasons, including some of the advanced biofuel targets not being met, a compliance system that some view as not being transparent, and the possibility that the policy may require more biofuel to be produced than can actually be used. Lastly, Congress may continue to debate if a domestic biofuel industry is necessary for national defense, and what, if any, role the military might take regarding biofuel production. Going forward, Congress may consider whether to modify various biofuel efforts, or to maintain the status quo. For Further Information [author name scrubbed], Specialist in Agricultural Conservation and Natural Resources Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report R41282, Agriculture-Based Biofuels: Overview and Emerging Issues , by [author name scrubbed] Spent fuel from commercial nuclear reactors contains most of the original uranium that was used to make the fuel, along with plutonium and highly radioactive lighter isotopes produced during reactor operations. A fundamental issue in nuclear policy is whether spent fuel should be "reprocessed" to extract plutonium and uranium for new reactor fuel, or directly disposed of without reprocessing. Proponents of nuclear power point out that spent fuel still contains substantial energy that reprocessing could recover. However, reprocessed plutonium can also be used in nuclear weapons, so critics of reprocessing contend that federal support for the technology could undermine U.S. nuclear weapons nonproliferation policies. In the 1950s and 1960s, the federal government expected that all commercial spent fuel would be reprocessed, using "breeder reactors" that would convert uranium into enough plutonium to fuel additional commercial breeder reactors. Increased concern about weapons proliferation in the 1970s and the slower-than-projected growth of nuclear power prompted President Carter to halt commercial reprocessing efforts in 1977, along with a federal demonstration breeder project. President Reagan restarted the breeder demonstration project, but Congress halted project funding in 1983 while continuing to fund breeder-related research and development. Under President Clinton, research on producing nuclear energy through reprocessing was largely halted, although some work on the technology continued for waste management purposes. The George W. Bush Administration renewed federal support for reprocessing, adopting an aggressive development schedule for a different technology, called UREX+, with a pilot plant to have begun operating by the early 2020s. Under the Obama Administration, the Fuel Cycle Research and Development Program has been redirected toward development of technology options for a wide range of nuclear fuel cycle approaches, including direct disposal of spent fuel (the "once through" cycle) and partial and full recycling, according to the FY2014 DOE budget justification. The program "will research and develop a suite of technology options that will enable future decision-makers to make informed decisions about how best to manage nuclear waste and used fuel from reactors," the FY2014 justification says. The total FY2014 funding request for this program was $165.1 million, down from the FY2013 level of $185.0 million. The House approved $91.1 million ( H.R. 2609 , H.Rept. 113-135 ), while the Senate Appropriations Committee recommended $175.1 million ( S. 1245 , S.Rept. 113-47 ). For Further Information [author name scrubbed], Specialist in Energy Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report RL33558, Nuclear Energy Policy , by [author name scrubbed] CRS Report RL34234, Managing the Nuclear Fuel Cycle: Policy Implications of Expanding Global Access to Nuclear Power , coordinated by [author name scrubbed] New and improved technology is widely recognized as necessary if growth is to occur in domestic ocean energy production. Prompted by concerns about diversifying the U.S. ocean energy portfolio (geographically and technologically), many in Congress seek to encourage deploying renewable ocean energy resources: generating electricity from wind blowing above the ocean; harnessing thermal power from the sun's heat on the sea, and capturing kinetic forces of ocean tides and waves. Of these technologies, offshore wind projects offer the only near-term options for commercial application in U.S. waters. According to the Energy Information Administration (EIA), 200 megawatts (MW) of offshore wind capacity producing about 750 million kilowatt hours (kWh) per year of electricity is anticipated to come online by 2015. The first site proposed for an offshore wind farm in U.S. waters is off the coast of Massachusetts–– the so-called "Cape Wind" project. This project, comprising approximately 46 square miles in Nantucket Sound, has been highly controversial. While some local residents voice concern that operating wind turbines might pose environmental risks, supporters claim generating "clean" electricity is long overdue. Delays stemming from litigation have placed further permitting for Cape Wind on hold; no schedule has been announced for commencing operations. In addition to litigation hurdles, financing poses challenges for deploying renewable energy projects. At issue for Congress is whether statutory changes might be needed to facilitate financing options for Cape Wind and other renewable energy projects. Options for addressing financing hurdles might include extending federal tax credits designed to spur renewable energy projects. On October 24, 2012, as part of an effort to streamline permitting for renewable energy projects, DOI announced the first lease granted under the "Smart from the Start" initiative. (No schedule has been established for this lease. For more details see http://www.boem.gov/Renewable-Energy-Program/Smart-from-the-Start/Index.aspx .) Recent concerns of policymakers about ocean drilling safety have prompted a renewed focus on research to address challenges accompanying deepwater drilling operations. Specifically to help prevent subsea blowouts, the Marine Well Containment Company –– a consortium of ExxonMobil, Chevron, ConocoPhillips and Shell ––developed a subsea containment system that was recently tested by the Bureau of Safety and Environmental Enforcement (BSEE). According to BSEE, this new system is engineered to shut off flow from an underwater well and to activate subsea dispersant injection equipment. This system is among other technologies being examined for blowout prevention at ocean depths of up to 10,000 feet. Congress will likely monitor this development to ensure ocean drilling safety. For Further Information [author name scrubbed], Specialist in Energy and Natural Resources Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report R42942, Deepwater Horizon Oil Spill: Recent Activities and Ongoing Developments , by [author name scrubbed] and [author name scrubbed] CRS Report R40175, Wind Energy: Offshore Permitting , by [author name scrubbed] The federal government spends billions of dollars supporting research and development to protect the homeland. Some of the issues that the 113 th Congress may consider include how the Department of Homeland Security performs research and development and issues regarding its programs to detect smuggled nuclear material and biological terrorism. This section also includes issues regarding the development of medical countermeasures against chemical, biological, radiological, and nuclear agents; oversight of who is permitted to perform research on certain dangerous biological pathogens; and how to communicate scientific results that may pose a security risk. The Department of Homeland Security (DHS) has identified five core missions: to prevent terrorism and enhance security, to secure and manage the borders, to enforce and administer immigration laws, to safeguard and secure cyberspace, and to ensure resilience to disasters. New technology resulting from research and development (R&D) can contribute to all these goals. Coordination of DHS R&D is a long-standing congressional concern. The Directorate of Science and Technology (S&T) has primary responsibility for establishing, administering, and coordinating DHS R&D activities. The Domestic Nuclear Detection Office (DNDO) is responsible for R&D relating to nuclear and radiological threats. The S&T Directorate, DNDO, and the Coast Guard are the only DHS components that report R&D expenditures to the Office of Management and Budget. In September 2012, however, the Government Accountability Office (GAO) found that at least ten DHS components fund R&D and R&D-related activities. GAO concluded that "as a result, it is difficult for DHS to oversee components' R&D efforts." (GAO-12-837). The S&T Directorate oversees a system of federal laboratories, federally funded R&D centers, and university centers of excellence. In recent years, maintaining this infrastructure has consumed a growing share of the directorate's budget. This trend has constrained the funding available for R&D projects. Construction of the planned National Bio- and Agro-defense Facility may further increase infrastructure costs. Initially envisioned as mainly an R&D organization, the S&T Directorate has expanded its role in technology acquisition and operational support of other components. It oversees operational test and evaluation for major acquisitions and provides other scientific and technical assistance throughout DHS. The focus of its R&D activities is increasingly short-term and incremental, with reduced emphasis on basic research and high-risk, high-reward projects. DHS has reorganized its R&D-related activities several times. DNDO and the Office of Health Affairs (OHA) were both created largely from elements of the S&T Directorate. In the explanatory statement for the Consolidated and Further Continuing Appropriations Act, 2013 ( P.L. 113-6 ), Congress directed DHS to evaluate the option of merging DNDO and OHA and realigning some of their functions, possibly including R&D, into other components. For Further Information [author name scrubbed], Specialist in Science and Technology Policy ( [email address scrubbed] , [phone number scrubbed]) Congress has emphasized the need to detect and interdict smuggled nuclear and radiological material before it enters the United States, funding investment in nuclear detection domestically and abroad. The U.S. Government has adopted a layered strategy of engaging internationally through threat reduction programs and provision of detection equipment to foreign governments; increasing supply-chain security efforts to track cargo approaching the U.S. border; securing the border through emplacement of radiation portal monitors and non-intrusive imaging equipment; and developing fixed and mobile detection capabilities within the United States. Experts have criticized this combined system as being insufficient to detect all smuggled special nuclear material. Research and development activities supporting detection of nuclear smuggling span multiple agencies, including DHS and the National Nuclear Security Administration (NNSA). The DHS and NNSA have spent several years developing, testing, and evaluating next-generation detection equipment. The development of these next-generation systems has not yet met performance and timeline expectations. In addition, a shortfall of a key neutron detection material, helium-3, may force reconsideration of the current nuclear detection approach and require deployment of new neutron-detection materials. Congressional policymakers may continue their oversight over the interagency coordination in nuclear detection activities; development, testing, and procurement of current and next-generation nuclear detection equipment; and the sufficiency of the global nuclear detection architecture that links these efforts together. For Further Information [author name scrubbed], Specialist in Science and Technology Policy ( [email address scrubbed] , [phone number scrubbed]) The anthrax attacks of 2001 highlighted the nation's vulnerability to biological terrorism. The federal government responded to these attacks by increasing efforts to protect civilians against chemical, biological, radiological, and nuclear (CBRN) terrorism. Effective medical countermeasures, such as drugs or vaccines, could reduce the impact of a CBRN attack. Policymakers identified a lack of such countermeasures as a challenge to responding to the CBRN threat. To address this gap, the federal government created several programs over the last decade to encourage private sector development of new CBRN medical countermeasures. Despite these efforts, the federal government still lacks medical countermeasures for many CBRN threats. The Biomedical Advanced Research and Development Authority (BARDA) and Project BioShield are two key pieces of the federal efforts supporting the development and procurement of new CBRN medical countermeasures. The BARDA directly funds the advanced development of countermeasures through contracts with private sector developers. Project BioShield provides a procurement mechanism to remove market uncertainty for countermeasure developers. It allows the federal government to guarantee companies that if they successfully develop a countermeasure, then the government will purchase a specified amount of it. The 113 th Congress enacted Pandemic and All-Hazards Preparedness Reauthorization Act of 2013 ( P.L. 113-5 ), which reauthorized and modified BARDA and Project BioShield. However, some key issues remain unresolved, including the form and magnitude of appropriations. In FY2004, Congress advance appropriated $5.6 billion to Project BioShield for a ten year period. Congress funded BARDA through annual transfers from the unobligated balance of the Project BioShield advance appropriation. However, as of FY2014, HHS had obligated all of this advance appropriation. Congressional policymakers may consider whether providing appropriations to BARDA and Project BioShield individually on an annual basis rather than through a combined, multiyear advance appropriation would improve efficiency or performance. Additionally, congressional policymakers may consider deviating from the previous funding amounts for BARDA and Project BioShield to account for perceived countermeasure needs or the current fiscal environment. For Further Information [author name scrubbed], Specialist in Science and Technology Policy ( [email address scrubbed] , [phone number scrubbed]) The National Select Agent Registry Program (NSAR, http://www.selectagents.gov/ ) oversees the possession of "select agents"—i.e., biological agents and toxins with the potential to pose a severe threat to public, animal, or plant health, or to animal or plant products. The select agent list is developed and periodically updated by the HHS Centers for Disease Control and Prevention (CDC) and the USDA Animal and Plant Health Inspection Service (APHIS). Congress mandated the program in 1996, and expanded and strengthened it through subsequent reauthorizations. NSAR requires registration and specified security practices by U.S. laboratory facilities—including those at government agencies, universities, research institutions, and commercial entities—that possess, use, or transfer biological agents and toxins. Individuals given access to select agents must undergo background investigations conducted by the Federal Bureau of Investigation. Federal law bars access by certain groups of individuals, based on criminal history, immigration status, and other factors. CDC regulates laboratory facilities that possess human pathogens and toxins (42 CFR 73), and APHIS regulates laboratory facilities that possess animal and plant pathogens and toxins (7 CFR 331 and 9 CFR 121). The two agencies share oversight of so-called "overlap agents" (such as the pathogen that causes anthrax), which affect both human and non-human animals. While NSAR emphasizes the prevention of the intentional use of these agents, there have also been concerns about the accidental release of these agents from registered facilities. Such releases can result from the failure of environmental controls, or from improper laboratory practices. NSAR regulations require registered facilities to have, in addition to the biosecurity provisions discussed above, biosafety plans that address good laboratory practices, worker safety, and related matters, to mitigate the possibility of an accidental release. NSAR has imposed significant constraints on those who choose to work with select agents. Skeptics point out, however, that it may not prevent intentional acts by individuals who have been granted access, or by others who have gained access to these agents in countries that lack comparable regulatory controls. In a 2012 final rule, pursuant to an executive order, CDC designated a subset of select agents that "present the greatest risk of deliberate misuse with the most significant potential for mass casualties or devastating effects to the economy, critical infrastructure; or public confidence" as "Tier 1" agents. The rule established new security requirements for entities that possess Tier 1 agents, including ongoing monitoring of personnel who have been granted access to them (77 Fed. Reg. 61084, October 5, 2012). For Further Information [author name scrubbed], Specialist in Public Health and Epidemiology ( [email address scrubbed] , [phone number scrubbed]) The BioWatch program—begun in 2003—deploys pathogen sensors in more than 30 large U.S. cities to detect the possible aerosol release of a bioterrorism pathogen, in order that medications can be distributed before exposed individuals become ill. The DHS Office of Health Affairs (OHA) manages the system. The CDC oversees some aspects of laboratory testing. Local jurisdictions would manage the public health response to a bioterrorism incident. Timely treatment will reduce casualties during a bioterrorism incident. Federal officials have sought to improve the responsiveness of the BioWatch system by replacing the current practice of daily sensor filter collection and analysis with so-called autonomous sensors, which would transmit pathogen detection findings in near-real time. OHA has pursued procurement of this type of sensor, which it terms Generation 3, or Gen-3, since 2007. However, GAO has noted that Gen-3 has a history of technical and management challenges, and a sizeable $5.8 billion life-cycle cost through FY2028. GAO recommends that DHS reevaluate the mission need and alternatives before continuing acquisition of these sensors. (GAO-12-810, September, 2012.) DHS later announced that further Gen-3 procurement was on hold pending an analysis of alternatives. BioWatch has not detected a bioterrorism incident since its inception, although it has detected pathogens of interest; scientists believe that natural airborne "background" levels of these pathogens, or close relatives of them, exist in certain regions. In July 2012, the Los Angeles Times published the first in a series of investigative articles criticizing the performance of BioWatch, echoing in part the concerns of GAO (above), as well as the National Academy of Sciences. The articles claimed that the system is prone to false alarms and is also insufficiently sensitive to detect an actual incident. DHS disputed these claims. In addition, some state and local health officials defended the program, saying, among other things, that it has fostered collaboration among federal, state, and local officials, who would be called upon to work together in response to an actual incident. The performance of BioWatch has attracted the attention of Members of Congress since its inception. Congressional appropriators have at times sought to limit funding for program expansion and/or called for program reviews. Authorizing committees in each Congress since the 108 th have held hearings on the program. In addition, Members of the House Committee on Energy and Commerce began an investigation of the program in the 112 th Congress, which has continued in the 113 th Congress. For Further Information [author name scrubbed], Specialist in Public Health and Epidemiology ( [email address scrubbed] , [phone number scrubbed]) "Office of Health Affairs," in CRS Report R43147, Department of Homeland Security: FY2014 Appropriations , coordinated by [author name scrubbed] The federal government generally supports the publication of federally funded research results because wide dissemination may drive innovation, job creation, technology development, and scientific advances. However, a series of scientific articles describing how to make influenza more transmissible have highlighted the possibility that publication of some research results could threaten national security. Congress, the Administration, and other stakeholders are considering whether current research publishing policies sufficiently balance potential benefits with potential harms. The current issues under debate cut across traditional policy areas, involving simultaneous consideration of security, science, health, export, and international policy. Because of the complexity of these issues, analysis according to one set of policy priorities may adversely affect other policy priorities. For example, maximizing security may lead to detriments in public health and scientific advancement, while maximizing scientific advancement may lead to security risks. Accounting for such trade-offs may allow policymakers to establish regulatory frameworks that more effectively maximize the benefits from such research while mitigating its potential risks. The Administration has begun developing policy frameworks for funding agencies and researchers to consider when sponsoring or performing specific sets of life science experiments that might produce results that could have beneficial and malicious uses. Stakeholders have not reached consensus on the effectiveness or appropriateness of these nascent policies. Congressional policymakers could decide to allow full implementation of the new policies before evaluating whether they sufficiently address the policy issues. Alternatively, Congress could require agencies to implement new, different processes to identify potential research of concern prior to funding; require federal prepublication review of all potential research of concern to establish appropriate limits on the distribution of the research results; require federal licensing of researchers permitted to conduct such experiments and access results; and limit such research to the most safe and secure laboratories. For Further Information [author name scrubbed], Specialist in Science and Technology Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report R42606, Publishing Scientific Papers with Potential Security Risks: Issues for Congress , by [author name scrubbed] and [author name scrubbed] The rapid pace of advancements in information technology presents several issues for congressional policymakers, including cybersecurity, potential changes to how the Internet is governed, issues related to broadband access, and issues related to the allocation of spectrum to support wireless services. For more than a decade, experts have expressed concerns about the security of information and communications systems—often referred to as cybersecurity —in the United States and abroad. The frequency, impact, and sophistication of attacks on those systems have added urgency to the concerns. The federal role in cybersecurity is complex, involving both securing federal systems and fulfilling the appropriate federal role in protecting nonfederal systems. No overarching framework legislation is in place, but many enacted statutes address various aspects of cybersecurity. Consensus has grown that the federal policy framework take into account the diversity and continuing evolution of the technology and threats, and the increasing role of the Internet in the U.S. economy and the lives of citizens. Among the issues Congress continues to confront are cybersecurity for critical infrastructure, given that most of it is owned by the private sector; prevention of and response to cybercrime, especially given its international character; the relationship between cyberspace and national security; and how federal funding should be invested to protect information systems. Proposed legislation has focused largely on issues in 10 broad areas: national strategy and the role of government, reform of the Federal Information Security Management Act (FISMA), protection of critical infrastructure (especially the electricity grid and the chemical industry), information sharing and cross-sector coordination, breaches resulting in theft or exposure of personal data such as financial information, cybercrime offenses and penalties, privacy in the context of electronic commerce, international efforts, research and development (R&D), and the cybersecurity workforce. Several bills addressing those issues were considered in the 112 th Congress, but none were enacted. Some have been reintroduced, and additional proposals are expected. The White House issued an executive order in February 2013 designed to improve the cybersecurity of U.S. critical infrastructure. Citing repeated cyber-intrusions into critical infrastructure and growing cyberthreats, Executive Order 13636, Improving Critical Infrastructure Cybersecurity, attempts to enhance security and resiliency of critical infrastructure through voluntary, collaborative efforts involving federal agencies and owners and operators of privately owned critical infrastructure, as well as use of existing federal regulatory authorities. Several bills have been introduced in the 113 th Congress, and additional proposals are expected. For Further Information [author name scrubbed], Senior Specialist in Science and Technology ( [email address scrubbed] , [phone number scrubbed]) [author name scrubbed], Analyst in National Security Policy and Information Operations ( [email address scrubbed] , [phone number scrubbed]) CRS Report R42114, Federal Laws Relating to Cybersecurity: Overview and Discussion of Proposed Revisions , by [author name scrubbed] CRS Report R42984, The 2013 Cybersecurity Executive Order: Overview and Considerations for Congress , by [author name scrubbed] et al. The Internet is comprised of international and decentralized networks largely owned and operated by private sector entities. As the Internet becomes more pervasive in all aspects of modern society, the question of how it should be governed becomes more pressing. Currently, an important aspect of the Internet is governed by a private sector, international organization called the Internet Corporation for Assigned Names and Numbers (ICANN), which manages the domain name system and Internet addressing. ICANN makes its decisions using a multistakeholder model of governance, in which a collaborative policy development process is open to all Internet stakeholders. National governments have increasingly recognized the importance of ICANN policy decisions, especially in cases where Internet policy intersects with national laws addressing such issues as intellectual property, privacy, law enforcement, Internet freedom, and cybersecurity. Some governments are advocating greater intergovernmental influence over the way the Internet is governed, while other governments (such as the United States and the European Union) oppose intergovernmental jurisdiction over the Internet. This debate surfaced during consideration of the revised International Telecommunication Regulations (ITR) treaty held by the International Telecommunication Union (a United Nations agency) during the December 2012 World Conference on International Telecommunications (WCIT) in Dubai. Ultimately, the United States (and 54 other nations) chose not to sign the final treaty, citing an unacceptable expansion of ITR jurisdiction over the Internet. As part of its input into the WCIT debate, the 112 th Congress unanimously passed S.Con.Res. 50 , which expressed the sense of Congress that the Administration should promote a global Internet free from intergovernmental control, and should preserve and advance the successful multistakeholder model of Internet governance. On May 14, 2013, the House unanimously passed H.R. 1580 , which states that it is "the policy of the United States to preserve and advance the successful multistakeholder model that governs the Internet." A key issue for the 113 th Congress is whether and how the U.S. government should continue to maximize its influence over ICANN's multistakeholder Internet governance process, while at the same time effectively resisting proposals for an increased role by international governmental institutions such as the United Nations. An ongoing concern is: to what extent will future international telecommunications and Internet conferences constitute an opportunity for some nations to increase intergovernmental control over the Internet, and how effectively will the Administration work to counteract that threat? For Further Information [author name scrubbed], Specialist in Science and Technology Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report R42351, Internet Governance and the Domain Name System: Issues for Congress , by [author name scrubbed] CRS Report 97-868, Internet Domain Names: Background and Policy Issues , by [author name scrubbed] Broadband—whether delivered via fiber, cable modem, copper wire, satellite, or wirelessly—is increasingly the technology underlying telecommunications services such as voice, video, and data. Since the initial deployment of broadband in the late 1990s, Congress has viewed broadband infrastructure deployment as a means towards improving regional economic development, and in the long term, to create jobs. According to the Federal Communications Commission's (FCC's) National Broadband Plan, the lack of adequate broadband availability is most pressing in rural America, where the costs of serving large geographical areas, coupled with low population densities, often reduce economic incentives for telecommunications providers to invest in and maintain broadband infrastructure and service. The National Broadband Plan also identified broadband adoption as a problem, whereby 1 in 3 Americans have broadband available but choose not to subscribe. Populations continuing to lag behind in broadband adoption include people with low incomes, seniors, minorities, the less-educated, non-family households, and the non-employed. The 113 th Congress is addressing a range of broadband-related issues. These include the transition of the telephone-era Universal Service Fund to the broadband-focused Connect America Fund, reauthorization of broadband loan programs in the 2013 farm bill, and the development of new wireless spectrum policies. Additionally, the 113 th Congress may choose to examine our existing regulatory structure and consider possible revision of the 1996 Telecommunications Act and its underlying statute, the Communications Act of 1934. Both the convergence of telecommunications providers and markets and the transition to an Internet Protocol (IP) based network have, according to a growing number of policymakers, made it necessary to consider revising the current regulatory framework. How a possible revision might create additional incentives for investment in, deployment of, and subscribership to, our broadband infrastructure is likely to be just one of many issues under consideration. To the extent that Congress may consider various options for further enhancing broadband deployment, a key issue is how to develop and implement federal policies intended to increase the nation's broadband availability and adoption, while at the same time minimizing any deleterious effects that government intervention in the marketplace may have on competition and private sector investment. For Further Information [author name scrubbed], Specialist in Telecommunications Policy ( [email address scrubbed] , [phone number scrubbed]) [author name scrubbed], Specialist in Science and Technology Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report R42524, Rural Broadband: The Roles of the Rural Utilities Service and the Universal Service Fund , by [author name scrubbed] and [author name scrubbed] CRS Report RL30719, Broadband Internet Access and the Digital Divide: Federal Assistance Programs , by [author name scrubbed] and [author name scrubbed] CRS Report RL33816, Broadband Loan and Grant Programs in the USDA's Rural Utilities Service , by [author name scrubbed] CRS Report R40616, Access to Broadband Networks: The Net Neutrality Debate , by [author name scrubbed] Congress passed the High-Performance Computing and Communications Program (HPCC) Act of 1991 ( P.L. 102-194 ) to enhance the effectiveness of federally-funded information technology (IT) research and development (R&D) programs, as well as encourage coordination among agencies conducting such research. Proponents of federal support of IT R&D assert that it has produced positive outcomes for the country and played a crucial role in supporting long-term research into fundamental aspects of computing. Such fundamentals may provide broad practical benefits, but generally take years to realize. Additionally, the unanticipated results of research are often as important as the anticipated results. Another aspect of government-funded IT research is that it often leads to open standards, something that many perceive as beneficial, encouraging deployment and further investment. Industry, on the other hand, is more inclined to invest in proprietary products and will diverge from a common standard when there is a potential competitive or financial advantage to do so. Supporters believe that the outcomes achieved through the various funding programs create a synergistic environment in which both fundamental and application-driven research are conducted, benefitting government, industry, academia, and the public. Critics, however, assert that the government, through its funding mechanisms, may be picking "winners and losers" in technological development, a role more properly residing with the private sector. For example, the size of the NITRD Program may encourage industry to follow the government's lead on research directions rather than selecting those directions itself. The NITRD Program is funded through appropriations to its individual agencies, so support for it will likely be part of the Federal budget debate in Congress. For Further Information [author name scrubbed], Specialist in Internet and Telecommunications Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report RL33586, The Federal Networking and Information Technology Research and Development Program: Background, Funding, and Activities , by [author name scrubbed] The rapid growth in mobile voice and data technologies has created new demands for advanced communications infrastructure and radio frequency spectrum capacity that can support high-speed, content-rich uses. Forging new policies for managing radio frequency spectrum may be the subject of far-reaching debates during the 113 th Congress. By statute, spectrum is treated as a natural resource, but it is considered by many as a form of property, through the assignment of licenses. Electro-magnetic, or radio frequency, spectrum is segmented into bands of radio frequencies and typically measured in cycles per second, or hertz. Spectrum allocations and license assignments are described in hertz. Standard abbreviations for measuring frequencies include kHz—kilohertz or thousands of hertz; MHz—megahertz, or millions of hertz; and GHz—gigahertz, or billions of hertz. The emerging debate over spectrum policy centers on how best to apply technology to maximize the societal and economic value of the airwaves to support popular and essential wireless services. Immediate policy concerns tend to focus on providing new spectrum capacity to fuel the building of networks using IP-enabled technologies to meet immediate consumer demand. Still to be fully addressed – by Congress and by most policy-makers – is how to bring the wireless network technology to the next level of accomplishment, assuring American leadership in a wireless, mobile economy for decades to come. The "Spectrum Act," Title VI of the Middle Class Tax Relief and Job Creation Act of 2012 ( P.L. 112-96 )—signed into law on February 22, 2012—addresses present and future needs to provide adequate spectrum. The act authorizes the Federal Communications Commission (FCC) to establish an "incentive auction" process. The incentive auction is intended to release airwaves, now used for television broadcasting, to be licensed and auctioned to commercial wireless companies for broadband networks. The act also seeks to expand the amount of spectrum available for unlicensed use and stipulates conditions under which federal agencies may share their spectrum holdings with commercial users. The technologies for next-generation networks built using licensed spectrum are well-established. Technologies that rely on databases to manage spectrum availability are being deployed and tested for next-generation unlicensed use. More advanced technologies, such as Dynamic Spectrum Access, that many believe will be the base for future spectrum policy, are in early stages of testing and development. For Further Information [author name scrubbed], Specialist in Telecommunications Policy ( [email address scrubbed] , [phone number scrubbed]) CRS Report R43256, Spectrum Policy: Provisions in the 2012 Spectrum Act , by [author name scrubbed]
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Science and technology (S&T) have a pervasive influence over a wide range of issues confronting the nation. Public and private research and development spurs scientific and technological advancement. Such advances can drive economic growth, help address national priorities, and improve health and quality of life. The constantly changing nature and ubiquity of science and technology frequently create public policy issues of congressional interest. The federal government supports scientific and technological advancement by directly funding research and development and indirectly by creating and maintaining policies that encourage private sector efforts. Additionally, the federal government establishes and enforces regulatory frameworks governing many aspects of S&T activities. This report briefly outlines an array of science and technology policy issues that may come before the 113th Congress. Given the ubiquity of science and technology and its constantly evolving nature, some science and technology related-issues not discussed in this report may come before the 113th Congress. The selected issues are grouped into 11 categories: Overarching S&T issues, Workforce and Education, Agriculture, Biomedical Research and Development, Physical Science and Material Sciences Defense, Space, Environment, Energy, Homeland Security, and Information Technology. Each of these categories includes concise analysis of multiple policy issues. The information and analysis presented in this report should be viewed as introductory rather than comprehensive. Each section identifies available CRS reports and the appropriate CRS experts for further information and analysis.
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The national defense strategy of the United States is evolving in response to changing global environments. As Congress responds to these changes, an important aspect is the responsibility for oversight and appropriations for an aging tactical airlift fleet. The C-130 has been the cornerstone of the U.S. tactical airlift fleet since the late 1950s. Military planners believe that C-130 aircraft provide the United States an edge in achieving national goals. They provide a capability to rapidly deliver forces making conventional deterrence more effective and expanding the ability to provide humanitarian assistance. However, the fleet has aged with some current models being flown by aircrew younger than the aircraft they are flying. As the fleet ages, management issues arise with reduced reliability, obsolescence and reduced parts availability, and changing aviation rules that impact availability of airspace due to obsolete avionics capabilities. Over the past 57 years, several models of the C-130 were built and delivered to the U.S. Air Force, Navy, Marine Corps and Coast Guard, with the C-130J model being the most recent. These aircraft are referred to as tactical airlifters because they can deliver passengers and cargo directly into remote or austere areas. In contrast, strategic airlift delivers capability on a global scale and more routinely operate from large airports. The FY2013 National Defense Authorization Act provided guidance on recapitalizing a portion of the C-130 fleet, but a significant number of aircraft may still need to be replaced, modernized or retired to maintain the desired capabilities. Recapitalizing refers to replacing older model aircraft with new production aircraft. As Congress shapes the tactical airlift fleet of the future, there may also be decisions regarding force structure or infrastructure that may impact C-130 basing. While these aircraft may be supporting the individual service's mission on a day to day basis, they are also routinely assigned to joint commands in support of ongoing operations. Warfighting and theater engagement is conducted by geographic combatant commands. These combatant commands are often operationally assigned C-130s to accomplish their mission. Based on this command relationship, there may be an Air Force C-130 assigned to a base in Arkansas temporarily stationed within one of the combatant command's area of responsibility (AOR) executing operations in support of the defense strategy. For example, when called upon during crisis such as the super typhoon Haiyan that struck the Philippines in November 2013, tactical airlift played a critical role in delivering aid within the region. As stated in the 2014 Quadrennial Defense Review, the U.S. military must be prepared to protect the homeland, to deter and defeat attacks on the United States and to support civil authorities in mitigating the effects of potential attacks and natural disasters; build security globally, in order to preserve regional stability, deter adversaries, support allies and partners, and cooperate with others to address common security challenges; and project power and win decisively, to defeat aggression, disrupt and destroy terrorist networks, and provide humanitarian assistance and disaster relief. To accomplish these goals, the U.S. military needs the ability to deploy rapidly and sustain capabilities to all regions of the world. Maintaining the correct mix of intra- and inter-theater airlift provides this capability. In his most recent overarching guidance to the Department of Defense, President Obama outlined several guiding principles of force and program development to ensure mission success: maintain a broad portfolio of military capabilities that, in the aggregate, offer versatility across the range of missions; differentiate between those investments that should be made today and those that can be deferred; maintain a ready and capable force, even as we reduce our overall capacity; reduce the "cost of doing business;" examine the mix of Active Component (AC) and Reserve Component (RC) elements best suited to the strategy; and make every effort in adjusting U.S. strategy and attendant force size to maintain both an adequate industrial base and investment in science and technology. In regards to maintaining a broad portfolio of capabilities, tactical airlift is often considered a critical element in offering versatility. Versatility in this context is how quickly and easily the military can transition between missions. For example, a C-130 could provide humanitarian support to a natural disaster area in the morning and swing to transporting military forces into a combat operation later that day. How this resource is managed may shape how versatile future U.S. capabilities will be. This report will examine some factors in deciding which C-130 investments may be made today or deferred and in doing so which capabilities are at risk. This report will also review, in light of current investments, the C-130 acquisition strategy and review how this strategy may reduce overall procurement cost and its impact on the industrial base. C-130 procurement is accomplished under a total force construct with the U.S. Air Force as the lead command for all C-130 procurement. This construct attempts to streamline the overall process and induce cost savings. Additionally, the C-130 fleet is particularly well suited to encourage analysis of the Active Duty/Reserve Component mix due to the large number of aircraft in the Guard and Reserve forces. In concert with these guiding principles, this report will review the following congressional issues associated with managing an aging C-130 fleet: How many C-130s are needed to execute the defense strategy? Should the fleet continue to be recapitalized? Should the current fleet be modernized? Does the force structure support the future fleet? and Is the current Active Duty/Reserve Component mix correct? The C-130 Hercules is a medium sized tactical transport aircraft providing multi-purpose theater support while assuming several diverse roles within the U.S. Air Force, Navy, Marine Corps and Coast Guard. Missions include tactical and intra-theater airlift and airdrop support, Arctic resupply, aerial refueling, special operations support, aeromedical evacuation, aerial spraying, firefighting duties for the U.S. Forest Service, and natural disaster and humanitarian relief missions. The aircraft is very versatile with the ability to take off and land from unprepared surfaces during day or night in hostile environments and in all weather. The aircraft is typically used to support operations within a certain theater, as opposed to the C-5 or C-17 aircraft that routinely fly cargo internationally. The bulk of the U.S. government fleet comprises 667 aircraft. There are a small number assigned to other agencies, such as the U.S. Forest Service, but this report will focus on the aircraft assigned to the USAF, USN, USMC and the USCG. The majority of the USAF C-130 fleet comprises C-130H and J models flying combat delivery missions, which entail the aerial transport of cargo and passengers. As of February 2014, 362 C-130 aircraft are assigned to this mission in the active duty, Air National Guard and Air Force Reserves. Due to the unique aspects of the C-130, several versions of the aircraft have been modified from the traditional airlift mission to support special missions. The major versions are the AC-130, MC-130, HC-130 and EC-130 (see Table 1 ). These aircraft are flown by Air Force Special Operations Command (AFSOC), Air Combat Command (ACC), and the Air National Guard. 152 modified C-130s support special operations missions. The Naval Air Systems Command manages a fleet of 94 C-130 aircraft. The Naval Reserves fly 20 C-130T aircraft, which provide logistics support to Navy operating forces and transports personnel or cargo. The active duty and Marine Corps Reserve operate the remaining 74 USMC KC-130T/J aircraft. The KC-130T and KC-130J aircraft provide logistic support, air-to-air refueling and close air support to fleet operating forces. The Coast Guard manages a fleet of 28 HC-130s. Six of the HC-130s are the new J model aircraft. The HC-130 provides the Coast Guard with a long range surveillance aircraft capable of search and rescue operations, command and control, and air-to-air refueling. These aircraft are responsible for coverage of both the Atlantic and Pacific areas. The illustration below is one way to view the C-130 fleet. There are commonalities across the entire fleet but there are also issues common only to specific groups so it may be helpful to view the entire fleet as smaller groupings. The USAF combat delivery aircraft flown by the active duty, Air National Guard and Air Reserves combine into one group with Special Operations aircraft lumped into another group within the Air Force. The Navy fleet comprises Naval Reserve aircraft with Marine Corps Active duty and Reserve aircraft. Finally, the Coast Guard fleet is presented as a single fleet. The USAF combat delivery group has had the most attention from Congress in the recent past. This grouping includes all the Air National Guard and Reserve combat delivery aircraft. The group was also the focus of the FY2013 NDAA directed "floor" of 358 intra-theater aircraft. The table below outlines the primary models assigned to each service and the number of aircraft. One should keep in mind that the fleet is managed dynamically with new aircraft entering service and others retiring so the numbers fluctuate on a small scale. The aircraft will also routinely change status when they are sent to long term modifications or depot level maintenance which will slightly change the numbers assigned. The table represents the most accurate data at the time the table was populated. An important question for Congress is to determine how many C-130s are needed in the future to provide desired capability. In determining the desired fleet size an analyst may move away from the discussion of actual aircraft numbers toward a broader question of how much capability is desired to accomplish the missions of the future. A typical question might be how much cargo or how many people must be airlifted to support a specific scenario, like a major land battle, versus how many aircraft a commander may need to achieve the objective. This analysis is typically accomplished by the services but normally returns to a discussion of numbers of aircraft since this can be assigned a monetary value. For the purposes of this report, aircraft numbers will be used to indicate desired capability. After release of the FY2013 President's Budget, the Air Force submitted a modification to force structure to Congress in November 2012. This Total Force Proposal (TFP) offered an integrated set of modifications to the FY2013 Budget. The TFP requested a fleet of 326 intra-theater aircraft. Additionally, the TFP made the following changes to the FY2013 PB submission: reversed the elimination of one ANG and one Reserve C-130H squadron; restored some Reserve Component missions performed prior to FY2012 by adding two ANG C-130 squadrons and increasing the size of one ANG C-130 squadron; and made adjustments to the FY2012 Active Component force structure by divesting two C-130H squadrons. The fleet size was modified in the FY2013 NDAA to increase the number by 32 to 358 for FY2013 and allow for 23 prior year approved FY2013/FY2014 C-130 retirements. After retaining the 358 inter-theater airlift aircraft required by the FY2013 NDAA, the Air Force modified the plan to retire only one Active component C-130H squadron. The current USAF plan is to inactivate the 53 rd Airlift Squadron at Little Rock and retire their assigned C-130Hs (approximately 14 aircraft). In order to maintain an inventory of 358 intra-theater airlift aircraft, the Air Force considered options regarding the C-130/C-27 fleet mix. The Air Force determined that the requirements of the defense strategic guidance called for 310 C-130 combat delivery aircraft; however, the FY2012 President's Budget projected an inventory of 372 C-130s and 38 C-27s at the end of the Future Years Defense Program. The Air Force analysis identified an excess in intra-theater airlift which resulted in a strategic choice to request permission to retire 65 C-130H aircraft across the FYDP and divest all 21 C-27J aircraft. These retirements would leave a fleet of 318 C-130s which the Air Force deemed sufficient to meet the requirements levied by the defense strategic guidance, including the Army's direct support requirement. In the USAF FY2015 budget request, the Air Force requests again to retire excess C-130H aircraft to a total of 318 total combat delivery aircraft in FY2015 but to grow to 328 as the final J models arrive within the Future Years Defense Program (FYDP). Additionally, as directed by the FY2013 National Defense Authorization Act, the Department of Defense conducted a Mobility Capabilities Assessment (MCA-18) to examine and report to Congress how the planned mobility system supports the guidance in the 2012 Defense Strategy and how much tactical airlift is needed to fill the strategic requirements. The MCA-18 listed four objectives: 1. Assess the mobility system's ability to support a range of current and future challenges as identified in existing guidance. 2. Identify key constraints associated with deploying and sustaining U.S. forces. 3. Evaluate options to mitigate constraints. 4. Identify possible programmatic actions to align mobility capabilities with current and future challenges. A summary of the findings as they relate to intra-theater airlift found that no surge scenarios associated with the current defense strategy (even one in which a significant homeland defense event occurs concurrently with two wars) require a fleet of 358 C-130s. This assessment was further justification to support the Air Force's previous assessments indicating a combat delivery C-130 force closer to 300 would meet current and future requirements. The Air Force has committed to maintaining the minimum number of C-130 aircraft at 358 for FY2013 and FY2014. The question for Congress is where to set the "floor" for combat delivery intra-theater airlift in the future. Approximately 152 C-130s have been modified from the traditional airlift mission to support special operations. The Air Force, as described in the proposed Acquisition Program Baseline dated September 27, 2013, plans to recapitalize the entire fleet of AC, MC, and HC-130 special operations aircraft. This includes a proposal to purchase 37 HC-130Js and 94 MC-130Js. Out of the 94 MC-130Js, 37 will become AC-130Js through modifications by U.S. Special Operations Command. There are also 21 EC-130 models, seven of which have been recapitalized as EC-130Js. An issue for Congress is how many of these special mission aircraft are needed to support future requirements. The current Navy Program of Record is 104 aircraft: 79 Marine Corps and 25 Naval Reserve KC-130J aircraft. The Naval Reserves fly the C-130T and the current plan is to retire them on a near one to one basis as new KC-130J models enter service. This will create a homogenous fleet of KC-130J aircraft, although some aircraft may be modified with the Harvest Hawk (Hercules Airborne Weapons Kit). With the Harvest Hawk kit the aircraft has the ability to deliver air-to-ground Hellfire missiles, precision-guided bombs and 30 millimeter auto-cannon rounds. An issue for Congress is whether these levels should be authorized. The DHS FY2014 Strategic Context Congressional Justification lists the current Program of Record for 22 Long Range Surveillance aircraft (HC-130s). This number has been consistently mentioned as the Coast Guard requirement. However, with the FY2014 NDAA transferring 14 C-27J aircraft from the Air Force to the Coast Guard, the requirement for 22 HC-130s may change. As the Coast Guard fleet adapts to this recent change, Congress may want to examine the fleet mix and determine what number of HC-130s are required. A significant issue in the current C-130 fleet is age of the C-130H models. Years of flight in austere environments, advancing technologies, and aircraft age are catching up to the fleet. The fleet faces part obsolescence issues, fatigue on the aircraft structure, and changing aviation regulations that may impact access to certain areas of the world. The average age of the C-130H fleets in all the services is over 25 years. The figure below shows the breakout in the Air Force. As fleets age and aviation rules evolve, aircraft fleet managers are confronted with the choice to modify their current aircraft with new equipment (modernize) or replace the aircraft with new production models (recapitalize). Each option has advantages and disadvantages; a significant driver for both options is cost. If the decision is made to recapitalize the older aircraft with new planes, cost becomes a major consideration. The current FY2014-FY2018 multi-year procurement lists the cost for 79 C-130J aircraft at $5.8B. While this is a significant investment, new aircraft may produce cost savings over time. The C-130J can carry more cargo, fly greater distances, and incur fewer maintenance costs than the older C-130H models which may create savings in the future. In choosing modernization over recapitalization there are several issues to address. Most importantly, what components should be modernized? The current fleet has significant structural issues and older C-130Hs will need to modify the center wing box structure to extend their service life at some point. This modification costs approximately $7 million per aircraft. There are also potential problems with the current avionics capability in the C-130H. Within the next several years there are anticipated changes to the international and domestic flight rules with which current C-130Hs cannot comply due to outdated avionics. If no upgrades are performed to the avionics and the rules do change there may be areas of the world, including airspace around busy U.S. airports, that may be inaccessible to C-130H aircraft. The upgrades to the avionics also come with a menu of options that start with minimal capability upgrades to significant overhauls of the current system. The costs will likely rise as more significant upgrades are accomplished. The overall decisions regarding the C-130 fleet are complex with several variables. One approach might be to forecast what the fleet of 2025 might look like and how this supports expected future requirements. If current production rates are maintained, the fleet will have several older model aircraft in the inventory well into the future. If older aircraft are not replaced with new aircraft before obsolescence issues impact capability, concurrent recapitalization and modernization may be the best option to support future requirements. Older model C-130s currently make up a significant portion of the entire fleet and are the focus of modernization issues. The age of the fleet has created parts and avionics obsolescence issues, along with structural fatigue, that may impact the overall capability of the aircraft in the future. An important consideration for military planners when analyzing an aging aircraft fleet for either recapitalization or modernization is Diminishing Manufacturing Sources and Material Shortages (DMSMS). Defined as the loss of commercial sources of items or material, DMS surfaces when a source announces the actual or impending discontinuation of a product, or when procurements fail because of product unavailability. DMS is a significant issue for the C-130H fleet, primarily because the C-130H has old and outdated avionics; 22% of the avionics are already obsolete according to the Air Force Life Cycle Management Center. This was magnified by the decision to cancel the C-130 Avionics Modernization Program (AMP), which was originally planned to address DMS issues within the fleet. Since the older parts would be replaced with new parts as part of the AMP, the DMS issue faded during the life of that program. When the Air Force attempted to cancel the program in 2012 and airplanes were no longer being modified, the DMS issues again became a rising concern. According to the recent Institute for Defense Analyses (IDA) study addressing C-130 avionics modernization, 75% of the avionic pieces-parts will be considered to be obsolete by FY2023. DMS issues also impact structural components such as the C-130H outer wing box, which is no longer in production. Assuming current international/U.S. regulations for aircraft Communication Navigation Surveillance/Air Traffic Management (CNS/ATM) requirements follow current implementation timelines, a significant portion of the C-130 fleet may be restricted access to certain European airspace as early as 2017. The current fleet of C-130H models do not have the required avionics capabilities anticipated in certain U.S. airspace and in areas surrounding busy U.S. airports as soon as 2020. This may be of particular concern for units stationed at or near these large U.S. airports, especially Air National Guard and Reserve units. The table below provides an illustration of how many J model aircraft are expected to join the fleet between FY2014 and FY2018. An approach may be to look at the fleet in FY2018 along with guidance on recapitalizing and decide what modernization steps to take. For instance, the USN/USMC is forecasted to have a fleet of 53 J models and 41 H models in FY2018. If the decision was made to continue to replace the USN/USMC H models at a rate of 10 per year, the new regulatory guidance may not be an issue, as there is expected to be some relief from these regulations for aircraft that are retiring. In this case, modernization efforts might be kept to a minimum and resources directed toward recapitalization. However, by FY2018 the USAF combat delivery fleet will still have approximately 250 H models in the inventory, assuming the fleet size remains at current levels. These remaining aircraft may be subject to changing avionics regulations that may limit access to certain airspace. The most recent C-130 modernization effort in the USAF authorized and appropriated by Congress is the C-130H Avionics Modernization Program (AMP), which began system development in 2001. According to DOD, funding instability and problems integrating hardware and software, as well as an Air Force decision to exclude C-130E aircraft from the program, triggered a Nunn-McCurdy unit cost breach in February 2007. The program was subsequently restructured to include far fewer aircraft—221 instead of 519—at a cost $1.8 billion greater than the original program estimate. The Air Force attempted to cancel AMP in 2012, citing budget concerns. Prior to the decision to cancel the program, development, test, and evaluation on the program was completed including 427 flights and 1,066 flight hours. Currently five aircraft have been modified and delivered along with a flight simulator. Inside Defense reported in December that the five upgraded C-130 aircraft effectively remain idle at Little Rock Air Force Base awaiting a decision on the program. The aircraft are being maintained in a flyable status at the base and are being used to train student loadmasters. Because the avionics systems are so different, they are "unusable" for currently trained pilots, flight engineers and navigators. The current policy in the Air Force is for pilots to be qualified on only one model aircraft at a time, with a few exceptions (e.g. test pilots). With the small number of AMP modified planes, new pilots are not being trained to fly them. See appendix for a comparison of C-130 cockpits. The FY2013 NDAA directed the Secretary of the Air Force to have the Institute for Defense Analyses conduct an independent cost-benefit analysis comparing continuing the C-130 AMP program or upgrading and modernizing the fleet using a reduced scope program for avionics and mission planning systems. The study looked at three alternatives: (1) continue the AMP program; (2) option A; which replaces all cockpit gauges and the current self-contained navigation system (SCNS); and option B, which has fewer avionics upgrades. All three options guarantee they comply with regulations for flying in the U.S. and international airspaces under current rules. As explained in the report, they differ in details with respect to navigation performance, potentially imposing restrictions on aircraft in the future if rules are changed. Option B also does not replace the current SCNS, which will likely need to be replaced in the future to ensure compliance with future aviation rules. An important point to consider in reviewing this data is that it does not include the approximately $1.7 billion previously spent on the AMP program. The report estimated remaining acquisition cost for each of the alternatives, including research, development, test, evaluation and procurement costs. In considering alternatives, an issue to consider is also the time it takes to field a new system. The AMP took over 40 months to deliver the first aircraft from contract award. The combined estimated acquisition costs with calculated operations and support savings were used to estimate the 25-year costs in the figure below. The FY2014 National Defense Authorization Act ( P.L. 113-66 ) prohibits the Air Force from taking any action to cancel or modify the avionics modernization program of record for C–130 aircraft; or initiate an alternative communication, navigation, surveillance, and air traffic management program for C–130 aircraft that is designed or intended to replace the Avionics Modernization Program. It further directs the Comptroller General of the United States to submit to the congressional defense committees a sufficiency review of the cost-benefit analysis conducted by IDA by 1 April, 2014. As of May 1 st , the draft report has been delivered and is being reviewed by DOD and IDA. The USAF FY2015 budget submission requests to address C-130H modernization with a reduced scope Communications, Navigation, Surveillance/Air Traffic Management program. The budget overview lists a savings of over $1 billion (total acquisition cost) as compared to the C-130 AMP. This request supports the FY2013 IDA C-130 AMP study recommendation to pursue a reduced scope program although it does not specifically identify an alternative program. For the 14 EC-130H, Compass Call, aircraft stationed at Davis-Monthan AFB, Arizona, the Air Force plans to modernize the avionics. L-3 Platform Integration has selected Rockwell Collins as the avionics solution provider for a CNS/ATM avionics upgrade. The EC-130H CNS/ATM program calls for upgrading the legacy EC-130H aircraft to provide compliance with international CNS/ATM airspace standards meeting necessary calendar year 2020 navigation performance mandates. USAF submitted a proposal in the FY2015 budget to divest 7 of these EC-130H aircraft in FY2016. This may impact future upgrade requirements. The USN has decided to upgrade its fleet of older C-130T with new avionics to comply with future aviation regulations and provide the aircraft with expanded capabilities. The first of these upgrades was recently completed by BAE Systems, which included replacing 43 obsolete analog gauges with two flat panel digital displays and prepared the aircraft for the follow on Avionics Obsolescence Upgrade (AOU) program. The AOU program is a government integration with software development and select hardware components contracted to Lockheed Martin Mission Systems and Training. Additional elements are provided by the government to be integrated into the final modification. The goal of this approach is to reduce total life cycle costs by leveraging existing modernization programs and proven technology. The program is scheduled to reach initial operational capability with delivery of the first three modified aircraft in 2016. When completed, this modification will bring the USN C-130T fleet into compliance with anticipated future avionics regulatory requirements. The Coast Guard is currently upgrading the avionics on the older HC-130 aircraft with the Avionic 1 Upgrade (A1U). The stated objective of A1U is to replace aging/obsolete equipment and update the avionics to comply with the CNS/ATM requirements in the future. The first modified aircraft was accepted by the Coast Guard from Rockwell Collins, the primary contractor, in November 2012. As of February 2014, two aircraft have been modified. The Coast Guard stated plans to complete up to four A1U installations on HC-130H aircraft in FY2014. With the addition of new C-27Js and the continued procurement of C-130J models there may be changes to the overall strategy in upgrading these older aircraft. The current avionics upgrades on the C-130J for the USAF, USN, USMC and USCG are being accomplished in a phased approach. The last two phases are the Block 7.0 and 8.1 upgrades. Block 7.0 – includes new flight management systems, civil Global Positioning System, Link 16 tactical data exchange, and 23 other items. Block 8.1 – includes Mode 5, ADS-B out, Data Links, and seven other items. In order to better manage the fleet and to avoid simultaneous upgrades the USAF has combined Block 7.0 and Block 8.1 modifications. The development costs are shared via a global Project Arrangement (PA) by the United States (USAF, USMC, USCG), the United Kingdom, Italy, Australia, Denmark, Canada, and Norway. Due to the combining of upgrades, funding for Block 7.0 was combined with 8.1 in FY2014. Once complete, these upgrades will bring the C-130J fleet into compliance with currently forecasted aviation regulations. A key issue in any aircraft fleet is the structural service life of the airframe. The structural service life relates the time after production during which the aircraft structural components exceed minimum acceptable safety standards when routinely maintained. Structural service life is impacted by several factors including corrosion, mission severity, and structural fatigue. A major modification currently being accomplished on the C-130 fleet to extend the service life is the replacement of the center wing box, a critical fatigue component of the C-130 fleet due to the stresses of flying missions over such a long period of time. The center wing box is attached to the fuselage and forms the center section of the wing. Two outer wing sections connect to the left and right ends of the center wing. There have been problems historically with fatigue cracking of the center wing on Special Operations Forces (SOF) aircraft in the early 1990s and on the combat delivery fleet in 2000-2005. The fatigue cracking detected on combat delivery aircraft ultimately led to the implementation of strict service life limits that were implemented in 2005. The implementation of these limits led to the numerous aircraft being grounded or restricted in 2005. The center wing replacement modification replaces C-130H center wings with either Extended Service Life (ESL) center wings or standard center wings. The ESL wing has been the production wing on C-130Js since 2009. To date, 128 center wings have been replaced on USAF aircraft. Fifty center wings were replaced with ESL center wings on special mission aircraft from 1993-2000, and 77 center wings have been modified on special mission and combat delivery aircraft since 2007 with 37 aircraft receiving ESL center wings and 40 aircraft receiving standard center wings. The FY2015 USAF budget requested funding from Congress to continue the center wing replacement program. The Coast Guard has identified six aircraft to undergo center wing box replacement. The first was completed in August 2012, in partnership with the Air Force. The second is scheduled for November 14, but once again the transfer of the 14 C-27s may impact these modifications as the fleet numbers are changing. The Navy is currently estimating retirement of the H model aircraft in the Navy prior to them needing center wing box replacements. Based on calculated Equivalent Baseline Hours (EBH) derived from a USAF fatigue study, all center wing boxes on Navy KC-130T and C-130T have at least 20 years of life remaining. The approximate cost per airframe is $7 million and the work is done at Robins Air Force Base in Georgia. This cost may be a consideration when older aircraft that may be scheduled for retirement are maintained on active duty since they will need this modification. Current recapitalization efforts center on the C-130J model. The C-130J is the newest model aircraft and the only version still in production. Although similar in appearance to earlier models, the J model has more powerful Rolls-Royce engines and advanced avionics (including a heads-up display) with a digital backbone versus the analog instrumentation on the older H models. Other notable differences, according to the Air Force, include improved reliability, maintainability, greater capacity, and the removal of two aircrew members (navigator and engineer). Deliveries of the first aircraft began in 1999. Since then, over 200 aircraft have been delivered to the U.S. Government. The illustration below gives a review of the increased capability the C-130J provides over legacy models. The USAF is the lead command for procurement of all C-130J aircraft for the services and the USCG. The current acquisition strategy employed by the USAF is a multi-year procurement for C-130J models. DOD listed the following benefits to the government from a multi-year procurement, which have generally been accepted without contention: Substantial Savings: savings for the FY2014-FY2018 listed at $610.6M (TY$) or 9.5%. Stability of Requirement: the USAF requirement for C-130J procurement is expected to remain unchanged during the multi-year contract period. Stability of Funding: the Navy and Air Force have demonstrated commitment to a stable funding stream by fully funding the requirement across the Future Years Defense Program (FYDP). Stable Configuration: the baseline C-130J variant aircraft has been thoroughly tested and certified by the Federal Aviation Administration and the USAF. Realistic Cost Estimate: prior procurement and previous multi-year procurement on the C-130J variants support the conclusion the pricing is realistic. National Security: investments in DOD's theater capabilities include ongoing procurement of C-130J aircraft to recapitalize the aging C-130 fleet. Multi-year procurement has been used previously for C-130 acquisition. The 2003 Department of Defense Appropriations Act ( P.L. 107-248 Section 8008), appropriated funds to be used for the multi-year procurement contract for C-130 aircraft. This commitment was for 62 aircraft covering six years of procurement. The MYP was also used in the FY2014 PB request and authorized by the FY2014 NDAA. The FY2014 multi-year procurement encompasses FY2014 through FY2018. The procurement includes 79 C-130J variant aircraft at a total cost of approximately $5.8 billon. The proposed production timeline by variant is listed in the figure below. In the FY2014 Procurement Exhibits from DOD, the cost savings attributable to the multi-year strategy is estimated at $610.6 million dollars (Then Year $). The total cost of the program is listed at $5.809B (Then Year $). For the combat delivery fleet, the Air Force plans to recapitalize the entire active duty fleet. Assuming current guidance remains the same; the active duty fleet would consist entirely of approximately 100 C-130Js by FY2018. While providing general recommendations, the most current airlift analysis, MCA-18, did not list how many of each type of aircraft are required to execute the current defense strategy. The current requirements document for C-130J aircraft, the 2005 DOD Operational Requirements Document (ORD) listed the requirement for combat delivery C-130Js at 155. While the current recapitalization plan appears to fall short of this number, there may be justification to continue procurement of C-130Js beyond the current number of approximately 136 combat delivery models. The decision whether or not to continue C-130J procurement beyond the current FY2018 MYP is a significant issue for Congress. If USAF plans are met, the current planned number of C-130J combat delivery aircraft will reach 136 aircraft in FY2019 and stop. This would leave the Air National Guard with approximately 24 J models and the Air Force Reserve with approximately 10 J models. If C-130J procurement was to stop at this point, there may be significant interest in what capabilities the future Guard and Reserve C-130H fleets will have. This may be magnified by slowing modernization efforts in the short term. As previously stated, the Air Force plans to recapitalize the entire fleet of AC, MC, and HC-130 special operations aircraft. This includes a proposal to purchase 37 HC-130Js and 94 MC-130Js. Out of the 94 MC-130Js, 37 will become AC-130Js through modifications. The USAF budget request only includes the FYDP. However, the figure below illustrates the forecasted recapitalization rate of the HC/MC/AC-130s into the future followed by the FY2014-FY2015 USAF Budget Request levels. The Navy plans to recapitalize the entire Navy and Marine fleet with KC-130J aircraft. The current Program of Record is 104 aircraft–79 USMC and 25 U.S. Navy Reserve. Within the USMC, 51 aircraft are designated as active duty and 28 will be assigned to the Marine Corps Reserve. As of February 2013, 46 KC-130Js had been delivered to the active duty with only 5 remaining to replace the entire active duty force. The 28 remaining Marine Corps Reserve aircraft are scheduled to begin delivery in March 2014. All Navy/Marine Corps KC-130J aircraft are being procured through the C-130J USAF procurement contract. The Coast Guard has also plans to recapitalize its entire fleet with HC-130J aircraft. The current fleet has an average age of 28 years, making the HC-130Hs increasingly difficult to maintain and sustain operationally. The current program of record for the Coast Guard is for 22 HC-130Js. To date; six have been delivered and are stationed at Air Station Elizabeth City, North Carolina. The next three are schedule to be delivered to Air Station Barbers Point, Hawaii. This number has been consistently mentioned as the Coast Guard requirement. With the FY2014 NDAA transferring 14 C-27J aircraft from the Air Force to the Coast Guard, this requirement for 22 HC-130s may change. In the current debate over strategy, and in the context of current budget limitations, opportunities may emerge to analyze the current force structure and decide how much tactical airlift is required to achieve national goals. While not suggesting a specific number, the MCA-18 analysis did determine that there is currently a surplus of capability in the C-130 fleet. This position was reiterated recently by the then Commander of Air Mobility Command, General Paul Selva. "My position is that the fleet itself is affordable. It's how we deploy the fleet and who operates it," he said. While "there is disagreement on the total numbers, I think we'll land right about the 300 number," he said. This would be a reduction of approximately 40 aircraft. He also suggested adjustments to the Air Mobility Command force structure. His preference was to preserve the actual aircraft in the inventory and achieve savings by changing how they are operated including moving some to the Guard and Reserve. A major consideration when adjusting the fleet size or mix is the resultant Active, Guard, and Reserve mix. The MCA-18 report cautions that any adjustments should be made with due consideration to that mix and with dwell rates in mind. Both divesting aircraft and transferring them between components involves both financial and political considerations but, from the perspective of implementing national strategy, perhaps the most important consideration is maintaining the proper capabilities mix to meet future requirements. One important variable in determining future force structure is the rate of aircraft retirement. The following chart illustrates the historic rate at which the Air Force has retired aging C-130s. In recent years the rate has declined in part due to congressional limits on force structure. If the rate continues at a relatively low level, the Air Force may be challenged with continuing costs associated with maintaining the aging fleet. C-130 basing has been a contentious issue. Over half the states in the country have a C-130 unit within their borders. The states with C-130 Air Guard units are also assigned responsibilities within the state. Balancing the roles and missions of each unit and how they support the defense strategy directly influences basing decisions. With some C-130 Air National Guard bases employing over 1,000 civilians in support of the base operations, it is a major concern when force structure and basing issues are addressed. There may be opportunities to address force structure concerns by creating or growing associate units. However, the Air Force does not appear to be moving in that direction. Unit associations link Reserve component units to active duty units. The goal is to combine unit strengths and increase overall effectiveness. For instance, the active duty has young pilots who need training and the Reserve component typically has a very experienced pilot base. Matching these two units may result in some synergies in regards to pilot training. There are three types of unit associations within the Air Force: Classic associate: A regular Air Force unit retains principal responsibility for a weapon system or systems and shares unit equipment and aircraft with one or more reserve component units. Under the classic associate structure, active-duty and reserve units retain separate organizational structures and chains of command. Active associate: A reserve component unit has principal responsibility for a weapon system or systems and shares unit equipment and aircraft with one or more regular Air Force units. Active duty and Reserve units retain separate organizational structures and chains of command. Air reserve component (ARC) associate: Two or more air reserve component units integrate with only one retaining principal responsibility for the weapons system or systems. Each unit retains separate organizational structures and chains of command. In 2007, the Air Force, in an effort to achieve more cooperation between Active and Reserve forces and in response to the 2005 Base Realignment and Closure Directive, directed the first Air Force Reserve C-130 unit to form an active association with an active duty unit at Pope Air Force Base. The current force structure utilizes the Active Association at the following bases: Keesler Air Force Base, Mississippi (Air Force Reserves, C-130Js); Little Rock Air Force Base, Arkansas (Air Force Reserves, C-130Hs); Cheyenne Air National Guard Base, Wyoming (Air National Guard, C-130Hs); Peterson Air Force Base, Colorado (Air Force Reserves, C-130Hs); and Pope Field, North Carolina (Air Force Reserves, C-130Hs). As part of the FY2015 Budget Request, the USAF is proposing closure of the Active Associations at Peterson and Cheyenne and drawing down the two units by 4 C-130H each in FY2015. Additionally, the Air Force is requesting retirement of the C-130H aircraft at Pope Field in FY2014 and to move the C-130J aircraft (the WC-130Js would remain) at Kessler to Little Rock. If these moves are approved the overall concept of the active association in the C-130 fleet may be significantly altered. Adding to the discussion of associations is the current rate of recapitalization of the active duty C-130H force. There may be no C-130H aircraft assigned to the active duty as soon as FY2018. Current USAF policy is for pilots to qualify in either the H model or the J model C-130s, but not both. This may decrease the availability of H model aircraft since active duty aircrews will not be qualified to fly them if demand increased. The Air Force FY2015 budget proposal has significant impacts on Guard and Reserve basing by closing some Active Associates and reducing aircraft at several bases. Additionally, as the active duty Air Force transitions to an all C-130J fleet there may be significant impacts on Reserve Component training, maintenance, operations, and manning. The distribution of combat delivery C-130s assigned to the active duty, Air National Guard, and Air Force Reserves has recently been the focus of congressional oversight hearings and generates several concerns regarding force structure and manning. The distribution of these aircraft is illustrated in the figure below. Operational mix refers to how different capabilities are combined to achieve the desired overall effect in accomplishing the military mission. In regards to a fleet composed of different variants of the same aircraft, how they are distributed between the components affect how they support the overall mission. As new production aircraft enter service, debate arises on which units will receive the newest aircraft. In terms of fleet management, it is generally more economical to recapitalize units as a whole rather than to assign aircraft piecemeal throughout the force. In the 1980s-90s the Air Force recapitalized a large portion of the C-130E fleet with new C-130H models. The majority of these new aircraft went to Reserve component units leaving the older C-130E aircraft in the Active component. When the C-130J production began, a large number of these aircraft were assigned to the active duty to replace the aging C-130E aircraft. This began a disparity between the Active and Reserve component fleets which remains today. If current plans are followed, that disparity will grow. The figure below illustrates where the newer C-130J combat delivery aircraft are being assigned with the USAF. Three current studies address the Active versus Reserve component mix. A 2013 Rand study titled "Costs of Flying Units in Air Force Active and Reserve Components" explored a methodology based on cost using aircraft inventory and flying hour data and offered the conclusions illustrated in the figure below. In regards to the C-130 combat delivery fleet, strategic capacity would be the ability to launch aircraft and deliver passengers and cargo. The operational demand would be how many passengers and cargo the user must deliver and the force mix refers to the number of Active versus Reserve forces. The report suggested that in an environment in which capacity exceeds demand, the more cost effective force mix favors the Reserve Component (RC) conversely if demand exceeds capacity a larger Active Component (AC) force would be more favorable. The study goes on to say that, generally speaking, for the purposes of meeting strategic surge demand, RC units provide mission-ready aircraft with competent aircrew and maintenance workforces at a lower cost than AC units. However the complementary depth and capacity provided by the RC units is offset by the agility and responsiveness relied upon in the AC. The report suggested that from a cost perspective, the nation is well served by a sustained Active Component/Reserve Component mix. The illustration below is a graphical representation of the Active and Reserve force mix; how far up or down the diagonal line one sets the force posture determines the operational mix of force. The challenge for Congress is determining this tradeoff between the agility of the Active force and the depth/cost of the Reserve Components. The USAF Mobility Capabilities Study (MCA-18), while addressing options to mitigate constraints on airlift capability, did not recommend any changes to the current force structure but offered some considerations if greater support to daily operations over sustained periods is desired. Taking into account that only 33% of the C-130s and 43% of the aircrew are in the active component, two options for consideration were given. 1. Adjust Active Component (AC)/Reserve Component (RC) Mix: Increase the ratio of active duty aircraft and flight crews. This alternative increases the capability of a fleet during periods of long-term steady state operations without altering the fully mobilized capability. Returning to the graphic above, if the force is continually tasked (move left on the diagonal line), even below surge levels, the availability of the RC on short notice could become an issue, making a case for more AC forces. The reverse is also true. If the assumption is made that future steady state operations will be less demanding, the case for more RC forces is strengthened. The statement regarding mobilized capability refers to the assumption that RC forces are not activated during the long-term steady state operation. If the RC forces were activated, then dwell-rates may increase costs. 2. Create More Associate Units: If greater access to C-130 aircraft is needed to meet daily operational demands over sustained periods, the creation of more associate units in which AC flight crews are assigned to fly RC aircraft is a reasonable option. This would increase access to RC aircraft without significantly altering the current AC/RC mix. Again the assumption is that a continually tasked force would experience difficulty with RC availability and more specifically aircrew availability. If AC aircrews are assigned within the RC unit they would be able to augment the RC aircrew and increase availability of the aircraft since there will be more crews available to fly. The National Commission on the Structure of the Air Force was created by the FY2013 National Defense Authorization Act. This commission released its findings January 30, 2014. While not directly addressing C-130 units, the commission did make a number of recommendations favoring an increased utilization of the Air Reserve Component. The commission also recommended integration of units currently structured under classic or active associations in order to reduce redundant organizational overhead. If this recommendation were to be adopted, the current C-130 active associations would integrate Active and Reserve component members under one organization. The commission goes on to recommend legal and policy revisions that if made would positively impact an organization of this type. The commission specifically recommended changes to 10 U.S.C. regarding the roles, responsibilities, and functions of the Reserve components. The report recommends that the Active Component force structure should comprise no less than approximately 55% of the Total Air Force end strength. In terms of the Air Force C-130 combat delivery fleet, the USAF currently far exceeds this recommendation with close to 70% of the aircraft assigned to the Reserve Component. The commission also recommended that the Air Force consider, and Congress allow, the closing or warm basing of some installations. A few of the recommendations that pertain to the AC/RC mix follow: In the FY2015 National Defense Authorization Act and Defense Appropriations Act, Congress should allow DOD increased flexibility in applying budget cuts across budget categories, including installations; The Air Force should consider, and Congress should allow, the closing or warm basing of some installations; To ensure the Air Force leverages full capacity of all components of the force, in its FY2016 Program Objective Memorandum, the Air Force should plan, program, and budget for increased reliance on the Reserve Components. The commission recommends: (1) the Air Force should include in all future budget submissions a specific funding line for "operational support by the Air Reserve Component" to clearly identify those funds programmed for routine periodic employment of the ARC either as volunteers or under the authority of 10 U.S.C. §12304b; (2) in its future budget submissions the Air Force should program for approximately 15,000 man years of operational support annually by the Air Reserve Component; (3) in succeeding years, the Air Force should monitor the execution of this program element to ensure it is utilizing the Air Reserve Component to its fullest extent; The Chief of Staff of the Air Force should direct the integration of Air Force Reserve associations of flights, squadrons, groups, and wings into corresponding Active Component organizations in order to eliminate the current redundant organizational overhead found in classic associations; and The Chief of Staff of the Air Force should direct the integration of Air Force flights, squadrons, groups, and wings into corresponding Air National Guard organizations in order to eliminate the current redundant organizational overhead found in active associations. Modernization or recapitalization decisions will likely have manpower implications throughout the USAF components. The C-130J models have a crew size of three. This includes two pilots and a loadmaster. The current C-130H models have a minimum crew of five, adding a navigator and an engineer to the crew. There are modernization options (like AMP) that eliminate the requirement for the navigator on C-130H models. Additionally, recapitalizing a unit with C-130Js would eliminate the need for engineers and navigators as well as a percentage of whatever manpower support functions the base has for these positions. Hence, recapitalization or modernization decisions will likely impact base manning requirements at some level. Lockheed Martin Aeronautics Company has been the primary contractor for the C-130 since the first production contract for two YC-130A prototypes in September 1952. The assembly of all C-130s takes place at Air Force Plant #6 in Marietta Georgia on Dobbins AFB. The following chart is a list of the contractor and government activities for the C-130 program. A potential issue with the C-130 program is the long lead times associated with production. Some parts have two year lead times that create instability in both the main and subsidiarity production lines unless the output is forecasted accurately. As illustrated below, there has been variation in the production of C-130s throughout the years. The multi-year procurement process has the potential to reduce the instability of annual C-130 deliveries and provide Lockheed Martin with a predictable schedule. With procurement schedules exceeding two years, they may also reduce the DMS issues by providing suppliers with a stable build rate. There are approximately 750 part numbers with lead times greater than 24 months and approximately 7,700 part numbers with lead times greater than 12 months as listed in the DOD funding Exhibit MYP-1. Based partly on these extended lead times, Lockheed is attempting to stabilize their production line at 24 aircraft per year. This number includes U.S. and foreign aircraft deliveries. The following charts illustrate Lockheed's USG program status in regards to the number of aircraft order/delivered and the remaining backlog. Currently Lockheed has orders for C-130Js from 15 foreign countries. These foreign sales also allow for a robust production schedule by maintaining the aircraft output at predictable levels. From an industry base standpoint, if the C-130 program continues at the currently anticipated rate the production line is likely to remain stable well into the future. The C-130 fleet has provided the U.S. government with a versatile and relevant capability to achieve national objectives for decades. The issue for Congress is how to provide oversight and appropriations for this aging fleet and maintain the desired capabilities into the future. The following issues are provided for consideration. The ability to rapidly deploy and sustain military capabilities throughout the world in support of U.S. national interests will likely be a key aspect of U.S. strategy well into the future. If so, the issue for Congress is more how than whether to maintain this capability. The recent authorization and appropriation of the C-130J MYP will recapitalize a large portion of the fleet. However, at the end of the current commitment in FY2018 over 400 C-130H aircraft will still be in the inventory, assuming current policy does not shift substantially. A decision for Congress is whether to continue C-130 recapitalization beyond the current MYP. USN, USMC, and USCG have stated the desire to recapitalize their entire fleets. USAF has also stated the desire to recapitalize the special missions fleet but has not been as definitive on the combat delivery fleet. The current request falls well short of replacing all the combat delivery aircraft, specifically the aircraft assigned to the Air Guard and Reserves. If the decision is made to stop C-130J combat delivery aircraft at 136 in FY2019 and the remaining C-130H fleet is not substantially modified, the fleet could be subject to obsolescence issues which may impact the overall capability of the USAF. If Congress decides to continue recapitalization the issue remains as to how quickly the airplanes can be produced. Lockheed Martin has expressed the desire to maintain the production rate at 24 aircraft per year. However, the production facilities have historically produced aircraft at a higher rate. If the production line maintains the 24 aircraft a year rate, the number of aircraft delivered to the U.S. government may be approximately 15 a year taking into account foreign sales. Referencing the chart below, if that production rate is maintained past the current multi-year commitment ending in FY2018, approximately 80 H models remain in the fleet in the 2028 timeframe. This chart also assumes a gradual reduction in the size of the fleet that may not occur. Based on a production rate of 24 aircraft per year, there may be a significant fleet of C-130H models well into the future. The remaining aircraft, if not modified, would be subject to obsolescence issues and changing aviation rules which may limit their access to airspace in the busiest parts of the world. In 1998, the USAF released a C-130 Tiger Team Final Report citing concerns over aging avionics and the need to modernize the fleet to comply with federal and international airspace regulations. These issues remain in the current C-130H fleet. The AMP was the planned solution to obsolescence issues before it was cancelled by the USAF. The challenge for Congress is how to address the growing problem of obsolescence and sustain a fleet that will maintain the future desired capability. The IDA study addressed the future cost of three independent modernization options. While cost was not the only issue addressed, IDA's analysis illustrates that AMP in its current form may not be the most cost beneficial program. However, there remains a need to address the future obsolescence of the current C-130H avionics suite. There may be opportunities, based on current guidance, to request individual waivers to the avionics requirements if the individual aircraft identified are to be retired by 2025. This may allow for a portion of the fleet to remain unmodified; however, unless current retirement rates change substantially, a large number of aircraft will need some form of modernization to maintain the same access they have today. The issue for Congress is how to develop the way forward in regards to C-130 avionics modernization. If the AMP is cancelled and avionics modernization is a priority, another program may need to take its place. In considering alternatives, an issue to consider is the time it takes to field a new system. The AMP took over 40 months to deliver the first aircraft from contract award. Perhaps a scaled down version of the AMP program may be investigated with either fewer aircraft upgraded or fewer modifications installed, or an entirely new program with an emphasis on timely upgrades to essential equipment. The USAF has been recapitalizing the C-130 fleet on a sole source basis with Lockheed Martin as the primary contractor. While this strategy is driven by an assessment of technical and programmatic risk to the government, the requirements for tactical airlift may change in the future as technological advances are made. New requirements may drive the need for future studies on the tactical airlift force of the future. These future requirements may lead to an interest in investigating new alternatives to provide the capabilities required. As next generation capabilities develop, perhaps the next tactical airlifter (C-X) will be able to provide expanded capabilities that may change the way the military views tactical airlift. Each flying unit in the USAF is authorized a Primary Assigned Aircraft (PAA) number. This number forms the primary authorization for allocating resources such as manpower, flying hours, and maintenance costs. Any aircraft assigned to a unit above the PAA number are classified as Backup Aircraft Inventory (BAI). The BAI aircraft are available to fly, however the unit does not receive resources to support them. The FY2013 NDAA directed an inter-theater airlift "floor" of 358 C-130 aircraft. Within the 358 number is approximately 27 C-130Hs and six C-130Js classified as BAI. These BAI aircraft are spread throughout the Air National Guard and Reserve units with most units having one or two aircraft. The Air Force has listed the C-130 combat delivery requirement at not greater than 310 as well as their intention to maintain the fleet at 358 through FY2014. Since 33 aircraft are currently being carried without allocated resources there could possibly be an opportunity to reduce the fleet size by retiring BAI aircraft without severely impacting unit missions as early as FY2015. However, as aircraft are retired there may be a loss of capacity at these bases due to the reduction in available aircraft. As part of the FY2015 Budget Request, the following modifications are being requested by the USAF. Due in part to limits set by Congress on adjusting Reserve Component force structure, the USAF Active Component has plans to retire or recapitalize the entire active duty C-130H combat delivery fleet with C-130J aircraft. If approved, this will create two distinct combat delivery fleets within the Air Force: a C-130J active duty fleet and a C-130H Air National Guard and Reserve fleet. This raises questions on how aircrew training, maintenance, and operations will be conducted in the future. There may also be an impact on Reserve Component recruitment of qualified aircrew as active duty crews will only be qualified on C-130J aircraft. The challenge for Congress in regards to the combat delivery fleet is setting the desired force structure to maintain desired capabilities but also to do this in the context of a shrinking DOD budget. Approving the USAF FY2015 force structure proposals may reduce the fleet size to more closely match USAF stated requirements but may also have impacts on Reserve Component units. As Congress moves forward, the most significant debate may be centered on the C-130 combat delivery fleet. With a significant portion of this fleet in the Reserve Component there are considerable interests at state with adjusting force structure. As budgets contract, adjustments will likely need to be made but the substance of these adjustments may incite considerable debate. Maintaining the appropriate operational mix in this environment is a challenge. In regards to recapitalization and modernization, the fleet is aging and actions may need to be taken to maintain a fleet that will support future desired capabilities. With the recently approved multi-year procurement, the framework for future recapitalization is in place, however, at current production levels the fleet may still need significant funding for modernization efforts to remain relevant in future environments. Modernization is an expensive process that should be approached with an informed opinion but also viewed in the context of future force structure requirements and the time it takes to achieve desired capabilities in the current procurement process. Appendix A. Legislative Activity FY2014 National Defense Authorization Act ( P.L. 113-66 ) Title 1 - Procurement Subtitle D - Air Force Programs SEC. 132. MULTI-YEAR PROCUREMENT AUTHORITY FOR C–130J AIRCRAFT. (a) AUTHORITY FOR MULTI-YEAR PROCUREMENT.-Subject to section 2306b of title 10, United States Code, The Secretary of the Air Force may enter into one or more Multi-year contracts, beginning with the fiscal year 2014 program year, for the procurement of C-130J aircraft for the Department of the Air Force and the Department of the Navy. (b) CONDITION FOR OUT-YEAR CONTRACT PAYMENTS.-A contract entered into under subsection (a) shall provide that any obligation of the United States to make a payment under the contract for a fiscal year after fiscal year 2014 is subject to the availability of appropriations for that purpose for such later fiscal year. SEC. 133. PROHIBITION ON CANCELLATION OR MODIFICATION OF AVIONICS MODERNIZATION PROGRAM FOR C-130 AIRCRAFT. (a) PROHIBITION.-None of the funds authorized to be appropriated by this Act or otherwise made available for fiscal year 2014 for the Air Force may be used to- (1) take any action to cancel or modify the avionics modernization program of record for C-130 aircraft; or (2) initiate an alternative communication, navigation, surveillance, and air traffic management program for C-130 aircraft that is designed or intended to replace the avionics modernization program described in paragraph (1). (b) COMPTROLLER GENERAL REPORT.-Not later than April 1, 2014, the Comptroller General of the United States shall submit to the congressional defense committees a sufficiency review of the cost-benefit analysis conducted under Section 143(b) of the National Defense Authorization Act for Fiscal Year 2013 (Public Law 112–239; 126 Stat. 1662), including any findings and recommendations relating to such review. Title X - General Provisions Subtitle I - Other Matters SEC. 1098. TRANSFER OF AIRCRAFT TO OTHER DEPARTMENTS FOR WILDFIRE SUPPRESSION AND OTHER PURPOSES; TACTICAL AIRLIFT FLEET OF THE AIR FORCE. (h) TACTICAL AIRLIFT FLEET OF THE AIR FORCE.- (1) CONSIDERATION OF UPGRADES OF CERTAIN AIRCRAFT IN RECAPITALIZATION OF FLEET.-The Secretary of the Air Force shall consider, as part of the recapitalization of the tactical airlift fleet of the Air Force, upgrades to C-130H aircraft designed to help such aircraft meet the fuel efficiency goals of the Department of the Air Force and retention of such aircraft, as so upgraded, in the tactical airlift fleet. (2) MANNER OF UPGRADES.-The Secretary shall ensure that upgrades to the C-130H aircraft fleet are made in a manner that is proportional to the number of C-130H aircraft in the force structure of the regular Air Force, the Air Force Reserve, and the Air National Guard. FY2013 National Defense Authorization Act ( P.L. 112-81 ) Title 1 - Procurement Subtitle D - Air Force Programs SEC. 141. REDUCTION IN NUMBER OF AIRCRAFT REQUIRED TO BE MAINTAINED IN STRATEGIC AIRLIFT AIRCRAFT INVENTORY. (a) REDUCTION IN INVENTORY REQUIREMENT.-Section 8062(g)(1) of title 10, United States Code, is amended by adding at the end the following new sentence: ''Effective on the date that is 45 days after the date on which the report under section 141(c)(3) of the National Defense Authorization Act for Fiscal Year 2013 is submitted to the congressional defense committees, the Secretary shall maintain a total aircraft inventory of strategic airlift aircraft of not less than 275 aircraft.''. (b) MODIFICATION OF CERTIFICATION REQUIREMENT.-Section 137(d)(3)(B) of the National Defense Authorization Act for Fiscal Year 2010 (Public Law 111–84; 123 Stat. 2221) is amended by striking ''316 strategic airlift aircraft'' and inserting ''275 strategic airlift aircraft''. (c) MOBILITY REQUIREMENTS AND CAPABILITIES STUDY 2018.- (1) IN GENERAL.-The Director of Cost Assessment and Program Evaluation and the Chairman of the Joint Chiefs of Staff, in coordination with the Commander of the United H. R. 4310-29 States Transportation Command and the Secretaries of the military departments, shall jointly conduct a study that assesses the end-to-end, full-spectrum mobility requirements for all aspects of the National Military Strategy derived from the National Defense Strategy that is a result of the 2012 Defense Strategic Guidance published by the President in February 2012 and other planning documents of the Department of Defense. (2) MATTERS INCLUDED.-The study under paragraph (1) shall include the following: (A) A definition of what combinations of air mobility, sealift, surface movements, prepositioning, forward stationing, seabasing, engineering, and infrastructure requirements and capabilities provide low, moderate, significant and high levels of operational risk to meet the National Military Strategy. (B) A description and analysis of the assumptions made by the Commander of the United States Transportation Command with respect to aircraft usage rates, aircraft mission availability rates, aircraft mission capability rates, aircrew ratios, aircrew production, and aircrew readiness rates. (C) An analysis of different combinations of air mobility, sealift, surface movements, prepositioning, forward stationing, seabasing, engineering, and infrastructure requirements and capabilities required to support theater and tactical deployment and distribution, including- (i) the identification, quantification, and description of the associated operational risk (as defined by the Military Risk Matrix in the Chairman of the Joint Chiefs of Staff Instruction 3401.01E) for each excursion as it relates to the combatant commander achieving strategic and operational objectives; and (ii) any assumptions made with respect to the availability of commercial airlift and sealift capabilities and resources when applicable. (D) A consideration of metrics developed during the most recent operational availability assessment and joint forcible entry operations assessment. (E) An assessment of requirements and capabilities for major combat operations, lesser contingency operations as specified in the Baseline Security Posture of the Department of Defense, homeland defense, defense support to civilian authorities, other strategic missions related to national missions, global strike, the strategic nuclear mission, and direct support and time-sensitive airlift missions of the military departments. (F) An examination, including a discussion of the sensitivity of any related conclusions and assumptions, of the variations regarding alternative modes (land, air, and sea) and sources (military, civilian, and foreign) of strategic and theater lift, and variations in forward basing, seabasing, prepositioning (afloat and ashore), air-refueling capability, advanced logistics concepts, and destination theater austerity, based on the new global footprint and global presence initiatives. (G) An identification of mobility capability gaps, shortfalls, overlaps, or excesses, including- (i) an assessment of associated risks with respect to the ability to conduct operations; and (ii) recommended mitigation strategies where possible. (H) An identification of mobility capability alternatives that mitigate the potential impacts on the logistic system, including- (i) a consideration of traditional, non-traditional, irregular, catastrophic, and disruptive challenges; and (ii) a description of how derived mobility requirements and capabilities support the accepted balance of risk in addressing all five categories of such challenges. (I) The articulation of all key assumptions made in conducting the study with respect to- (i) risk; (ii) programmed forces and infrastructure; (iii) readiness, manning, and spares; (iv) scenario guidance from defense planning scenarios and multi-service force deployments; (v) concurrency of major operations; (vi) integrated global presence and basing strategy; (vii) host nation or third-country support; (viii) use of weapons of mass destruction by an enemy; and (ix) aircraft being used for training or undergoing depot maintenance or modernization. (J) A description of the logistics concept of operations and assumptions, including any support concepts, methods, combat support forces, and combat service support forces that are required to enable the projection and enduring support to forces both deployed and in combat for each analytic scenario. (K) An assessment, and incorporation as necessary, of the findings, conclusions, capability gaps, and shortfalls derived from the study under section 112(d) of the National Defense Authorization Act for Fiscal Year 2012 ( P.L. 112-81 ; 125 Stat. 1318). (3) SUBMISSION.—The Director of Cost Assessment and Program Evaluation and the Chairman of the Joint Chiefs of Staff shall jointly submit to the congressional defense committees a report containing the study under paragraph (1). (4) FORM.-The report required by paragraph (3) shall be submitted in unclassified form, but may include a classified annex. SEC. 143. AVIONICS SYSTEMS FOR C-130 AIRCRAFT. (a) LIMITATIONS.- (1) AVIONICS MODERNIZATION PROGRAM.-The Secretary of the Air Force may not take any action to cancel or modify the avionics modernization program for C–130 aircraft until a period of 90 days has elapsed after the date on which the Secretary submits to the congressional defense committees the cost-benefit analysis conducted under subsection (b)(1). (2) CNS/ATM PROGRAM.- (A) IN GENERAL.-The Secretary may not take any action described in subparagraph (B) until a period of 90 days has elapsed after the date on which the Secretary submits to the congressional defense committees the cost-benefit analysis conducted under subsection (b)(1). (B) COVERED ACTIONS.-An action described in this subparagraph is an action to begin an alternative communication, navigation, surveillance, and air traffic management program for C-130 aircraft that is designed or intended- (i) to meet international communication, navigation, surveillance, and air traffic management standards for the fleet of C-130 aircraft; or (ii) to replace the current avionics modernization program for the C-130 aircraft. (b) COST-BENEFIT ANALYSIS.- (1) FFRDC-The Secretary shall seek to enter into an agreement with the Institute for Defense Analyses to conduct an independent cost-benefit analysis that compares the following alternatives: (A) Upgrading and modernizing the legacy C-130 airlift fleet using the C-130 avionics modernization program. (B) Upgrading and modernizing the legacy C-130 airlift fleet using a reduced scope program for avionics and mission planning systems. (2) MATTERS INCLUDED.-The cost-benefit analysis conducted under paragraph (1) shall take into account- (A) the effect of life-cycle costs for-(i) adopting each of the alternatives described in subparagraphs (A) and (B) of paragraph (1); and (ii) supporting C-130 aircraft that are not upgraded or modernized; and (B) the costs associated with the potential upgrades to avionics and mission systems that may be required for legacy C-130 aircraft to remain relevant and mission effective in the future. Title X – General Provisions Subtitle F - Miscellaneous Authorities and Limitations SEC. 1059. LIMITATIONS ON RETIREMENT OF FIXED-WING INTRA-THEATER AIRLIFT AIRCRAFT FOR GENERAL SUPPORT AND TIME SENSITIVE/MISSION CRITICAL DIRECT SUPPORT AIRLIFT MISSIONS OF THE DEPARTMENT OF DEFENSE. (a) LIMITATION ON RETIREMENTS.-During fiscal year 2013, the Secretary of the Air Force shall retain an additional 32 fixed wing, intra-theater airlift aircraft beyond the number of such aircraft proposed to be retained in the Secretary's total force structure proposal provided to the congressional defense committees on November 2, 2012. Appendix B. Key Events March 2014 USAF submitted FY2015 Budget Request for 13 C-130Js. USMC requested one KC-130J. F ebruary 2014 Rolls-Royce Corp. in Indianapolis, IN received a $54.3 million firm-fixed-price, indefinite-delivery/indefinite-quantity contract for depot level repair of 50 KC-130 aircraft engines, propellers and other propulsion system components for the U.S. Marine Corps (47 planes/$50.2M/92%) and the government of Kuwait (3 planes/$4.1M/8%). $24.5 million committed immediately, using FY2014 Navy O&M budgets. Work to be performed in Indianapolis, IN (92%), Al Mubarak, Kuwait (2.1%); various locations in Japan (2%); Cherry Point. NC (1.3%); Miramar, CA (1.3%); and Fort Worth, TX (1.3%), and is expected to be complete in February 2015. This contract was not competitively procured pursuant to FAR 6.302-1 by U.S. Naval Air Systems Command in Patuxent River, MD (N00019-14-D-0007). Lockheed Martin Aeronautics Co. in Marietta, GA received a sole-source $12.2 million firm-fixed-price contract modification to provide spare parts that are unique to U.S. SOCOM's HC/MC-130Js, and cannot be drawn from general C-130J fleet spares. All funds were committed immediately, using FY2012 aircraft budgets. Work to be performed at Marietta, GA, and is expected to be complete by Feb 16, 2016. USAF Life Cycle Management Center/WISK at Wright-Patterson AFB, OH manages the contract (FA8625-11-C-6597, PO 0209). Lockheed Martin and Rolls-Royce complete a long-term agreement worth up to $1 billion, to deliver approximately 600 AE2100 turboprop engines for American and international contracts from 2014 through 2018. That totals about 150 aircraft, but it is probably closer to 125 with spares added in. January 2014 The USAF flew a fully-converted AC-130J gunship for the 1 st time, at Eglin AFB, FL. A $105.3 million indefinite-delivery/indefinite quantity contract modification, exercising the 3 rd option under the USAF's C-130J Long Term Sustainment Program. It is a two-year ordering period for sustainment services including logistical support, program management support, engineering services, spares, and technical data. Funds to be committed as needed through task orders. Work to be performed at Marietta, GA, and is expected to be complete by Jan 31, 2016. USAF Life Cycle Management Center/WLKCA at Robins AFB, GA manages the contract (FA8504-06-D-0001, PO 0026). USAF FY2013 Operational Test and Evaluation Annual report released reviewing AC-130J, HC/MC-130J. Report identified survivability and interoperability issues to be addressed. Rolls Royce in Indianapolis, IN received a $182.7 million firm-fixed-price, requirements contract modification, exercising the 7 th annual option for AE2100-D3 engine logistics support, program management support, engineering services, spares, and technical data. Funds to be spent as needed. Work to be performed at Indianapolis, IN, and is expected to be complete by Jan 31, 2015. The USAF Life Cycle Management Center/WLKCA at Robins AFB, GA, manages this contract (FA8504-07-D-0001, PO 0023). December 2013 Lockheed Martin in Marietta, GA received an $11,060,628 firm-fixed-price, indefinite-delivery/indefinite-quantity contract for logistics and engineering services in support of the C/KC-130J Aircraft for the U.S. Marine Corps/Marine Corps Reserve, U.S. Coast Guard and the Kuwait Air Force. Work to be performed in Marietta, GA (65.3%); Afghanistan (12%); Palmdale, CA (9.2%); Kuwait (3.3%); Okinawa, Japan (3%); Miramar, CA (1.8%); Cherry Point, NC (1.7%); Elizabeth City, NC (1.6%); Fort Worth, (1.5%); and Greenville, SC (.6%); and is expected to be completed in December 2014. No funds were obligated at time of award. Funds to be obligated against individual delivery orders as they are issued. This contract combined purchases for the U.S. Marine Corps/Marine Corps Reserve ($8,886,223; 80.3%); U.S. Coast Guard ($1,423,148; 12.9%); and the Government of Kuwait ($751,257; 6.8%) under the Foreign Military Sales Program. This contract was not competitively procured pursuant to 10 U.SC 2304(c)(1). The Naval Air Systems Command, Patuxent River, MD manages the contract (N00019-14-D-0006). A sole-source, maximum $169.7 million firm-fixed-price advance procurement contract for funding related to 18 C-130Js. All funds were committed immediately, using FY2013 procurement budgets. Work to be performed at Marietta, GA, and is expected to be complete by Oct 31, 2016. The USAF Life Cycle Management Center/WLNNC at Wright-Patterson AFB, OH manages this contract (FA8625-14-C-6450). A $48.5 million advance procurement contract modification for funding related to 5 more C-130Js. All funds were committed immediately, using FY2012 procurement budgets. All funds are committed immediately, using FY2012 aircraft budgets. Work under this multi-year contract to be performed at Lockheed Martin in Marietta, GA until Dec 31, 2016. The USAF Life Cycle Management Center/WLNNC at Wright-Patterson AFB, OH manages the contract (FA8625-11-C-6597, PO 0230). Lockheed Martin in Marietta, GA received a not-to-exceed $81.2 million modification to an existing contract to fund Israeli C-130J-30 aircraft #4, advance long-lead procurement of C-130Js #5 and 6, and external fuel tank modification kits. Work to be performed at Marietta, GA, and is expected to be completed by June 30, 2016. This contract is 100% foreign military sales for Israel, with the USAF Life Cycle Management Center/WLNNC at Wright-Patterson AFB, OH acting as Israel's agent (FA8625-11-C-6597, PO 0231). October 2013 Lockheed Martin Corp., Marietta, Ga., was awarded a $21.6 million contract modification to redesign the C-130J's Color Multipurpose Display Unit and Multi-Function Color Display for C-130J aircraft. The CDU & MFCDs need new central processor and graphics processor chip sets, in order to cope with "diminishing manufacturing sources." Work to be performed at Marietta, GA and is expected to be complete by September 30, 2015. This contract actually includes 15% foreign military sales to C-130 customers Norway, Israel and Kuwait, on top of the $21.6 million in FY2012 in USAF procurement funds that were committed immediately. USAF Force Life Cycle Management Center/WLNNC at Wright-Patterson AFB, OH manages the contract (FA8625-11-C-6597, PO 0228). Appendix C. C-130 Force Basing Appendix D. Comparing C-130 Cockpits The following pictures are provided for context when discussing cockpit modifications on the C-130 aircraft. Figure D-1 is an unmodified C-130H. Figure D-2 is a C-130H with the AMP modification. Figure D-3 is a production C-130J cockpit. These pictures may also provide some clarity on why aircrew members are only allowed to be qualified on one version of the aircraft. While the outside of the aircraft looks very similar the inside is quite different between models. The crew makeups are different as well. On the older H models there are a minimum of 5 crewmembers (2 Pilots, 1 Navigator, 1 Engineer, 1 Loadmaster). The AMP modification takes away the Navigator position and the new J models take away the Engineer and Navigator position for a minimum crew of three.
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The United States primary tactical airlift aircraft is the C-130. Nicknamed the Hercules, this venerable aircraft has been the workhorse of U.S. tactical airlift for the past 57 years. The majority of C-130s in the U.S. government are assigned to the U.S. Air Force, but the U.S. Navy, Marine Corps, and Coast Guard also operate sizeable C-130 fleets. The potential concerns for Congress include oversight of and appropriations for an aging C-130 fleet. As the C-130 fleet ages, management issues arise with reduced reliability, obsolescence and reduced parts availability, and changing aviation rules that impact the C-130's ability to operate worldwide. The C-130 program recently passed a major milestone; the FY2013 NDAA authorized the Secretary of the Air Force to enter into one or more multi-year contracts for the procurement of C-130J aircraft for the Department of the Air Force and the Department of the Navy. This was a significant step toward recapitalizing a portion of the fleet. As Congress decides the future of the tactical airlift fleet, a significant decision is whether or not to continue recapitalizing the fleet with new aircraft. This issue is fueled by several factors, including aircraft life cycles, cost, basing strategy, strategic guidance, the industrial base, and the desired capabilities mix. With these factors in mind, the services have committed to recapitalize a large portion of the C-130 fleet. However, at current production rates, there will still be aircraft in the fleet much older than the crews that fly them well into the future. A common strategy to extend the life of an aircraft fleet is to modernize the current airframes with new components. This strategy attempts to combat issues that plague an aging fleet such as diminishing reliability, antiquated avionics, and capabilities that no longer meet current requirements. The cost of modernization is commonly the driving factor behind these efforts. Analyzing the return on investment of modernizing components on aging aircraft versus recapitalizing the fleet to gain new capabilities will inform these decisions. Congress is currently faced with deciding the future of several modernization efforts being considered for the C-130 fleet. Circumstances that arise due to the changing nature of the global environment may drive decisions by Congress to reduce the size of the fleet by divesting some aircraft. With the current drawdown of U.S. military forces, perhaps the desired future capability can be met with fewer aircraft. Divesting aircraft from a fleet involves a detailed analysis of the capabilities that remain in the desired end-state fleet. Ideally, the required capabilities to meet strategic guidance still reside within the system as a whole when aircraft are retired. The mix of Active and Reserve forces that remain after drawing down a fleet may also be a significant concern. This mix of Active, Guard, and Reserve forces may also lead to decisions regarding force structure. Adjustments to force structure within the Guard and Reserve have been a contentious issue in the past and will require congressional oversight and approval.
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The U.S.-Colombia Trade Promotion Agreement entered into force on May 15, 2012. It is a comprehensive free trade agreement (FTA) between the United States and Colombia that eventually will eliminate tariffs and other barriers in bilateral trade in goods and services. During the 112 th Congress, President Obama submitted the draft legislation on October 3, 2011 that was then introduced by request in both houses of Congress ( H.R. 3078 / S. 1641 ) to implement the U.S.-Colombia FTA. On October 12, 2011, the House passed H.R. 3078 (262-167) and sent it to the Senate. The Senate passed the legislation (66-33) on the same day. The President signed the legislation into law on October 21, 2011 ( P.L. 112-42 ). The FTA entered into force after several months of work by both governments to review each other's laws and regulations related to implementation of the agreement, in addition to Colombia's efforts to fulfill its set of commitments under the Action Plan Related to Labor Rights. The U.S.-Colombia FTA negotiations grew out of a regional effort in 2004 to produce a U.S.-Andean free trade agreement between the United States and the Andean countries of Colombia, Peru, and Ecuador. After negotiators failed to reach an agreement, Colombia continued negotiations with the United States for a bilateral FTA. On February 27, 2006, the United States and Colombia concluded the U.S.-Colombia FTA, and finalized the text of the agreement on July 8, 2006. On August 24, 2006, President Bush notified Congress of his intention to sign the U.S.-Colombia FTA. The two countries signed the agreement on November 22, 2006. The Colombian Congress approved the agreement in June 2007 and again in October 2007, after the agreement was modified to include new labor and environmental provisions. Since the 1990s, the countries of Latin America and the Caribbean have been a focus of U.S. trade policy as demonstrated by the passage of the North American Free Trade Agreement (NAFTA), the U.S.-Chile Free Trade Agreement, the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR), and the U.S.-Peru Trade Promotion Agreement. After 2004, U.S. trade policy in the Western Hemisphere focused on completing trade negotiations with Colombia, Peru, and Panama and on gaining passage of these free trade agreements by the U.S. Congress. The U.S.-Peru FTA was approved by Congress and signed into law in December 2007 ( P.L. 110-138 ). The U.S.-Panama FTA was approved by Congress shortly after the U.S.-Colombia FTA on October 12, 2011, and signed into law on October 21, 2011 ( P.L. 112-43 ). It went into effect on October 31, 2012. The major expectation among proponents of the free trade agreement with Colombia, as with other trade agreements, is that it provides economic benefits for both the United States and Colombia as trade expands between the two countries. Another expectation among proponents is that it helps improve investor confidence and increase foreign direct investment in Colombia, which may bring more economic stability. For Colombia, a free trade agreement with the United States has been part of the country's overall development strategy and efforts to promote economic growth and stability. Before the U.S.-Colombia FTA entered into force, the U.S. average tariff on Colombian goods was 3%, while Colombia's average tariff on U.S. goods was 12.5%. Prior to the agreement, about 90% of U.S. imports from Colombia came into the country duty-free under trade preference programs or through normal trade relations. Most of Colombia's duties on U.S. exports were consolidated into three tariff levels: 0% to 5% on capital goods, industrial goods, and raw materials not produced in Colombia; 10% on manufactured goods, with some exceptions; and 15% to 20% on consumer and "sensitive" goods. Exceptions included automobiles, which were subject to a 35% duty; beef and rice, which were subject to an 80% duty; and milk and cream, which were subject to a 98% duty through August 11, 2010. Table 1 provides a summary of Colombian tariffs on goods coming from the United States before the free trade agreement entered into force. Other agricultural products fell under the Andean Price Band System (APBS), a system in which Colombia applied a variable levy on imports by increasing tariffs when world prices fall, and lowering tariffs when world prices rise. The APBS included 14 U.S. product groups and covered more than 150 tariff lines. The system resulted in high duties, sometimes exceeding 100%, on certain U.S. exports to Colombia, including corn, wheat, rice, soybeans, pork, poultry parts, cheeses, and powdered milk. However, upon entry into force of the U.S.-Colombia FTA, Colombia stopped imposing variable tariffs on U.S. agricultural exports. The comprehensive free trade agreement was reached after numerous rounds of negotiations over a period of nearly two years. Some issues that took longer to resolve were related to agriculture. Colombia had been seeking lenient agriculture provisions in the agreement, arguing that the effects of liberalization on rural regions could have adverse effects on smaller farmers and drive them to coca production. The United States agreed to give more sensitive sectors longer phase-out periods to allow Colombia more time to adjust to trade liberalization. Sectors receiving the longest phase-out periods include poultry and rice. This section summarizes several key provisions in the original agreement text as provided by the United States Trade Representative (USTR), unless otherwise noted. Upon entry into force, the agreement eliminated 80% of duties on U.S. exports of consumer and industrial products to Colombia. An additional 7% of U.S. exports received duty-free treatment after the five-year mark (2017), and most remaining tariffs are to be eliminated within 10 years after entry into force. Upon entry into force, the U.S.-Colombia FTA eliminated most tariffs immediately and is to phase out the remaining tariffs over periods of up to 19 years. Tariff elimination for major sectors includes the following: More than 99% of U.S. and almost 76% of Colombian industrial and textile tariff lines became free of duty upon the agreement's entry into force. Virtually all industrial and textile tariff lines are to be duty free after 10 years (2022). All tariffs in textiles and apparel that meet the agreement's rules-of-origin provisions were scheduled to be eliminated immediately (see section on " Textiles and Apparel " below). Tariffs on agricultural products are to be phased out over a period of time, ranging from 3 to 19 years (see section on " Agricultural Provisions " below). Colombia is to eliminate quotas and over-quota tariffs in 12 years for corn and other feed grains, 15 years for dairy products, 18 years for chicken leg quarters, and 19 years for rice after the agreement's entry into force. Prior to the FTA entering into force, Colombia applied some tariff protection on all agricultural products. The trade agreement provided immediate duty-free access on 77% of all agricultural tariff lines. Colombia will eliminate most other tariffs on agricultural products within 15 years, by 2027. U.S. farm exports to Colombia that received immediate duty-free treatment include high-quality beef, cotton, wheat, soybeans, soybean meal, apples, pears, peaches, cherries, and many processed food products including frozen french fries and cookies. U.S. farm products that have received improved market access include pork, beef, corn, poultry, rice, fruits and vegetables, processed products, and dairy products. The agreement also provides duty-free tariff rate quotas on standard beef, chicken leg quarters, dairy products, corn, sorghum, animal feeds, rice, and soybean oil. The FTA removed Colombia's price band system on U.S. products upon the agreement's entry into force. However, if the rates under the price band system result in a lower rate than that given under the FTA, the United States will be allowed to sell the product to Colombia at the lower rates. Under the agreement, Colombia agreed to join the World Trade Organization's Information Technology Agreement (ITA), and remove its tariff and non-tariff barriers to information technology products. Colombia agreed to allow trade in remanufactured goods, which increases export and investment opportunities for U.S. businesses involved in remanufactured products such as machinery, computers, cellular telephones, and other services. In textiles and apparel, products that meet the agreement's rules of origin requirements received duty-free and quota-free treatment immediately upon entry into force. The United States and Colombia have cooperation commitments under the agreement that allow for verification of claims of origin or preferential treatment, and denial of preferential treatment or entry if the claims cannot be verified. The rules of origin requirements are generally based on the yarn-forward standard to encourage production and economic integration. A "de minimis" provision allows limited amounts of specified third-country content to go into U.S. and Colombian apparel to provide producers in both countries flexibility. A special textile safeguard provides for temporary tariff relief if imports prove to be damaging to domestic producers. In government procurement contracts, the two countries agreed to grant non-discriminatory rights to bid on government contracts. These provisions cover the purchases of Colombia's ministries and departments, as well as its legislature and courts. U.S. companies are assured access to the purchases of a number of Colombia's government enterprises, including its oil company. In services trade, the two countries agreed to market access in most services sectors, with very few exceptions. Colombia agreed to exceed commitments made in the WTO and to remove significant services and investment barriers, such as requirements that U.S. firms hire nationals rather than U.S. citizens to provide professional services. Colombia also agreed to eliminate requirements to establish a branch in order to provide a service and unfair penalties imposed on U.S. companies for terminating their relationships with local commercial agents. U.S. financial service suppliers have full rights to establish subsidiaries or branches for banks and insurance companies. Portfolio managers are allowed to provide portfolio management services to both mutual funds and pension funds in the partner country, including to funds that manage privatized social security accounts. Investment provisions are designed to help establish a stable legal framework for foreign investors from the partner country. All forms of investment are protected, including enterprises, debt, concessions and similar contracts, and intellectual property. U.S. investors are treated as Colombian investors with very few exceptions. U.S. investors in Colombia have substantive and procedural protections that foreign investors have under the U.S. legal system, including due process protections and the right to receive fair market value for property in the event of an expropriation. Protections for U.S. investments are backed by a transparent, binding international arbitration mechanism. In the preamble of the agreement, the United States and Colombia agreed that foreign investors would not be accorded greater substantive rights with respect to investment protections than domestic investors under domestic law. The agreement provides intellectual property rights (IPR) protections for U.S. and Colombian companies. In all categories of IPR, U.S. companies are to be treated no less favorably than Colombian companies. In trademark protection, the agreement requires the two countries to have a system for resolving disputes about trademarks used in internet domain names; to develop an on-line system for the registration and maintenance of trademarks and have a searchable database; and to have transparent procedures for trademark registration. In protection of copyrighted works, the agreement has a number of provisions for protection of copyrighted works in a digital economy, including provisions that copyright owners will maintain rights over temporary copies of their works on computers. Other agreement provisions include rights for copyright owners for making their work available on-line; extended terms of protection for copyrighted works; requirements for governments to use only legitimate computer software; rules on encrypted satellite signals to prevent piracy of satellite television programming; and rules for the liability of Internet service providers for copyright infringement. In protection of patents and trade secrets, the U.S.-Colombia FTA limits the grounds on which a country could revoke a patent, thus protecting against arbitrary revocation. In protection of test data and trade secrets, the agreement protects products against unfair commercial use for a period of 5 years for pharmaceuticals and 10 years for agricultural chemicals. In addition, the agreement requires the establishment of procedures to prevent marketing of pharmaceutical products that infringe patents, and provides protection for newly developed plant varieties. The parties expressed their understanding that the intellectual property chapter would not prevent either party from taking measures to protect public health by promoting access to medicines for all. On music and motion picture property piracy, the agreement's IPR provisions include penalties for piracy and counterfeiting and criminalize end-user piracy. It requires the parties to authorize the seizure, forfeiture, and destruction of counterfeit and pirated goods and the equipment used to produce them. The agreement mandates both statutory and actual damages for copyright infringement and trademark piracy. This is to ensure that monetary damages could be awarded even if a monetary value to the violation is difficult to assess. The agreement includes comprehensive rules of origin provisions to ensure that only U.S. and Colombian goods benefit from the agreement. The agreement also includes customs procedures provisions, including requirements for transparency and efficiency, procedural certainty and fairness, information sharing, and special procedures for the release of express delivery shipments. The labor and worker rights obligations are included in the core text of the agreement. The United States and Colombia reaffirmed their obligations as members of the International Labor Organization (ILO). The two countries agreed to adopt, maintain and enforce laws that incorporate core internationally recognized labor rights, as stated in the 1998 ILO Declaration on Fundamental Principles and Rights at Work , including a prohibition on the worst forms of child labor. The parties also agreed to enforce labor laws with acceptable conditions of work, hours of work, and occupational safety and health. All obligations of the labor chapter are subject to the same dispute settlement procedures and enforcement mechanisms as other chapters of the agreement. The agreement includes procedural guarantees to ensure that workers and employers have fair, equitable, and transparent access to labor tribunals or courts. It has a labor cooperation and capacity building mechanism to pursue bilateral or regional cooperation activities, which may include the principles embodied in the 1998 ILO Declaration and activities to promote compliance with ILO Convention 182 on the Worst Forms of Child Labor. The United States and Colombia agreed to cooperate on activities on laws and practices related to ILO labor standards; the ILO convention on the worst forms of child labor; methods to improve labor administration and enforcement of labor laws; social dialogue and alternative dispute resolution; occupational safety and health compliance; and mechanisms and best practices on protecting the rights of migrant workers. The environmental obligations are included in the core text of the agreement. The agreement requires the United States and Colombia to effectively enforce their own domestic environmental laws and to adopt, maintain, and implement laws and all other measures to fulfill obligations under covered multilateral environmental agreements (MEAs). Both countries committed to pursue high levels of environmental protection and to not derogate from environmental laws in a manner that will weaken or reduce protections. The agreement includes procedural guarantees to ensure fair, equitable, and transparent proceedings for the administration and enforcement of environmental laws. In addition, the agreement includes provisions to help promote voluntary, market-based mechanisms to protect the environment and to ensure that views of civil society are appropriately considered through a public submissions process. All obligations in the environmental chapter of the agreement are subject to the same dispute settlement procedures and enforcement mechanisms as obligations in other chapters of the agreement. The core obligations of the agreement, including labor and environmental provisions, are subject to dispute settlement provisions. The agreement's provisions on dispute panel proceedings include language to help promote openness and transparency through open public hearings; public release of legal submissions by parties; and opportunities for interested third parties to submit views. The provisions require the parties to make every attempt, through cooperation and consultations, to arrive at a mutually satisfactory resolution of a dispute. If the parties are unable to settle the dispute through consultations, the complaining party will have the right to request an independent arbitral panel to help resolve the dispute. Possible outcomes could include monetary penalties or a suspension of trade benefits. In early 2007, some Members of Congress indicated that some of the provisions in pending U.S. FTAs would have to be strengthened to gain their approval, particularly relating to core labor standards. After several months of negotiation, bipartisan congressional leadership and the Bush Administration reached an understanding on May 10, 2007, on a new bipartisan trade framework that calls for the inclusion of internationally recognized labor rights and environmental provisions in the text of pending free trade agreements. On June 28, 2007, the United States reached an agreement with Colombia on legally binding amendments to the U.S.-Colombia FTA on labor, the environment, and other matters to reflect the bipartisan understanding of May 10. The amendments to the FTA are similar to the amendments that were made to the U.S.-Peru free trade agreement, which was approved by Congress in December 2008. Some of the key amendments include obligations related to five basic ILO labor rights, multilateral environmental agreements (MEAs), and pharmaceutical intellectual property rights (IPR). These provisions would be enforceable through the FTA's dispute settlement mechanism. On October 30, 2007, the Colombian Senate approved the labor and environmental amendments to the U.S.-Colombia FTA, marking the end of the approval process for the agreement in Colombia. After the bipartisan agreement, the Administration reached an agreement with Colombia to amend the FTA to require the parties to "adopt, maintain and enforce in their own laws and in practice" the five basic internationally recognized labor principles, as stated in the 1998 ILO Declaration. The amendments to the agreement strengthened the earlier labor provisions which only required the signatories to strive to ensure that their domestic laws would provide for labor standards consistent with internationally recognized labor principles. The amendments that resulted from the bipartisan trade framework were intended to enhance the protection and promotion of worker rights by including enforceable ILO core labor principles in the agreement. These include (1) freedom of association; (2) the effective recognition of the right to collective bargaining; (3) the elimination of all forms of forced or compulsory labor; (4) the effective abolition of child labor and a prohibition on the worst forms of child labor; and (5) the elimination of discrimination in respect of employment and occupation. These obligations would refer only to the 1998 ILO Declaration on the Fundamental Principles and Rights at Work . Another change to the agreement relates to labor law enforcement. A decision made by a signatory on the distribution of enforcement resources would not be a reason for not complying with the labor provisions. Under the amended provisions, parties would not be allowed to derogate from labor obligations in a manner affecting trade or investment. Labor obligations would be subject to the same dispute settlement, same enforcement mechanisms, and same criteria for selection of enforcement mechanisms as all other obligations in the agreement. Other amendments to the FTA include provisions on intellectual property, government procurement, and port security. On intellectual property rights (IPR) protection, some Members of Congress were concerned that the original commitments would have impeded the entry of generic medicines to treat AIDS or other infectious diseases. The amended agreement was a way of trying to find a balance between the need for IPR protection for pharmaceutical companies to foster innovation and the desire for promoting access to generic medicines to all segments of the population. The amended text of the agreement maintains the five years of data exclusivity for test data related to pharmaceuticals. However, if Colombia relies on U.S. Food and Drug Administration (FDA) approval of a given drug, and meets certain conditions for expeditious approval of that drug in Colombia, the data exclusivity period would expire at the same time that the exclusivity expired in the United States. This could allow generic medicines to enter more quickly into the market in Colombia. In government procurement, the amended provisions allow U.S. state and federal governments to condition government contracts on the adherence to the core labor laws in the country where the good is produced or the service is performed. Government agencies also will be allowed to include environmental protection requirements in their procurements. Concerning port security, an added provision ensures that if a foreign-owned company were to provide services at a U.S. port that would raise national security concerns, the agreement would not be an impediment for U.S. authorities in taking actions to address those concerns. The Labor Affairs Council (Council) of the U.S.-Colombia FTA convened its first meeting on June 4-5, 2013, in Washington, DC. Pursuant to Article 17.5 of the FTA, the Council is responsible for overseeing the implementation of the labor chapter, including reviewing each party's progress under the chapter. The Council is comprised of senior officials from labor ministries and other appropriate agencies. During the meeting, the Council, which includes the U.S. Secretary of Labor and Colombia's Minister of Labor, reaffirmed the parties' commitments under the labor chapter, such as the commitment to adopt and maintain in law and practice the rights as stated in the ILO Declaration on Fundamental Principles and Rights at Work. The Council further clarified the domestic mechanisms, institutions, and procedures that each party has established to advance the fulfillment of the FTA's labor provisions. Other topics addressed during the meeting include the following: the vision of Colombia's new Ministry of Labor; activities to strengthen institutional capacity and labor law enforcement and compliance in Colombia; and areas of particular concern regarding the implementation of the labor chapter. The Council recognized the significant progress that Colombia has made while recognizing that certain challenges remain. Article 17.5 of the FTA indicates that Council can meet as often as is considered necessary; however, the Council has not convened since June 2013. With a population of 49 million people, Colombia is the third-most populous country in Latin America, after Brazil and Mexico. Colombia's economy, the fourth-largest economy in Latin America, after Brazil, Mexico, and Argentina, is small when compared to the U.S. economy. Colombia's gross domestic product (GDP) in 2017 in purchasing power parity (PPP) basis was estimated at $714 billion, or about 3.7% of U.S. GDP of $19.4 trillion in 2017 (see Table 2 ). Colombia's exports of goods and services were equal to 14% of its GDP in 2017, compared to 12% for the United States. Colombia's imports of goods and services equaled 19% of its GDP in 2017, compared to 15% for the United States. The United States is Colombia's dominant trading partner in both imports and exports. Changes in Colombia's market in the past 13 years, however, have resulted in gradual reductions in overall trade with the United States. Colombia has regional trade agreements with most countries in Latin America, including the Central America Northern Triangle (Guatemala, Honduras, and El Salvador); Mexico; Mercosur (Brazil, Argentina, Paraguay, and Uruguay); and Chile. An FTA with Canada, approved by both countries in 2010, entered into force on August 15, 2011. Colombia signed an FTA with the European Union, which entered into force in August 2013, and recently saw its trade agreement with South Korea enter into force in July 2016. In addition, Colombia is one of four countries comprising the Pacific Alliance, an evolving regional trade integration arrangement that also includes Chile, Mexico, and Peru. In February 2014, the presidents of all four countries signed a protocol to eliminate tariffs on 92% of goods traded within the Alliance; the outstanding 8% of items with tariffs remaining are in the agricultural sector and will be phased out over a period of 17 years. The United States has observer status within the Alliance. Colombia accounts for a very small percentage of U.S. total trade (about 1% in 2017). In 2017, Colombia ranked 22 nd among U.S. export markets and 27 th among foreign exporters to the United States. U.S. merchandise exports to Colombia totaled $13.3 billion in 2017, while U.S. imports totaled $13.4 billion. As shown in Table 3 , the dominant U.S. import category from Colombia in 2017 was crude oil and gas (43.1% of total imports from Colombia), followed by gold, coffee, non-crude petroleum oil products, and fresh-cut flowers. The leading U.S. export categories to Colombia were non-crude petroleum products (15.9% of total exports to Colombia), corn, telephone sets, automatic data processing machines, and halogenated derivatives of hydrocarbons. U.S. exports to Colombia increased in 2017 to $13.3 billion, from $13.1 billion in 2016, but did not outperform the 2015 figure of $16.3 billion. In 2009, exports to Colombia decreased to $9.5 billion from $11.4 billion in 2008, following international trends in global trade after the financial crisis. Between 2003 and 2008, U.S. exports to Colombia increased from $3.8 billion to $11.4 billion. In 2009, exports dropped to 9.5 billion, but steadily increased through 2014 before dropping to $16.3 billion in 2015 (see Figure 1 ). In 2017, U.S. imports from Colombia decreased to $13.4 billion, down from $13.8 billion in 2016. Between 2014 and 2016, imports decreased from $17.2 billion in 2014 to $13.9 billion in 2015 and $13.8 billion in 2016. In the four-year period leading to 2013, imports had been increasing steadily, from $11.2 billion in 2009 to $24.6 billion in 2012, as shown in Figure 1 . Trade in services with Colombia totaled $9.2 billion in 2016 (latest data available). U.S. services exports to Colombia totaled $6.2 billion, and services imports totaled $3.0 billion. The U.S. services trade surplus with Colombia was $3.2 billion in 2016. As shown in Table 4 , the dominant U.S. services import category from Colombia in 2016 was travel (39% of total services imports from Colombia) followed by air transport, miscellaneous business services, and telecommunications, computers, and information services. The leading U.S. services export categories to Colombia were travel (42% of total exports to Colombia), air and sea transport, telecommunications, computer, and information services, and charges for the use of intellectual property. U.S. services exports to Colombia decreased in 2016 to $6.2 billion, from $6.4 billion in 2015. In 2014, U.S. services exports to Colombia peaked at $6.7 billion, but have since declined (see Figure 2 ). In 2016, U.S. services imports from Colombia decreased to $3.2 billion, down from $3.3 billion in 2015. Between years 2013 and 2015, services imports increased from $2.3 billion in 2013, to 2.8 billion in 2014 and to $3.3 billion in 2015. U.S. foreign direct investment in Colombia on a historical-cost basis totaled $6.2 billion in 2016, down from $7.1 billion in 2014 and $6.5 billion in 2015. In 2016, the largest amount was in mining, which accounted for 37%, or $2.3 billion, of total U.S. FDI in Colombia. The second-largest amount, $1.16 billion (19% of total), was in manufacturing, followed by $970 million in finance and insurance (16% of total). The U.S.-Colombia FTA is expected to improve investor confidence in Colombia and increase foreign investment from the United States and from other countries. The stock of U.S. FDI in Colombia decreased by 8% in 2015 and 5% in 2016 (see Figure 3 ). Upon full implementation, the U.S.-Colombia FTA will likely have a small, but positive, net economic effect on the United States. However, there will likely be some adjustment costs, especially in Colombia as industries adapt to the lower trade barriers on U.S. exports to Colombia. The net overall effect on the United States is expected to be minimal because Colombia's economy is very small when compared to the U.S. economy and the value of the U.S. trade with Colombia is a very small percentage of overall U.S. trade. Most of the economy-wide trade effects of trade liberalization from the FTA will likely arise from Colombia's removal of tariff barriers and other trade restrictions. Approximately 90% of U.S. imports from Colombia entered the United States duty-free before the agreement entered into force, either unconditionally or under the ATPA or other U.S. provisions; hence, the marginal effects of the FTA on the U.S. economy likely will not be significant. A 2006 study by the United States International Trade Commission (USITC) assessed the potential effects of a U.S.-Colombia FTA on the U.S. economy. The study found that, in general, the primary impact of an FTA with Colombia would be increased U.S. exports to Colombia as a result of enhanced U.S. access to the Colombian market. Major findings of the USITC study on the likely effects of a U.S.-Colombia FTA on the U.S. economy, should the agreement be fully implemented, include the following: U.S. exports to Colombia would increase by $1.1 billion (13.7%) and U.S. imports from Colombia would increase by $487 million (5.5%). U.S. GDP would increase by over $2.5 billion (less than 0.05%). The largest estimated increases in U.S. exports to Colombia, by value, would be in chemical, rubber, and plastic products; machinery and equipment; and motor vehicles and parts. In terms of percentage increases, the largest increases in U.S. exports would be in rice and dairy products. The largest estimated increases in U.S. imports from Colombia, by value, would be in sugar and crops not elsewhere classified. The largest estimated increases in U.S. imports, by percent, would be in dairy products and sugar. On an industry level, the FTA would result in minimal to no effect on output or employment for most sectors of the U.S. economy. The U.S. sugar sector would be the only sector with an estimated decline of more than 0.1% in output or employment. The largest increases in U.S. output and employment would be in the processed rice, cereal grains, and wheat sectors. The USITC reviewed seven studies that it found on the probable economic effects of a U.S.-Colombia FTA. The results of the studies reviewed by USITC varied. One study found that U.S. exports to Colombia would increase by 2.4% to 8.3%, while another study assessed that the expected increase would be 44%. Two studies found that the largest increases in U.S. exports would be in agriculture products, metal and wood, and food products. In assessing the impact on U.S. imports from Colombia, the results of the studies also varied. One study found that U.S. imports from Colombia would increase by 2.0% to 6.2%, while another found that U.S. imports would increase by 37%. The largest increases would be in apparel and leather goods, textile products, and metal and wood. The studies also assessed that an FTA would result in small overall welfare gains for both the United States and Colombia and a positive impact on the U.S. agricultural sector despite an increase in U.S. sugar imports. The nongovernmental Institute for International Economics (IIE) did a study in 2006 assessing the possible impact of a U.S.-Colombia FTA on both the U.S. and Colombian economies. The study found that a U.S.-Colombia FTA would be expected to result in an increase in total trade between the two countries. The total value of U.S. imports from Colombia would increase by an estimated 37% while the value of U.S. exports to Colombia would increase by an estimated 44%. In terms of welfare gains, the study assessed that a U.S.-Colombia FTA would result in small welfare benefits for both partners, though the gains would be larger for Colombia. On a sectoral level, the study found that an agreement would have minor sectoral effects on the U.S. economy, but the effect would be more significant for Colombia because it is the smaller partner. The study indicated that Colombia would face certain structural adjustment issues with a displacement of low-skilled workers in some sectors, but that these workers would all be able to find job possibilities in the expanding sectors. One of the drawbacks to the bilateral free trade agreement is that it may result in trade diversion because it is not fully inclusive of all regional trading partners. Trade diversion results when a country enters into an FTA and then shifts the purchase of goods or services (imports) from a country that is not an FTA partner to a country that is an FTA partner even though it may be a higher cost producer. In the case of the United States and Colombia, for example, goods from the United States may replace Colombia's lower-priced imports from other countries in Latin America. If this were to happen, the United States would now be the producer of that item, not because it produces the good more efficiently, but because it is receiving preferential access to the Colombian market. The IIE study assessed that a U.S.-Colombia FTA probably would not cause trade diversion in the United States, but that it could cause some trade diversion in Colombia. The IIE study estimated that an FTA with the United States would result in a decrease in Colombia's imports from other countries of approximately 9%. The USITC study found that one of the impacts of a U.S.-Colombia FTA would be increased U.S. agricultural exports to Colombia as a result of enhanced U.S. access to the Colombian market. In the agricultural sector, key findings of the study include the following: The removal of tariff and nontariff barriers would likely result in a higher level of U.S. exports of meat (beef and pork) to Colombia. U.S. imports of meat from Colombia would eventually increase, but those are currently restricted by Colombia's lack of certification to export fresh, chilled, or frozen beef or pork to the United States. Colombia's elimination of trade barriers and certain government support measures under a U.S.-Colombia FTA would likely result in increased U.S. grain exports to Colombia. Rice would account for most of the increase, with yellow corn and wheat accounting for the remaining balance. U.S. exports to Colombia in soybeans, soybean products, and animal feeds would likely increase under and FTA According to the IIE study, the main gains to Colombia in agricultural trade would likely be more secure and preferential market access to the U.S. market. U.S. agricultural exports would gain a small but not insignificant preference in the Colombian market for temperate-zone agricultural produce. The study's authors state that the long time periods for phasing out tariffs for sensitive products and safeguard provisions that would replace Colombia's price band system would lessen the impact of increased imports from the United States. One section of the study describes the results of a global applied general equilibrium model on the pending FTA. In terms of the overall effects on Colombia's economy, the results of the study imply that, in the medium term, Colombia would lose a net amount of $63 million, or about 0.06% of GDP. In the longer term, however, Colombia would gain $550 million each year, or about a 0.5% permanent increase to GDP. Colombia has a long tradition of civilian, democratic rule, yet has been plagued by violence throughout its history. The debate on U.S. free trade agreement with Colombia brought attention to the issue of labor rights violations in Colombia and whether the government was doing enough to curb violence, especially against union members; address the problem of human rights abuses; and end impunity. Numerous Members of Congress opposed the FTA with Colombia because of concerns about violence in Colombia against labor union members and other human rights defenders. Policymakers who voiced opposition to the agreement generally were concerned about the impunity issue in Colombia, the lack of investigations and prosecutions, and the role of the paramilitary. The Obama Administration also expressed concerns about the level of violence in Colombia and negotiated the "Action Plan Related to Labor Rights" discussed later in this report. Some Republican and Democratic supporters of the FTA took issue with these charges against the Colombian government and contended that Colombia has made significant progress in recent years to curb the violence. Some policymakers stated that Colombia was a crucial ally of the United States in Latin America and that if the FTA with Colombia did not enter into force, it would have led to further problems in the country and other Latin American countries. The Colombian government responded to U.S. concerns and acknowledged that, while there continued to be killings in Colombia, the situation had improved significantly since 2002. According to government data, assassinations of labor union activists and teachers decreased by 86% between 2002 and 2009, from 106 murders to 28 murders. In 2010, however this number increased to 37. Data on the number of labor leaders murdered may vary by source. In 2006, the Colombian government estimated that 60 labor union members were killed, while the National Labor School (ENS), a Colombian labor organization, estimated that 78 labor union members were killed. In 2010, the Colombian government recorded 34 murders, while the ENS recorded 51. According to the ENS, there were 24 murders of labor union members in 2012, 36 in 2013, and 20 in 2014. In 2017, Colombia's Ministry of Labor stated that the homicide rate for labor union members had decreased 51% between years 2010-2016. The ENS, meanwhile pointed to a 31% jump in homicides between years 2015-2016. According to the government, about 475 unionists benefit from state-funded security services. Whether labor activists are being targeted because of their union activity or for other reasons is an issue that continues to be debated. The United States and Colombia negotiated to develop an "Action Plan Related to Labor Rights" (the Action Plan) to help resolve the following U.S. concerns related to labor-related issues in Colombia: alleged violence against Colombian labor union members; inadequate efforts to bring perpetrators of violence to justice; and insufficient protection of workers' rights in Colombia. The governments of the United States and Colombia announced the plan on April 7, 2011. It includes numerous specific commitments made by the Colombian government to address U.S. concerns. The Obama Administration's announcement of the plan stated that the successful implementation of key elements of the plan was a precondition for the agreement to enter into force. The plan includes a number of obligations with target dates throughout 2011, and with a final target date of 2014 for the completion of hiring extra labor inspectors. The most significant target dates were April 22, 2011, and June 15, 2011. This section summarizes the details of the Action Plan as reported by the Office of the United States Trade Representative (USTR). One of Colombia's key commitments under the Action Plan was to create a new Labor of Ministry. By November 2011, the Colombian government had established the new ministry. On October 31, 2011, the Colombian government had established the new ministry. On October 31, 2011, President Santos announced the appointment of Liberal Party leader Rafael Pardo to lead the country's newly formed Labor Ministry, with the goal of implementing a broader and more effective regime to protect labor rights. The Colombian government expected that the Labor Ministry would provide the framework to mobilize resources and strengthen enforcement of labor laws. During the Uribe Administration, Colombia's labor-related functions were managed under the Ministry of Social Protection (MSP), which was created in 2002 by President Alvaro Uribe. The MSP had combined Colombia's Ministry of Health and previous Ministry of Labor into one central agency. The Action Plan's target dates for the measures related to the labor ministry ranged from April 22, 2011, to December 15, 2011. The Action Plan included the following as part of the Colombian government's commitments: Plan and budget for the hiring of 480 new labor inspectors over a four-year period, including the hiring of at least 100 new labor inspectors during 2011 and budgeting for an additional 100 new inspectors in the 2012 budget. Improve the system for citizens to file complaints concerning labor rights violations. The system is to have a toll-free telephone hotline and a new web-based mechanism for registering complaints. The MSP/Labor Ministry will conduct outreach to promote awareness of the complaint mechanisms. Improve the MSP/Labor Ministry mediation and conflict resolution system in all 32 departments (Colombian states) by assigning specialized resources to the MSP's regional offices, training workers and employers in conflict resolution, and conducting outreach. The MSP will also conduct outreach to the public, employers, and workers through TV programs and printed material. The Colombian government submitted legislation to the Colombian Congress to reform the country's criminal code by establishing criminal penalties for employers that undermine the right to organize and bargain collectively. The new article in the criminal code encompasses a wide range of practices that adversely affect fundamental labor rights and would penalize violators with up to five years of imprisonment. The Colombian government committed to have the legislation enacted by the Colombian Congress by June 15, 2011. Legislation on this matter entered into force on June 24, 2011. The Colombian government agreed to accelerate the effective date of the provisions of Article 63 of the 2010 Law of Formalization and First Employment, passed in December 2010. This provision of the law prohibits the misuse of cooperatives or any other kind of labor relationship that affects labor rights, and imposes significant fines for violations. The government submitted legislation to the Colombian Congress to move the effective date from July 1, 2013, to June 15, 2011. The Colombian congress approved the bill. The Labor Ministry was to direct 50 of the 100 new labor inspectors referenced above to be assigned exclusively to cases involving cooperatives. The hiring and training of these inspectors was to be completed by December 15, 2011. Most of these inspectors had been hired as of early December 2011. A second group of 50 labor inspectors specializing in cooperatives were to be hired during 2012. The priority sectors for labor inspections will be the palm oil, sugar, mines, ports, and flower sectors. The Colombian government agreed to confirm to the U.S. government by April 22, 2011, that these inspections had begun. The Colombian government agreed to issue regulations implementing the 2010 cooperatives law by June 15, 2011. The purpose of these regulations is to clarify earlier cooperatives laws; ensure coherence among earlier laws and the new cooperatives law; increase inspections of cooperatives; increase sanctions for labor law violators; strictly apply and enforce the requirements that cooperatives be autonomous and self-governing; and develop and conduct an outreach program to inform and advise workers of the following: their rights under Colombian law; remedies and courses of action available to them through the courts in order to enforce recognition of a direct employment relationship; and the existence of criminal penalties for employers who are responsible for undermining the right to organize and bargain collectively (upon congressional approval of the criminal code reforms in Colombia). The Colombian government agreed to work with the U.S. government to ensure that the agreed objectives are addressed and provide quarterly reports on the enforcement results to all interested parties. The Colombian government committed to implement a regime to prevent the use of temporary service agencies to circumvent labor rights. This would include actions such as improving the inspection process, designing a new training program for labor inspectors, and building databases to identify regions and sectors where there have been abuses. The enforcement regime is to include a monitoring and reporting mechanism in which all interested parties could verify progress and compliance with labor laws. As a first step, the MSP was to issue quarterly reports for interested parties that include the results of preventive inspections, penalties, fines, the cancellation of licenses and permits, and the list of those agencies found to be in violation. The Colombian government agreed the MSP, and later the Labor Ministry, would share a draft of the enforcement plan with the U.S. government by April 22, 2011; work with the U.S. government to ensure that the agreed upon objectives are addressed; conduct a series of preventive inspections by June 15, 2011; and fully implement the enforcement plan by December 15, 2011, which according to the USTR, was accomplished. The Colombian government committed to include in the bill on criminal code reform a provision stating it is a crime, subject to imprisonment, to use collective pacts to undermine the right to organize and bargain collectively. Approval of the criminal code reform took place in June 2011. The provision prohibits collective pacts from extending better conditions to non-union workers. The MSP/Labor Ministry began conducting a public outreach campaign after the criminal code reform was approved to promote awareness. Colombia's Labor Ministry is enforcing the reforms through preventive inspections and the new labor complaint mechanisms to detect and prosecute violations. The Colombian government committed to request technical assistance from the International Labor Organization (ILO) to monitor the use of collective pacts and work with the U.S. government to ensure that the agreed objectives are addressed. Colombia agreed that the MSP would collect the body of Colombian doctrine, case law, and jurisprudence that has narrowed the definition of essential services. The MSP disseminated this information and relevant guidelines to labor inspectors, the judicial branch, unions, and employers by the target date of April 22, 2011. The Colombian government's formal request to the ILO for technical assistance was accomplished by the target date of September 15, 2011. The Colombian government had committed to request cooperation, advice, and technical assistance from the ILO to help in the implementation measures in the Action Plan. It committed to work with the ILO to strengthen the presence and expand the capacity and role of the ILO in Colombia. The U.S. and Colombian governments committed to working together to identify the necessary resources and sources of support. Colombia's Ministry of Interior and Justice issued a Ministerial Resolution, by the target date of April 22, 2011, to broaden the definition of who is covered by its protection program. The broader definition includes (1) labor activists; (2) persons who are engaged in active efforts to form a union; and (3) former unionists who are under threat because of their past activities. The Colombian government planned and budgeted for necessary additional resources for this expansion by increasing the FY2011 allocation by 50% (approximately US $6 million) to provide adequate support for the expansion in the protection program. For FY2012, the Colombian government assessed the level of funding necessary to support the program and presented the requested budget to the Colombian Congress before the target date of July 30, 2011. The Ministry of Interior and Justice committed to eliminate the backlog of risk assessments on union member applications for protection, by July 30, 2011, through an emergency plan that had begun earlier. After the backlog elimination, the Colombian government committed to a national policy on conducting risk assessments to comply with the law to process all risk assessments within a 30-day period. On May 1, 2011, the Colombian government committed to providing monthly updates to interested parties. The Colombian government committed to issue a decree to reform the scope and functioning of the interagency committee that reviews risk assessments by September 15, 2011. The new committee was to include representatives from the Inspector General's Office and the Public Defender's Office to enhance objectivity in the assessment process. The Colombian government agreed to share with the U.S. government the relevant parts of the draft decree by April 22, 2011, and agreed to work with the U.S. government to ensure that the agreed objectives are addressed. The Colombian government also committed to strengthen the existing protection system by immediately implementing administrative measures. Colombia agreed to amend its teacher relocation and protection program, contained in Resolution 1240 ( Resolución 1240) of 2010, to ensure that meritorious requests are granted to teachers and to eliminate sanctions against teachers not found to be under extraordinary risk. The Colombian government agreed to work with the U.S. government to ensure that the program is achieving the objective of effectively protecting those covered by it and to ensure that the agreed objectives are addressed. Colombia began the sharing of quarterly reports on the program with interested parties beginning July 1, 2011. The Colombian government agreed to assign 95 additional full-time judicial police investigators to exclusively support prosecutors investigating criminal cases involving union members and activists. The first 50 of these judicial police were assigned by June 30, 2011, and most of the remaining police were assigned by December 15, 2011. The government stated that it would approve a request to increase funding for the Prosecutor General's Office for necessary resources to reduce impunity and for implementing the Action Plan. The Prosecutor General submitted the budget request by May 20, 2011. The Prosecutor General's Office of Colombia informed the Colombian government of numerous actions it had taken or plans to take to combat impunity in cases involving union members and labor activists: Issued a directive requiring criminal investigators to determine whether a victim was a union member or labor activist in the initial phase of the investigation; Issued a directive to the chiefs of the Unit of Justice and Peace and the Unit of Human Rights to share evidence and information about criminal cases involving union members, labor activists, teachers, journalists, and human rights activists; Developed a plan and identified budgetary needs for training judicial police investigators and prosecutors on crime scene management, and in investigative techniques with specific reference to the issues involved in labor cases; worked with the U.S. government in developing a detailed training program; Developed a plan and specified budgetary needs by May 20, 2011, to strengthen the institutional capacity, number of prosecutors and number of judicial police investigators; Finalized an analysis by July 15, 2011, on closed cases of homicides of union members and activists, in order to extract lessons that could improve investigations and prosecutions in future cases; the results of this analysis were widely publicized to help reduce impunity and deter future crimes; Developed a plan and identified specific budgetary needs for victims' assistance centers specialized in human rights cases, including labor cases; the Prosecutor General's Office agreed to staff the centers with professionals with expertise on human rights and labor issues; Colombia agreed to share the plans and budgetary allocations for this project to the U.S. government by June 15, 2011; Developed a program by the Prosecutor General's Office to address the backlog of unionist homicide cases that included (a) meeting with representatives of the union confederations and the National Labor School, Escuela Nacional Sindical (ENS), an independent labor rights monitoring body, in order to try to reconcile discrepancies; and (b) internal guidance to prosecutors to accelerate action on cases with leads, with a special focus on "priority labor cases", and to provisionally close cold cases by June 15, 2011; and Improved public reporting of completed criminal cases involving labor violence by the Prosecutor General's Office through the following: (a) publication by April 22, 2011, of cases decided as of January 1, 2011, and thereafter; and (b) identification of methods by June 15, 2011, for posting information regarding all completed cases on the Prosecutor General's Office website. The U.S. and Colombian governments agreed to assess progress in implementing the Action Plan and agreed to meet on a periodic basis through 2013 at the technical level and at the senior official level. In November 2013, the United States and Colombia agreed to continue bilateral meetings to discuss progress on commitments under the Action Plan. Both governments agreed to additional technical-level meetings and possible future meetings if both parties agree to it. After the announcement of the Action Plan, at least two of Colombia's labor confederations responded favorably to working with the Santos Administration and with business representatives to come to an agreement on labor issues. Labor unions in Colombia have responded favorably to at least some elements that were included in the Action Plan, especially those related to work cooperatives. The Secretary General of Colombia's National Labor Confederation remarked in November 2010 that President Santos' proposal under the 2010 labor cooperatives law was a "great achievement" for the trade union movement in Colombia. Although initial responses to the Action Plan from Colombian unions were mostly favorable, some labor unions continue to oppose the FTA with the United States. The ENS stated that the Action Plan was the most significant advance for the labor movement in Colombia in 20 years, but has also stated that it has gaps, such as not going far enough to address the labor abuses that are occurring in labor cooperatives. The Solidarity Center in the Andean Region contends that Colombia has not met its full commitment in the Action Plan to implement the 2010 Cooperatives Law because the decree that was signed in June 2011 is only a "partial decree." The Center argues that the decree leaves out other forms of contracting, other than cooperatives, that are included in the original decree. Some unions continue to oppose the FTA with the United States. Public sector unionists, in particular, protested plans of the Colombian and U.S. governments to enter into the FTA, even while the two presidents met in Washington, DC, on April 7, 2011, to announce the agreement on the Action Plan. On May 26, 2011, a tripartite labor agreement was reached among representatives of the Colombian government, the private sector, and some labor representatives. The agreement, which is the first concluded since June 2006, includes a consensus to request the ILO to provide cooperation, advice, and technical assistance on the implementation of the Action Plan measures. Two of Colombia's major labor confederations, however, the Confederation of Workers of Colombia (CTC) and the Central Union of Workers (CUT), did not sign the agreement because they felt they did not have sufficient time to analyze the agreement or to put forth their own proposals in the agreement. Two other confederations, the General Labor Confederation (CGT) and the Colombian Pensioners Confederation (CPC), signed the agreement and stated that it was one of the most significant advances in many years in strengthening labor movement in Colombia. Proponents of the agreement contend that it improves market access for U.S. exporters. Much of the U.S. business contends that the agreement helps increase exports of U.S. products, especially in agriculture. The National Pork Producers Council, for example, argues that the trade agreement provides significant new export opportunities for U.S. pork producers. Prior to passage of the agreement, U.S. exporters were concerned that they were losing market share in the Colombian market as a result of passage of FTAs that Colombia has negotiated with other countries. Some U.S. exporters were especially concerned about the Colombia-Canada FTA that entered into force in August 2011. U.S. wheat producers estimated that the agreement resulted in a decline in the U.S. share of Colombia's wheat as Canada's share increased. Numerous policymakers voiced concern about the United States losing market share of the Colombian market if Congress did not approve the U.S.-Colombia FTA. Over the ten years prior to the U.S.-Colombia FTA entering into force, Colombia entered into five FTAs with 12 countries in Latin America, in addition to the Colombia-Canada FTA. Colombia also signed FTAs with the European Union, and the EFTA (Iceland, Liechtenstein, Norway, and Switzerland). Colombia also joined an effort to create the Pacific Alliance, a regional trade integration agreement with Chile, Mexico, and Peru. Farmers in Colombia and their supporters are concerned that the FTA with the United States is hurting small farmers. Colombia's relatively high tariff structure of agricultural imports from the United States is to be phased out over a 19-year period under the U.S.-Colombia FTA, but tariffs on certain products, such as wheat and soybeans, were removed immediately upon the agreement's entry into force. Many in Colombia's farming sector argue that the agreement and other liberal trade policies are "undermining local food production and putting small farmers out of business" as lower cost imports enter the Colombian market. In August 2013, a nationwide strike in Colombia lasted over a week as more than 200,000 coffee growers, dairy farmers, and other agricultural workers and their supporters blocked roads and launched protests against the U.S.-Colombia FTA. Protesters stated that President Santos' policies of trade liberalization and privatization are forcing small farmers in Colombia to compete with subsidized U.S. products and making them more vulnerable to market fluctuations. Rural farmers are concerned that these policies are decreasing their incomes and were striking to ask for more protection and services from the government. Police reportedly fired tear gas at the protestors while the army patrolled the streets. Human rights organizations contend that Colombian military personnel were violating human rights of the protestors through beatings and unwarranted arrests. Some observers argue that the problems that farmers are facing go beyond the free trade agreement with the United States. For example, farmers in rural areas face extremely expensive credit rates and production supplies. Many also face challenges in transporting their goods to the main producers because of the poor state of supply routes. While there may be opportunities for some agriculture producers by exporting other goods, such as Colombia's array of exotic fruits, the mounting challenges for smaller producers may be too large for them to handle. In response to the protests, the President reshuffled his cabinet by replacing the agriculture minister, as well as several others. The government also negotiated a deal with the protestors in which the government said it would do more to protect the livelihoods of farmers and modernize the agricultural sector. The President announced that his administration would promote a "National Pact" for the agriculture industry that would include all stakeholders, including those in non-agricultural sectors. Some of the concessions made to the strikers included regulated fertilizer prices, a freeze on imports of certain produce, a suspension of a resolution that made it illegal for them to produce seeds from their own harvests, and a temporary freeze on proposed price hikes for diesel fuel. Numerous U.S. labor groups oppose the U.S.-Colombia FTA. They maintain that Colombia's labor movement is under attack through violence, intimidation, and harassment, as well as legal channels. The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) contends that Colombian labor union members continue to face daily legal challenges to their rights to organize and bargain collectively and that these challenges threaten the existence of the Colombian labor movement. While the AFL-CIO acknowledges that Colombia has made progress in protecting union members, it continues to have concerns regarding the government's commitment to protect fundamental worker rights. The AFL-CIO remained opposed to the FTA even after the Action Plan negotiated by the Obama Administration and the Colombian government was announced on April 6, 2011. The position of Colombian labor unions on passage of the U.S.-Colombia FTA was mixed, with some unions in favor of the agreement and others opposed. In May 2007, 17 Colombian unionists representing the textiles, flower, mining, and other Colombian industries visited the U.S. Congress to speak out in favor of the agreement. They represented the General Labor Confederation of Colombia (CGT), which acknowledged progress in protecting worker rights by the Colombian government. Union members in support of the FTA argued that it would provide jobs in the coffee, flower, textiles, and other industries in Colombia. They contended that the Uribe Administration made much progress in protecting worker rights and that the Santos Administration was making these positive changes "more concrete." Some CGT representatives stated they did not believe that union workers were being targeted for their labor activities and believed that the violence was due to the ongoing conflict in Colombia caused by guerrillas and paramilitaries. Other Colombian union representatives, however, many of whom are government employees, spoke out against the agreement. They argued that the FTA would interfere with the Colombian government's right to govern the country, and that it would have a negative effect on Colombia's agriculture sector and the economy in general. A major labor confederation in Colombia, the Central Union of Workers (CUT) strongly opposed U.S.-Colombia FTA and argued that it would not be effective in protecting worker rights in Colombia because the labor chapter in the agreement did not go far enough to protect worker rights. The CUT also contended that the Action Plan Related to Labor Rights would not be effective in ending the impunity of crimes against unionists in Colombia. According to a CUT representative, the main problem in Colombia was due to the high levels of impunity and the lack of justice in the legal system. The United States, Colombia, and the ILO worked to implement the Labor Action Plan, including supporting the establishment of a separate Ministry of Labor to elevate the importance of labor issues within the Colombian Government. Regular meetings and ongoing engagement between the two governments focus on achieving the goals of the plan, including providing technical assistance and cooperative efforts to build the institutional capacity of Colombia's Ministry of Labor. The two governments have recognized advances made by Colombia, and at the same time continue to underscore several areas of concern, including collection of fines imposed for labor violations; targeted inspections in priority sectors; investigation and sanction of all forms of abusive contracting; and violence and threats against trade unionists and continued impunity for the perpetrators. U.S. and Colombian officials continue to participate in technical-level and senior official meetings. Colombia has made progress in lowering its unemployment rate since the U.S.-Colombia FTA entered into force. Between 2012 and 2017, the unemployment rate went from 10.4% to 9.4%. The government is also making efforts to protect vulnerable groups. The annual budget to protect union leaders increased from $100 million in 2012 to $165 million in 2013 and to $155 million in 2014, 2015, and 2016. The number of union leaders protected went from 542 in 2012 to 677 in 2014 and currently stands at around 400. Colombia was excluded from the 2015, 2016, and 2017 lists of member states invited to appear for the annual International Labor Conference's Committee on the Application of Standards, indicating the progress Colombia has made in applying international labor standards. Exclusion from the list means that Colombia is considered as a case of progress in the observation of labor rights and labor inspection. Colombia was included in the 2014 list, however. The 2017 announcement took place in the framework of the 106 th International Labor Conference in Geneva, Switzerland, in June 2017, which addressed labor migration governance, fair labor recruitment, and the promotion of decent work for people in conflict zones or disaster areas. Colombia continues to work with the ILO to promote job creation. On June 6, 2015, the Colombian government and the International Labor Organization (ILO) signed a memorandum of understanding to establish a framework for cooperation on job creation in rural areas. The ILO Director Guy Rider emphasized the importance of such cooperation to create jobs in the formal sector of the Colombian economy and move away from informality. Some Members of Congress expressed concerns about implementation of the Labor Action Plan. An October 2013 congressional staff report to the Congressional Monitoring Group on Labor Rights in Colombia acknowledged that the Colombian government had undertaken important measures to protect worker rights and was working at the highest levels of government to implement the plan and improve working conditions in Colombia. The report, however, stated that, despite the "best intentions" by the Colombian government, the actions had not resulted in improved conditions for workers and activists in Colombia. The report's findings include the following: (1) indirect employment is still pervasive and growing; (2) the inspection system is ineffective, and worker protections are weak; and (3) the right to organize is being denied, and a lack of justice prevails. Prior to approval of the U.S.-Colombia FTA, labor groups raised concerns regarding the widespread practice of indirect employment relationships in Colombia such as labor cooperatives. Colombian cooperatives are work arrangements mostly found in the sugar cane, palm oil, flower, mining, and port industries. Critics of the programs contend that these indirect employment relationships lead to a lack of protection of worker rights, wages below the minimum wage, and lower health and pension benefits. The Colombian government established such work arrangements years ago to help generate employment, but later recognized these pacts could lead to an erosion of worker rights. Subsequently, it undertook a series of reforms since 2004. A key law was passed by Colombia's Congress on December 12, 2010. Article 63 of Ley 1429 , a law for formalizing the labor force and generating employment, has new and stronger measures to help ensure that worker rights are not being violated and to impose sanctions on businesses that are violating Colombian laws. The major changes in this law are increased sanctions on companies for violations of the law from about $25,000 to $1.5 million; accountability for inspectors if they do not enforce the law; and enhanced bargaining rights for workers belonging to a cooperative. The law was to have a transition period and not enter into effect until July 2013. However, in an agreement with the United States under the Action Plan Related to Labor Rights, the Colombian government agreed to accelerate implementation of the law to June 2011. Critics of the cooperative work arrangements contend that the arrangements lead to worker oppression, prevent workers from joining unions, and result in a denial of basic benefits. Critics also contend that certain marginalized groups, especially the Afro-Colombian population, are particularly vulnerable to unfair treatment. Colombian labor representatives urged Congress to delay passage of the FTA until Colombia improved its labor laws. Labor groups contend that indirect employment relationships in Colombia persist, even after implementation of the Action Plan, preventing workers from exercising their rights to free association and collective bargaining. According to the Colombian government, cooperatives are required by law to provide health benefits, worker rights protections, and pension benefits, but they have had numerous cases of non-compliance with the law. The government contends that it has increased inspections and imposed sanctions for non-compliance. For example, according to government documents, between 2007 and January 2011, inspectors made 4,787 visits to work areas, conducted 4,052 investigations, and imposed sanctions 816 times. As a result, the number of workers participating in cooperatives reportedly decreased from 2 million in 2007 to 600,000 in 2010, and the number of cooperatives reportedly decreased from 12,317 to 4,555 between 2007 and 2010. The government also contends that in 2012 and 2013, thousands of Colombian workers have benefitted from "formalization agreements" between employers and workers as a direct result from the Labor Action Plan. A 2013 Colombian government document states that numerous employers in the transportation, sugar cane, palm tourism, health, and other sectors reached agreement with their workers in which 15,700 workers moved from indirect working arrangements to permanent direct employment. In response to U.S. concerns regarding worker right protection in Colombia, the Embassy of Colombia in the United States reported on the progress that Colombia made since 2001 in strengthening the rights, benefits, and security of unions. According to progress reports issued by the embassy, government reforms in Colombia since 2002 helped protect Colombian worker rights to form unions, bargain collectively, and strike. Reforms include enhanced efforts to open dialogue with union members, including meetings with Colombia's President and Vice-President. A September 2011 report provided indicated that homicides dropped by 45% since 2000 and homicides of union members decreased 81% during the same period. Another report stated that a protection program aimed at vulnerable groups, including union members, and the creation of the special unit at the Prosecutor General's Office led to an 86% reduction in the level of homicides of union members. Regarding allegations that Colombia is the world's most dangerous country for union members, the Colombian government contends that because other countries use different methods for tracking this data, it cannot be compared among countries. The government argues that union membership in certain professions in Colombia is almost universal, including teachers and judicial branch employees. Government representatives have stated that many of victims of violence are union members, but that does not necessarily mean that they were targeted because of their union activities. April 2016 marked the fifth anniversary of the Colombian Action Plan Related to Labor Rights. A report commemorating the occasion by the Obama Administration stated that Colombia had made "meaningful" progress since the plan's inception. Major achievements, according to the report, include reductions in the number of fake worker cooperatives and a doubling of labor inspectors within the Colombian Ministry of Labor. The report also listed certain issues that require attention going forward. According to the text, other forms of illegal subcontracting have started to replace worker cooperatives, threatening the improvements made over the past five years. Similarly, the report found that the government has been slow to address the culture of impunity that surrounds labor law violations and that the government has not been effective in collecting fines levied against employers. The Obama Administration continued to work closely with Colombia on issues of ongoing concern and devoted resources to address these matters. The Department of Labor sent a labor attaché to be stationed at the U.S. Embassy in Bogota. Colombia is the second country to which DOL has sent an attaché, which highlights the importance placed on worker rights in Colombia. Some Colombian government officials contend that the U.S.-Colombia FTA and the Labor Action Plan demonstrate an unprecedented level of cooperation between two countries on labor issues and can serve as an example for other free trade agreements on labor issues. In 2016, the U.S. Office of Trade and Labor Affairs (OTLA) received a complaint from five Colombian labor organizations and the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO). The group alleged that the Colombian Government had failed to comply with the terms described in the labor chapter of the U.S.-Colombia FTA. Those alleged failures, according to the complaint, were especially damaging, as they helped undermine the fundamental labor rights of Colombian workers, particularly their rights to freedom of association and collective bargaining. The group provided examples from the petroleum and sugar sectors to illustrate specific shortcomings. The OTLA investigated the group's claims and published its findings on January 11, 2017. It wrote that the Colombian government, despite making progress in certain aspects of the labor question, was marred by inconsistencies that endangered recent advances in labor rights. The OTLA specifically highlighted problems with the Labor Inspectorate, the inspection process, and the process for collecting fines. The OTLA also stated that Colombia's "high rate of impunity" in cases of violence against unionists, its unlawful collective labor pacts, and pervasive subcontracting practices were major obstacles for worker rights in the country. The OTLA included a list of 19 recommendations in its investigation report to help the Government of Colombia address its labor rights issues. These included, among other things, strengthening the Ministry of Labor's labor inspection system; investigating and prosecuting cases of violence against unionists more thoroughly; and combating abusive subcontracting practices and collective pact agreements. The OTLA also encouraged the Secretary of Labor of the United States to "initiate consultations" with the Government of Colombia and indicated it would seek to involve relevant members of civil society in the consultation process. OTLA stated it would reevaluate the government's progress "within nine months and thereafter, as appropriate." In January 2018, OTLA published an assessment of the actions taken by Colombia in response to the recommendations included in the January 2017 report. According to the assessment, Colombia has "taken several steps" toward satisfying some of the recommendations found in the 2017 report. The Ministry of Labor, for example, mandated the installation and use of an electronic case management system in all regional offices and two special administrative offices. It also took steps to address high turnover rates within the inspectorate body by converting close to 90 percent of its existing inspector positions into career civil servant positions. The OTLA assessment also noted other changes that, if fully implemented, would contribute to addressing the issues and questions raised in the 2017 report. Some of these include remedial training for ministry employees, and a larger budget appropriation from the Colombian Congress for 2018. Despite some positive signs, however, the OTLA warns that not all listed recommendations have received full attention. The OTLA stated it would continue to monitor Colombia's progress with the help of the U.S. Department of State and the U.S. Trade Representative.
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The U.S.-Colombia Trade Promotion Agreement entered into force on May 15, 2012. It is a comprehensive free trade agreement (FTA) between the United States and Colombia, which will eventually eliminate tariffs and other barriers in bilateral trade in goods and services. On October 3, 2011, during the 112th Congress, President Barack Obama submitted draft legislation (H.R. 3078/S. 1641) that was introduced by request in both houses of Congress to implement the agreement. On October 12, 2011, the House passed H.R. 3078 (262-167) and sent it to the Senate. The Senate passed the implementing legislation (66-33) on the same day. The agreement was signed by both countries almost five years earlier, on November 22, 2006. The Colombian Congress approved it in June 2007 and again in October 2007, after it was modified to include new provisions agreed to in the May 10, 2007, bipartisan understanding between congressional leadership and President George W. Bush. The United States is Colombia's leading trade partner. Colombia accounts for a very small percentage of U.S. trade (approximately 1%), ranking 22nd among U.S. export markets and 27th among foreign exporters to the United States in 2017. Because the FTA has been in effect for only five and a half years, the economic effects of the agreement are not yet clear. Some economic studies estimated that, upon full implementation, the impact on the United States would likely be positive but very small due to the small size of the Colombian economy. The congressional debate surrounding the US-Colombia FTA mostly centered on violence, labor, and human rights issues in Colombia. Numerous Members of Congress opposed passage of the agreement because of concerns about alleged targeted violence against union members in Colombia, inadequate efforts to bring perpetrators to justice, and weak protection of worker rights. However, other Members of Congress supported the FTA and took issue with these charges, stating that Colombia had made great progress over the last 10 years to curb violence and enhance security. They also argued that U.S. exporters were losing market share of the Colombian market and that the agreement would further open the Colombian market for U.S. goods and services. To address the concerns related to labor rights and violence in Colombia, the United States and Colombia agreed upon an "Action Plan Related to Labor Rights" that included specific and concrete steps to be taken by the Colombian government with specific timelines. It included numerous commitments to protect union members, end impunity, and improve worker rights. The Colombian government submitted documents to the United States in time to meet various target dates listed in the Action Plan. The U.S. business community generally supports the FTA with Colombia because it contends that FTAs help increase U.S. exports. At the time of the debate, U.S. exporters urged policymakers to move forward with the agreement, arguing that the United States was losing market share of the Colombian market, especially in agriculture, as Colombia entered into FTAs with other countries. Colombia's FTA with Canada, which was implemented on August 15, 2011, was of particular concern for U.S. agricultural producers. Critics of the agreement expressed concerns about violence against union members and the lack of protection of worker rights in Colombia, especially in labor cooperatives. Labor unions in general remain highly opposed to the agreement. They argue that Colombia's labor movement is under attack through violence, intimidation, and harassment, as well as legal challenges.
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Paragraphs 2 and 3 of Senate Rule XIX identify language that is considered to violate standards of decorum in debate. Such "disorderly" language includes directly or indirectly imputing to another Senator or Senators "any conduct or motive unworthy or unbecoming a Senator" (paragraph 2) and referrin g "offensively to any State of the Union" (paragraph 3). Rule XIX prohibits imputing conduct or motive "by any form of words" to a sitting Senator. The presiding officer has stated that this prohibition includes language taken from "quotes, articles, or other materials," not just original words spoken by a Senator in debate. From a historical standpoint, these explicit statements of words that constitute disorderly language are relatively recent additions to the Senate's standing rules. The language of paragraph 2 related to impugning motives and of paragraph 3 against speaking offensively of any state were both adopted on April 8, 1902. While these explicit examples of disorderly language are newer to Senate rules, the prohibitions they codify are not. The Senate has, from its earliest days, stressed the importance of decorum in debate and had a mechanism in its rules to sanction Senators who use disorderly language. Senators could have been, and were, called to order for imputing motives or maligning a state prior to the adoption of these paragraphs. The concepts of decorum in debate made explicit by Rule XIX are clearly stated in Section XVII of Thomas Jefferson's Manual of Parliamentary Practice (" Jefferson's Manual ") and stem from English parliamentary practice prior to the 1 st Congress under the Constitution. The statements listed in Rule XIX are not considered to be a comprehensive recitation of language that may be considered disorderly and violate decorum in Senate debate. For example, while there is no specific Senate rule governing such statements, chamber precedents indicate that the body has, on occasion, ruled certain references made in debate to the character or conduct of the House of Representatives and its Members to be disorderly. The application of Rule XIX does not, however, "extend to remarks made about the President of the United States, the Vice President, or Administration officials," and a Senator cannot be called to order under the rule for comments or remarks made in debate about such individuals. Likewise, general criticism of the action of a congressional committee does not constitute a violation of the rule as to motives. As is discussed below, the presiding officer decides if a Senator has used disorderly language in debate in violation of Rule XIX, subject to an appeal to the full Senate. Paragraphs 4 and 5 of Rule XIX establish a parliamentary mechanism whereby a Senator who engages in the type of disorderly language described in the rule (discussed above) can be "called to order" by the presiding officer or by another Senator. These paragraphs of the rule state: 4. If any Senator, in speaking or otherwise, in the opinion of the Presiding Officer transgress the rules of the Senate the Presiding Officer shall, either on his own motion or at the request of any other Senator, call him to order; and when a Senator shall be called to order he shall take his seat, and may not proceed without leave of the Senate, which, if granted, shall be upon motion that he be allowed to proceed in order, which motion shall be determined without debate. Any Senator directed by the Presiding Officer to take his seat, and any Senator requesting the Presiding Officer to require a Senator to take his seat, may appeal from the ruling of the Chair, which appeal shall be open to debate. 5. If a Senator be called to order for words spoken in debate, upon the demand of the Senator or of any other Senator, the exceptionable words shall be taken down in writing, and read at the table for the information of the Senate. In current practice, the Rule XIX call to order is rarely formally invoked. It is far more common for the presiding officer, acting on his or her own initiative, to issue a "warning" to a Senator who has violated standards of decorum in debate or to simply read the provisions of Rule XIX aloud as a general reminder to the Senate in cases where debate has become heated. Occasionally, however, a formal call to order is made. The steps used to invoke the Rule XIX call to order are as follows: Any Senator who believes that another Senator has transgressed the rules of decorum in debate under Rule XIX may call that Senator to order. A Senator would do so by saying: Mr. (or Madam) President, I call the Senator to order under Rule XIX. The presiding officer may also, on his or her own initiative, call a Senator to order without any call to order being raised from the floor. Senate precedents state that a Senator or the presiding officer may call a Senator to order "without the latter yielding for that purpose." That is, a Senator properly in possession of the floor may be interrupted by another Senator who wishes to call the first to order for his or her remarks. Senate precedents further indicate that Rule XIX "can be invoked at any time upon its violation" and that a Senator may call another Senator who is addressing the Senate to order "at any time." Under paragraph 5 of Rule XIX, any Senator may demand that the allegedly objectionable words be read aloud, although this step is optional. To do so, a Senator would say: Mr. (or Madam) President. I demand that the words of the Senator from [STATE] be read aloud for the information of the Senate. The chair would then rule on whether or not the words in question were disorderly and transgressed Rule XIX. If the presiding officer ruled that a speaking Senator had transgressed Rule XIX, he or she would direct the speaking Senator to take his or her seat. Senate precedents indicate that the "penalty" for violating "Rule XIX, is that the speaking Senator take his seat." If, on the other hand, the presiding officer, in response to a call to order from the floor, ruled that the speaking Senator had not violated Rule XIX, the speaking Senator would be allowed to proceed in order. The ruling of the presiding officer under Rule XIX that a Senator has used disorderly words in debate is subject to an appeal by any Senator, including by a Senator who has been directed to take his or her seat. If such an appeal is raised, the presiding officer would state: The question before the Senate is, 'Shall the decision of the Chair to hold the Senator from [STATE] in violation of rule XIX stand as the judgment of the Senate?' Such an appeal is debatable but subject to a nondebatable motion to lay the appeal on the table. A speaking Senator who has been found to have violated Rule XIX by using disorderly language may not proceed in debate without the permission of the Senate. Senate precedents suggest that, unless lifted by unanimous consent or by motion, the prohibition on debate is in force during consideration of the pending question. Senate precedents state, however, that a Senator who has been called to order "would be entitled to recognition to speak on another matter subsequently taken up by the Senate." Permission for a sanctioned Senator to proceed in order could be granted by unanimous consent or by the adoption of a nondebatable motion. If a motion to proceed in order is adopted, the speech of the offending Senator is not terminated: He or she would retain possession of the floor and could continue speaking. The motion to proceed in order can be made only by a Senator in possession of the floor or when a Senator in possession of the floor yields for the purpose of making the motion. Such a motion cannot be made after the Senate has taken up other business. To make such a motion, a Senator would say: Mr. (or Madam) President, I move that the Senator from [STATE] be permitted to proceed in order. If a Senator has been found to have violated decorum in debate under Rule XIX, his or her objectionable words may be stricken from the Congressional Record either by unanimous consent or by motion. Senate precedents indicate that matters that have, by such a motion, been stricken from the Record as having violated Rule XIX include not only remarks or language reflecting on a sitting Senator but also a chart, a letter, or a telegram doing so. CRS identified one instance in which a Senator sought a ruling that language used in debate earlier in the day by a colleague had violated Rule XIX, and when the chair indicated that, in his opinion, it had, the Senator asked and received unanimous consent to strike the offending language from the Record . A mechanism for calling Senators to order for the use of disorderly language in debate has existed in Senate rules since the 1 st federal Congress (1789-1790), beginning with the Senate's adoption of 19 standing rules governing its operation on April 16, 1789. Of these, Rule XVI, stated: When a member shall be called to order, he shall sit down until the President shall have determined whether he is in order or not; and every question of order shall be decided by the President, without debate; but, if there be a doubt in his mind, he may call for the sense of the Senate. The rule was rewritten in 1856 to state: If any member, in speaking, or otherwise, transgress the rules of the Senate, the presiding officer shall, or any member may, call to order, and when a member shall be called to order by the President, or a Senator, he shall sit down, and shall not proceed without leave of the Senate. And every question of order shall be decided by the President, without debate, subject to an appeal to the Senate; and the President may call for the sense of the Senate on any question of order. Rule XIX was amended to its present form on June 14, 1962, by Senate adoption of S.Res.37. The 1962 amendment made a significant change in the operation of the call-to-order mechanism. Under the 1856 amendment described above, the mechanism had been interpreted to require a Senator to immediately take his or her seat when called to order by another Senator, even before any ruling had been made as to whether the words spoken by the Senator were, in fact, disorderly. This interpretation is illustrated in an exchange Majority Leader Scott Lucas had with the presiding officer on the Senate floor on May 8, 1950: Sen. Lucas: Mr. President. Can a Senator, at any time when another Senator is speaking, merely rise and say in substance that the Senator from Nebraska, the Senator from Illinois, or whoever might be speaking, is violating rule XIX, and that he therefore demands the Senator take his seat? Under those circumstances, is it necessary for the Senator who is speaking to take his seat? And can one Senator discipline another Senator under those circumstances, whether the Senator is guilty of violating Rule XIX or is not guilty? The Vice President: The Chair is bound to say that the language of the rule gives the Chair no authority whatever to pass on the question of whether a Senator is violating rule XIX. It provides that whenever a Senator is speaking, and another Senator calls him to order on the ground that he is violating the rule, he must take his seat. No matter what he has said, no matter what he is talking about, no matter whether there is any offense given or any violation of the rule, the Senator must take his seat until the Senate permits him to proceed in order. The Chair would not hesitate to say that it is a rather peculiar rule, but even if a Senator is repeating the Lord's Prayer, some other Senator may call him to order, and the Senator must take his seat until he is permitted to proceed in order. The 1962 amendment to the call-to-order provision changed the interpretation of Rule XIX so that, when called to order by a colleague, the presiding officer would first have to rule whether the words were disorderly (with that ruling subject to an appeal) before a Senator was required to be seated. The amendment was designed to ensure that a Senator could not be taken off his or her feet by a simple allegation that he or she had transgressed Rule XIX, something supporters of amending the rule argued had occurred. The Rules Committee report accompanying S.Res.37, quoting its author, Senator Joseph S. Clark, stated: [S.Res.37] would modify Senate Rule XIX, requiring a Senator to take his seat without a ruling by the Chair that he has spoken disparagingly of another Senator, which has become a deterrent to frank and free debate.... Rule XIX ... has been construed to permit a Senator at any time to interrupt another Senator, raise a point of order and require that Senator to take his seat without any ruling on the part of either the Presiding Officer or the Senate that the Senator called to order had violated the rule. All Senators will recall the several instances of abuse of the rule which have occurred during the August session of Congress. Senate rules governing the call to order mechanism have seen a number of other, smaller changes over the years. Table 1 , below, outlines the evolution of the Senate's call to order rule from its inception in 1789 to the present. It provides the dates that amendments to the rule were adopted, the text of the rule at that time, and notes providing additional context. As previously mentioned, the Rule XIX call to order is rarely formally invoked. However, references to the rule in floor debate have been a much more common occurrence and served as warnings or reminders that decorum should be maintained. Both methods of practice are examined in more detail below. CRS conducted full-text searches of the Congressional Record and the Senate Journal using the Legislative Information System of the U.S. Congress (LIS) and the ProQuest Congressional database in order to identify instances in which a call to order under Senate Rule XIX had been formally invoked since June 14, 1962. These instances are identified in Table 2 . The most recent example of a formal call to order being made occurred on February 7, 2017. In that case, a Senator was called to order by the majority leader for quoting a former Senator and reading passages from a letter written to the Committee on the Judiciary by a notable private individual, both of which negatively characterized a sitting Senator. The presiding officer had previously warned the speaking Senator that her remarks could be in violation of the Rule XIX provisions regarding disorderly language. When called to order, the speaking Senator asked unanimous consent to proceed in order, but objection was heard to the request. The presiding officer then instructed the Senator in question to take her seat, and she appealed the ruling of the chair. After a quorum was established, the ruling of the chair was upheld on appeal. A subsequent motion to allow the speaking Senator to proceed in order was rejected by a vote of 43-50. In practice, Senators have utilized a number of different techniques to draw a speaker's attention to Rule XIX without formally invoking a call to order. Senators have, for example, stated that they considered raising a Rule XIX call to order, indicated their belief that certain words transgressed the rule, cautioned their colleagues to be mindful of Rule XIX when speaking, made parliamentary inquiries of the chair about the application of the call to order mechanism, or directly asked the chair to read from the rule. These practices afforded Senators the opportunity to express their displeasure with a speaker's remarks without having to formally call a colleague to order. This informal manner of lessening tensions and enforcing decorum in debate is perhaps unsurprising in a chamber that has traditionally valued comity and senatorial courtesy over a rigid adherence to procedure. Most recently, at the urging of a Senator, the presiding officer of the Senate, on January 21, 2018, read paragraph 4 of Rule XIX aloud to the Senate immediately following a request by a Senator that it be read aloud. While it is not clear what specific words prompted the request that the rule be read, the incident occurred in the course of an animated floor debate regarding government funding during a lapse in appropriations. In another example, on October 4, 2013, a Senator stated in debate that, in his judgment, certain statements made by another Senator violated Rule XIX standards of decorum but that he was not going to raise a call to order related to them. In response to the Senator's statement, the presiding officer read paragraph 2 of Rule XIX aloud "for the edification of all Senators." There have been numerous other examples in recent years in which Rule XIX was mentioned in floor debate but a call to order was not formally invoked.
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The Senate has, from the 1st Congress (1789-1790), valued the importance of decorum in debate and included a "call to order" mechanism in its rules to sanction Senators who use "disorderly" language. The rules adopted in 1789 contained such a call-to-order provision, and its language has been amended multiple times over the years. Table 1 of this report details the historical evolution of the rule. The present form of the Senate's call-to-order provision was adopted on June 14, 1962. Senate Rule XIX identifies specific language that is considered disorderly. This includes language directly or indirectly imputing to another Senator or Senators "any conduct or motive unworthy or unbecoming a Senator" (paragraph 2) and referring "offensively to any State of the Union" (paragraph 3). Rule XIX prohibits imputing conduct or motive "by any form of words" to a sitting Senator, which includes not just original words spoken in debate but quotes, news articles, and other materials. The statements in paragraphs 2 and 3 are not considered to be a comprehensive recitation of language that may violate decorum in Senate debate. Although precedents on the subject are mixed, Senators have at times also been called to order for making disparaging references in debate to the House of Representatives or its Members. Paragraphs 4 and 5 of Rule XIX establish a parliamentary mechanism whereby a Senator who engages in the type of disorderly language described in the rule can be "called to order" by the presiding officer or by another Senator. This call to order is rarely formally invoked in the modern Senate. Table 2 of this report lists instances in which the rule has been invoked since 1962. It is far more common for the presiding officer, acting on his or her own initiative, to issue a "warning" to a Senator who has violated standards of decorum in debate or to read the provisions of Rule XIX aloud as a general reminder to the Senate in cases where debate has become heated. If a formal call to order is made, however, any Senator may demand that the allegedly disorderly words be read aloud for the benefit of the Senate. Should the chair then rule that the speaking Senator's words have violated Rule XIX, the sanctioned Senator must take his or her seat. The chair's ruling in this regard is subject to an appeal to the full body. A Senator sanctioned under the rule in this manner is barred from participating in further debate on the pending matter unless the Senate, by unanimous consent or by nondebatable motion, permits him or her to proceed in order. Disorderly words used in Senate debate can be stricken from the Congressional Record by unanimous consent or by motion.
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The U.S. Postal Service (USPS) has a long relationship with the Department of Defense (DOD) to facilitate correspondence and the exchange of gifts between service personnel and their families. Post offices throughout the country accept mail and packages for military personnel and deliver these items to military installations in the United States. Overseas military mail delivery is somewhat more complicated. The USPS delivers mail and packages to USPS gateway sites in New York, Newark, San Francisco, Miami, and Chicago. Domestic postage covers the cost of this service. The cost of transporting the mail from those sites to overseas Army/Air Force Post Offices (APOs) and Fleet Post Offices (FPOs) that serve members of the Armed Forces is borne by the military mail service. For mailers, then, the postage is subsidized—they pay only the domestic portion of the cost. When the Armed Forces are engaged in combat or other dangerous activities, the President has the authority to permit service members to send personal correspondence, free of charge, to places within the delivery limits of a U.S. post office (39 U.S.C. 3401(a)(1)). This privilege is currently available to service members in Iraq, Afghanistan, and certain surrounding countries and seas, and to service personnel hospitalized in a military facility as a consequence of service in the designated areas. The DOD pays the USPS for the costs of delivering this mail from the U.S. gateway sites to any domestic address. Free mail must have a complete APO or FPO return address and the word "free" written in the upper right corner with an APO or FPO postmark. However, citizens of the United States have never been authorized to send mail to service members, whether overseas or not, without paying postage. It is the case that the government created "V-Mail" as a means for Americans to correspond with members of the Armed Forces during World War II. But only members of the Armed Forces could send V-Mail free of postage. Families and friends had to pay postage at the standard rates of the day. Those wishing to send written correspondence to members of the Armed Forces overseas currently pay postage between $0.44 and $3.28 per letter (1 to 13 ounces). Someone wishing to send a package will pay the standard domestic package postage rates, which are calculated on a range of factors, including package size, shape, and weight. Alternatively, a mailer may take advantage of the discounted APO/FPO Priority Mail Flat-Rate Box. The USPS offers "free Military kits" to military families who want to send packages overseas. The mailing kits can be ordered by phone by calling 1-800-610-8734 and asking for the Care Kit. Each kit includes two Priority Mail boxes, six Priority Mail Flat-Rate boxes, eight Priority Mail labels, one roll of Priority Mail tape and eight customs forms with envelopes. A sender must pay postage of $12.95, a discount of $2 off the standard postage, for each 12" by 12" by 5" box. Representative Peter King introduced H.R. 1935 , the Supply Our Soldiers Act of 2011, on May 23, 2011. It was referred to the House Committee on Armed Services. H.R. 1935 would establish a postage benefit for members of the armed services on active duty in Iraq or Afghanistan, and for individuals who are "hospitalized at a facility under the jurisdiction of the Armed Forces of the United States as a result of a disease or injury incurred as a result of service in Iraq or Afghanistan," provide a beneficiary with one coupon or voucher per month, which he or she could give to anyone who wished to send a letter of no more than 13 ounces or a parcel of no more than 15 pounds; and authorize an appropriation to the DOD to cover the cost of this program to the USPS. Funding is "not to exceed $75 million for the total period beginning with fiscal year 2012 and ending with fiscal year 2017." H.R. 1935 is nearly identical to bills introduced in previous Congresses by Representative King— H.R. 704 (111 th Congress) and H.R. 1439 (110 th Congress). Legislation to establish a free-mail-to-troops postage benefit has been introduced in the 109 th , 110 th , and 111 th Congresses. None of the bills were enacted. Representative Vito Fossella introduced H.R. 923 , the Mailing Support to Troops Act of 2005, on February 17, 2005. As introduced, the bill would have allowed family members of military service personnel to mail letters and packages free of charge to active members of the military serving in Afghanistan or Iraq, and to servicemen and women hospitalized as a result of disease or injury suffered in Afghanistan or Iraq. To receive this free postage benefit, mailers simply would have written on the envelope or box "'Free Matter for Member of the Armed Forces of the United States' or words to that effect [as] specified by the Postal Service." H.R. 923 would have forbidden this mail to contain advertisements. The bill would have authorized appropriations to reimburse the USPS for its extra expenses in transporting such mail. Another approach to providing a free postage benefit was taken by Representative Harold E. Ford, Jr., in H.R. 2874 , the Supply Our Soldiers Act of 2005, which was introduced on June 14, 2005. The bill would have provided a free postage benefit to both families of service members and charities. Soldiers mobilizing for overseas duty would have been given an allotment of special stamps (equivalent in value to $150 per calendar quarter) to send to their families or selected charities. These stamps would have permitted them to mail letters and packages to service members without postage. There would have been a 10-pound limit on packages mailed, and the DOD would have reimbursed USPS for providing this service. By putting individual service members into the authorization chain for the mail they received, this bill would have avoided the problem of the free postage benefit being used to send unsolicited mail to the troops. Additionally, capping the allotment per service member would have mitigated potential stress on the military postal system. H.R. 2874 was referred to the House Committees on Armed Services and Government Reform. On September 29, 2005, the House Government Reform Committee marked up H.R. 923 and, in doing so, adopted an amendment in the nature of a substitute that incorporated the core concept, as well as the title, of H.R. 2874 . As amended and ordered to be reported by voice vote of the committee, the new version of H.R. 923 would have required the DOD, in consultation with the USPS, to establish a one-year program under which a qualified member of the Armed Forces would have received a monthly voucher. The voucher was transferable to a service member's family or friends, and would cover the postage to send one letter or parcel (weighing up to 15 pounds) to the service member. The Congressional Budget Office (CBO) estimated that nearly all of the about 145,000 American service personnel who would have been eligible for the postage benefit would have taken advantage of it, and assigned it a budget cost of $30 million over FY2006 and FY2007. The House Armed Services Committee added the language of H.R. 923 as Sections 575, 576, and 577 of H.R. 5122 , the John Warner National Defense Authorization Act for Fiscal Year 2007. The House passed H.R. 5122 on May 11, 2006. On June 22, 2006, the Senate substituted its own defense authorization language for the House language and passed H.R. 5122 . Neither the Senate version of the FY2007 authorization bill nor the conference report ( H.Rept. 109-702 ) included the free-mail-for-troops provision. Thus, the free postage provision was not included in either the FY2007 defense authorization act ( P.L. 109-364 ) or the FY2007 defense appropriations act ( P.L. 109-289 ). Representative Fossella and 13 cosponsors introduced H.R. 1439 on March 9, 2007. The bill would have established a postage benefit for members of the armed services on active duty in Iraq or Afghanistan, and for individuals who are "hospitalized at a facility under the jurisdiction of the Armed Forces of the United States as a result of a disease or injury incurred as a result of service in Iraq or Afghanistan." A beneficiary would have received one voucher per month, which he or she could have given to anyone who wished to send him or her a letter or parcel free of charge. The bill would have limited the weight of letters to no more than 13 ounces and parcels to no more than 15 pounds. H.R. 1439 would have authorized an appropriation to the DOD to cover the cost of this program to the USPS. H.R. 1439 was referred to the House Armed Services Committee. Senator Hillary Clinton and two cosponsors introduced S. 1444 on June 6, 2007. This bill was very similar to H.R. 1439 , although it would have limited packages to no more than 10 pounds, and it would have capped the cost of the free postage program at $10 million in FY2008. S. 1444 was referred to the Senate Committee on Homeland Security and Governmental Affairs, then to the Subcommittee on Federal Financial Management, Government Information, Federal Services, and International Security. On May 16, 2007, Representative Fossella offered a floor amendment ( H.Amdt. 184 ) to H.R. 1585 , the National Defense Authorization Act for Fiscal Year 2008. The amendment was quite similar to H.R. 1439 and S. 1444 . It would have required the Secretary of Defense to provide a "qualified individual" with one voucher every other month. As in earlier bills, a "qualified individual" would have been defined as a member of the Armed Forces serving in Iraq or Afghanistan, or a member of the Armed Forces hospitalized under the care of the military. This individual could have given the voucher to anyone, who then could mail, at no charge, a parcel (up to 10 pounds) or first-class mail piece (up to 13 ounces) to the same qualified individual. H.Amdt. 184 was adopted by voice vote immediately. The House passed H.R. 1585 with the postage benefit provision on May 17, 2007, by a vote of 397 to 267. Again, the Senate passed its version of the defense authorization bill without the postage benefit provision on October 1, 2007, by a vote of 92 to 3. The conference report ( H.Rept. 110-477 ) filed on December 6, 2007, did not authorize an appropriation for the postage benefit. Representative Peter King introduced H.R. 704 , the Supply Our Soldiers Act of 2009, on January 27, 2009. The same day, Representative Kathy Castor introduced H.R. 707 , the Home Front to Heroes Postal Benefits Act. H.R. 704 and H.R. 707 were referred to the House Armed Services Committee, and then to its Subcommittee on Military Personnel. Like earlier bills, both H.R. 704 and H.R. 707 would have given one free-postage voucher per month to each "qualified individual" in the Armed Forces. Each voucher would have provided free postage on letters weighing up to 13 ounces or packages weighing up to 15 pounds. The DOD would have provided advance transfers of funds to the USPS to cover the Postal Service's costs in delivering the mail to the APOs and FPOs. H.R. 704 and H.R. 707 would have authorized this postage benefit for one year. Though similar, H.R. 704 and 707 differed in two significant ways. (1) H.R. 704 , Sec. 2(b) defined a "qualified individual" as a member of the Armed Forces of the United States on active duty (as defined in section 101 of title 10, United States Code); and ... serving in Iraq or Afghanistan ... or ... hospitalized at a facility under the jurisdiction of the Armed Forces of the United States as a result of a disease or injury incurred as a result of service in Iraq or Afghanistan. 10 U.S.C. 101(d)(1) defined "active duty" to mean full-time duty in the active military service of the United States. Such term includes full-time training duty, annual training duty, and attendance, while in the active military service, at a school designated as a service school by law or by the Secretary of the military department concerned. Such term does not include full-time National Guard duty. Meanwhile, H.R. 707 , Sec. 2(b) defined a "qualified individual" as "a member of the Armed Forces described in subsection (a)(1) of section 3401 of title 39, United States Code, who is entitled to free mailing privileges under such section." This definition of "qualified individual" may be broader than the definition included in H.R. 704 because 39 U.S.C. 3401(a)(1) includes an individual who is a member of the Armed Forces of the United States on active duty, as defined in [10 U.S.C. 101], or a civilian, otherwise authorized to use postal services at Armed Forces installations, who holds a position or performs one or more functions in support of military operations, as designated by the military theater commander.... (2) H.R. 704 did not define who may use a postage voucher. H.R. 707 , Section 2(e) would have permitted qualified individuals to transfer a voucher to "a member of the family of the qualified individual, a nonprofit organization, or any other person selected by the qualified individual for use to send qualified mailings to the qualified individual or other qualified individuals." When the House passed H.R. 2647 , the National Defense Authorization Act for Fiscal Year 2010, on June 25, 2009, it included the text of H.R. 707 as Section 666. However, when the Senate approved an amended version of H.R. 2647 on July 23, it did not include the free postage benefit. Additionally, neither the House nor the Senate Appropriations Committee included a free postage benefit when it approved H.R. 3326 , the Department of Defense Appropriations Act, 2010. Ultimately, the 111 th Congress did not enact a free-mail-to-troops postage benefit. The recent postage benefit bills prompt at least two observations and four questions. (1) It is unclear whether any concerns exist about the voucher-type free postage proposals. As indicated above, during the 109 th , 110 th , and 111 th Congresses, measures advanced but were not enacted. In each instance, the House bill carried the free postage benefit, and the Senate bill did not. The conference committee reports did not elaborate on why the Senate version was preferred, and the Congressional Research Service has not located any published accounts that detail any objections to these postage benefit bills. (2) It is unclear how much a free-mail-to-troops postage benefit would cost annually. Only one of the aforementioned bills was scored—the CBO scored the final version of H.R. 923 (109 th Congress), at $30 million for the 2006 calendar year, "including $17 million for postage, and $13 million for the DoD's transportation and administrative costs." (1) None of the free postage for troops bills described the means through which the DOD was to provide postage vouchers to military personnel overseas; nor did the bills describe how these individuals would transfer these vouchers to family members or friends back in the United States. Rather, legislation has required the DOD to devise the means for administering the benefit. (The CBO's scoring of H.R. 923 during the 109 th Congress, it should be noted, did not include an estimate of the costs of either voucher distribution to military personnel or voucher transference to persons in the United States.) Should legislation provide guidance or direction for this aspect of implementation? (2) What precautions would be adopted to ensure that vouchers were not counterfeited? Is there any risk that individuals could sell or trade postage vouchers for cash? (3) Recent bills would have permitted a voucher to be used either to send correspondence or a package. As noted above, currently a mailer must pay between $0.44 and $3.28 in postage to send written correspondence. Should this relatively low-cost mailing be further subsidized by enacting a free-mail-to-troops postage benefit? And are senders likely to use a voucher for letters that can be used to cover the more expensive parcel postage? (4) The dimensions and shape of a package significantly affect the USPS's costs to deliver it. For example, mailing 15 pounds of widgets in a 20" by 4" by 4" package (320 cubic inches) from the Silver Lake, Ohio zip code 44224 to the APO zip code 96278-2050 would require over $20 in postage. Sending the same 15 pounds of widgets in a 12" by 12" by 5" Priority Mail Flat-Rate Box (720 cubic inches) would cost $14.95. (Whether the DOD experiences similar cost differences for package delivery is unclear.) To reduce delivery costs, should any free postal benefit require recipients to use a box of a particular size and shape?
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Members of the Armed Forces on duty in designated combat areas can send personal correspondence, free of postage, to addresses in the United States. However, there is not a comparable policy to permit individuals in the United States to send letters and packages to troops serving overseas free of charge. H.R. 1935 has been introduced in the 112th Congress to establish a new, free postage benefit. Military personnel who are deployed in Afghanistan or Iraq, or who are hospitalized as a result of such deployment, would receive one postage voucher or coupon per month. The recipient may then give this voucher to a person in the United States, who could use it to send a letter or a parcel to a deployed member of the Armed Forces. Similar legislation was introduced but not enacted in the previous three Congresses. The federal government does subsidize the postage an individual pays to send mail to troops. A sender is charged only for the cost of the domestic portion of the delivery—the Department of Defense pays the cost to move the mail from the United States to troops overseas. Additionally, since October 2008 the U.S. Postal Service has offered a discounted package service to families wishing to send packages to members of the Armed Services stationed overseas. This report will be updated to reflect significant legislative action.
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The annual Interior, Environment, and Related Agencies appropriations bill funds agencies and programs in three federal departments, as well as numerous related agencies and bureaus. Among the more controversial agencies represented in the bill is the Fish and Wildlife Service (FWS), in the Department of the Interior (DOI). This report analyzes FY2011 appropriations and gives a brief review of the agency's appropriation enacted for FY2010 ( P.L. 111-88 ). For FWS in FY2011, the Administration requests $1.64 billion, down 0.3% from the FY2010 level of $1.65 billion. By far the largest portion of the FWS annual appropriation is the Resource Management account, for which the President requests $1.27 billion, down 0.07% from the FY2010 level of $1.27 billion. Among the programs included in Resource Management are Endangered Species, the Refuge System, Law Enforcement, and Climate Change Adaptive Science Capacity. Only a few FWS issues that may arise in an appropriations context seem predictable at this early phase of the appropriations cycle. One possibility may be the management of certain California water projects. The Bureau of Reclamation has faced many legal challenges in its role as a water resources manager in California. Among them are lawsuits challenging how Reclamation operations may affect several species listed under the Endangered Species Act (ESA). Over a year ago both FWS and the National Marine Fisheries Service (NMFS) issued separate biological opinions (BiOps) for Central Valley Project (California) water operations, holding that certain actions by Reclamation would jeopardize listed species. Under the ESA, these BiOps provided alternatives to avoid jeopardy or adverse modification of habitat designated as critical to the listed species. In addition, the BiOps provided incidental take statements (ITSs) that authorized takes of listed species that might result even though the action agency followed the BiOp, the alternatives, and any mitigation recommended by FWS or NMFS. Some of the actions in the alternatives may result in restricting water supplies to certain water users in central and southern California. The agricultural users are in regions of California that are also heavily affected by the general downturn in the economy and loss of jobs in the building construction industry. Various California water interests support restricting or modifying the implementation of the BiOps to provide more water for agriculture. Others in the area point to the need for maintaining water in streams not only for listed species but also for commercial fisheries and water quality. While the shape of the congressional response is unclear, FWS appropriations might become a vehicle for an amendment to address California long-standing water issues. Funding for the endangered species program is part of the Resource Management account, and is one of the perennially controversial portions of the FWS budget. The Administration's FY2011 request is $181.3 million, an increase from the FY2010 enacted level of $179.5 million. (See Table 2 .) For FY2010, the House Appropriations Committee's report encouraged FWS to address a backlog of candidate species awaiting listing decisions; the Administration's request proposed a decrease in this program for FY2011. The Senate Appropriations Committee's FY2010 report urged improvement in the consultation program to address past deficiencies. The FY2010 conference report set aside $2.5 million in the consultation program to improve monitoring and record-keeping. The Cooperative Endangered Species Conservation Fund also benefits conservation of species that are listed, or proposed for listing, under the Endangered Species Act, through grants to states and territories. The President proposes to leave the program at the FY2010 level. In total, the two endangered species programs would increase by 1%. The Administration requested $499.5 million for FY2011 for refuge operations and maintenance, a 1% decrease from the FY2010 level of $502.8 million. Costs of operations have increased on many refuges, partly due to special problems such as hurricane damage and more aggressive border enforcement, but also due to increased use, invasive species control, maintenance backlog and other demands. Refuge funding was not keeping pace with new demands, and these demands, combined with the rising costs of rent, salaries, fuel, and utilities, led to cuts in funding for programs to aid endangered species, reduce infestation by invasive species, protect water supplies, address habitat restoration, and ensure staffing at the less popular refuges. While some increases were provided to address these problems in recent years, the FY2009 stimulus law provided additional funding to address these concerns. Some observers contend that the system's problems are ongoing and will be significant after the stimulus funding is exhausted. Balanced against these concerns is congressional interest in general deficit reduction. The Administration requests $63.3 million for nationwide law enforcement, a decrease of 4% from the FY2010 level of $65.8 million. Nationwide law enforcement covers border inspections, investigations of violations of endangered species or waterfowl hunting laws, and other activities. The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ) provided FWS with $165.0 million for Resource Management and $115.0 million for Construction, using nearly identical criteria for project selection. Obligation authority for these funds ceases on October 1, 2010. According to FWS, "[t]o complete this work, we plan to hire local laborers, building contractors, companies and other entities to do the maintenance, repairs, retrofits, and construction." Refuges are among the biggest beneficiaries within FWS of the stimulus funding, and the refuge maintenance backlog could be affected substantially. Improvements in energy conservation at refuge visitor centers are also being funded, as are habitat improvements, such as removal of invasive species, and recovery of protected species. For FY2011, the Administration requests $28.8 million for Climate Change Planning and Adaptive Science Capacity, an increase of 44% over the FY2010 level of $20.0 million. Part of the funding would support work with partners at federal, state, tribal, and local levels to develop strategies to address climate impacts on wildlife at local and regional scales. The remainder would be used to support cooperative scientific research on climate change as it relates to wildlife impacts and habitat. Both portions would support and work through a network of new Landscape Conservation Cooperatives (LCCs) to ameliorate the effects of climate change. The LCCs are an amalgam of research institutions, federal resource managers and scientists, and lands managed by agencies at various levels of government. The additional funding is intended to increase the network of LCCs from 9 to 12, with an eventual goal of 21 LCCs. The Administration requests $106.3 million for land acquisition, an increase of $20.0 million (19%) from the FY2010 enacted level of $86.3 million. See Table 1 . As compared to recent years, the request and the FY2010 level both devote a somewhat higher percentage (80% and 77% respectively) of the funding to acquisition of land for specified federal refuges, rather than for closely related functions (e.g., acquisition management, land exchanges, emergency acquisitions, and purchase of inholdings). This program is funded with appropriations from the Land and Water Conservation Fund. Under the Migratory Bird Conservation Account (MBCA), FWS (in contrast to the other three federal lands agencies) has a source of mandatory spending for land acquisition. The MBCA does not receive funding in annual Interior appropriations bills. The account is permanently appropriated, with funds for FY2011 estimated at $58.0 million, derived from the sale of duck stamps to hunters and recreationists, and import duties on certain arms and ammunition. This estimate is $14.0 million above the previous year, and is based in part on the assumption that Congress approves a proposed increase in the price of duck stamps from $15 to $25. The National Wildlife Refuge Fund (also called the Refuge Revenue Sharing Fund) compensates counties for the presence of the non-taxable federal lands of the NWRS. A portion of the fund is supported by the permanent appropriation of receipts from various activities carried out on the NWRS. However, these receipts are not sufficient for full funding of amounts authorized in the formula, and county governments have long urged additional appropriations to make up the difference. For FY2011, the Administration requests $14.1 million, down 3% from the FY2010 level of $14.5 million. With refuge receipts, the FY2010 appropriation was estimated to fund about 36% of the authorized payment level. A projected increase in receipts, combined with the appropriation of $14.1 million, would increase the payment to 38% of the authorized level in FY2010. The Multinational Species Conservation Fund generates considerable constituent interest despite the small size of the program. It benefits Asian and African elephants, tigers, rhinoceroses, great apes, and marine turtles. The President requests $10.0 million for FY2011, a 13% decrease from the FY2010 level of $11.5 million. See Table 3 . The President also requests $4.0 million for the Neotropical Migratory Bird Conservation Fund, down 20% from the FY2010 level of $5.0 million. State and Tribal Wildlife Grants help fund efforts to conserve species (including nongame species) of concern to states, territories, and tribes. The grants have generated considerable support from these governments. The program was created in the FY2001 Interior appropriations law ( P.L. 106-291 ) and further detailed in subsequent Interior appropriations laws. (It has no separate authorizing statute.) Funds may be used to develop state conservation plans as well as to support specific practical conservation projects. A portion of the funding is set aside for competitive grants to tribal governments or tribal wildlife agencies. The remaining portion is for grants to states. A state's allocation is determined by formula. The Administration's request for FY2011 is $90.0 million, identical to the FY2010 level. See Table 1 , above. The FY2010 appropriations law included language reducing the required state match from 50% to 25% for planning grants. (Because the entire program is part of annual appropriations bills, the change would apply only to that year's appropriation.) It also reduced the required state share of implementation grants from 50% to 35%, to encourage more states to participate. The Administration proposal for FY2011 would return the latter figure to a minimum of 50% from the states for implementation, and allow grants to be distributed to more projects. CRS Report R40185, The Endangered Species Act (ESA) in the 111 th Congress: Conflicting Values and Difficult Choices , by [author name scrubbed] et al. CRS Report RS21157, International Species Conservation Funds , by [author name scrubbed] and [author name scrubbed]. For general information on the Fish and Wildlife Service , see its website at http://www.fws.gov/ .
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For Fish and Wildlife Service appropriations in FY2011, the Administration requests $1.64 billion, down 0.3% from the FY2010 level of $1.65 billion. Climate change and land acquisition programs would receive notable increases; construction and funds for wetlands, neotropical migratory birds, and selected foreign species would decrease. The annual Interior, Environment, and Related Agencies appropriations bill funds agencies and programs in three federal departments, as well as numerous related agencies and bureaus. Among the more controversial agencies represented in the bill is the Fish and Wildlife Service (FWS), in the Department of the Interior. This report analyzes FY2011 appropriations and gives a brief review of the agency's appropriation enacted for FY2010 (P.L. 111-88). Emphasis is on FWS funding for programs of interest to Congress, now or in recent years. These include the endangered species program, global climate change, wildlife refuges, land acquisition, international conservation, and state and tribal wildlife grants. In addition, related policy issues are also considered in the funding context. Each of the related policy issues is explained in more detail in the report. For FY2010, the House passed H.R. 2996, the Interior appropriations bill, containing FWS appropriations, on June 26, 2009 (H.Rept. 111-180). The Senate passed its version of H.R. 2996 on September 24, 2009 (S.Rept. 111-38). The conference report (H.Rept. 111-316) included a Division B, providing continuing appropriations for other federal agencies and programs whose FY2010 appropriations had not yet been passed. The House and Senate both approved the conference report on October 29, 2009; the President signed the bill the following day (P.L. 111-88).
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Insurance companies constitute a major segment of the U.S. financial services industry. The industry is often separated into two parts: life and health insurance companies , which also often offer annuity products, and property and casualty insurance companies , which include most other lines of insurance, such as homeowners insurance, automobile insurance, and various commercial lines of insurance purchased by businesses. Premiums for life and health companies in 2013 totaled $533.8 billion with assets totaling $6.08 trillion. Premiums for property and casualty insurance companies totaled $484.4 billion with assets totaling $1.76 trillion. Different lines of insurance present very different characteristics and risks. Life insurance typically is a longer-term proposition with contracts stretching over decades and insurance risks that are relatively well defined in actuarial tables. Property/casualty insurance typically is a shorter-term proposition with six-month or one-year contracts and greater exposure to catastrophic risks. Health insurance has evolved in a very different direction, with many insurance companies heavily involved with healthcare delivery, including negotiating contracts with physicians and hospitals, and a regulatory system much more influenced by the federal government through the Medicare, Medicaid, the Employee Retirement Income Security Act of 1974 (ERISA), and the Patient Protection and Affordable Care Act (ACA). This report concentrates primarily on property/casualty and life insurance. Insurance companies, unlike banks and securities firms, have been chartered and regulated solely by the states for the past 150 years. Legal and legislative landmarks in the state-based insurance regulatory system have included Supreme Court decisions in 1868 ( Paul v. Virginia ) and 1944 ( U.S. v. South-Eastern Underwriters Associa t ion ) and federal legislation in 1945 (the McCarran-Ferguson Act). The McCarran-Ferguson Act specifically preserved the states' authority to regulate and tax insurance and also granted a federal antitrust exemption to the insurance industry for "the business of insurance." (The evolution of insurance regulation is presented in greater detail in Appendix A ; a legal analysis of the constitutionality of federal regulation of insurance can be found Appendix B .) Since the passage of McCarran-Ferguson, both Congress and the federal courts have taken actions that have somewhat expanded the reach of the federal government into the insurance sphere. The insurance industry has often been divided over the possibility of federal actions affecting insurance. The states typically, though not always, have resisted federal actions, arguing that the states are better positioned to regulate insurance and address consumer complaints and that states have engaged in concerted actions to address concerns raised at the federal level. The two large legislative overhauls of financial regulation in the past two decades, the Gramm-Leach-Bliley Act of 1999 (GLBA) and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank), expanded the federal role in insurance, but the states continued as the primary regulators of insurance following these acts. GLBA removed legal barriers between securities firms, banks, and insurers, allowing these firms to coexist under a financial holding company structure. Under the act, such a holding company was overseen by an umbrella regulator—the Federal Reserve for holding companies that included bank subsidiaries or the Office of Thrift Supervision (OTS) for holding companies with thrift or savings association subsidiaries. Within a holding company, GLBA established a system of functional regulation for the bank, thrift, securities, and insurance subsidiaries. This meant that insurance company subsidiaries within a bank or thrift holding company were functionally regulated by state insurance authorities, with limited oversight by the federal regulator of the holding company. For more information on GLBA, see " The Gramm-Leach-Bliley Act " below. The Dodd-Frank Act altered the post-GLBA regulatory structure, while leaving the basic functional regulatory paradigm largely the same. The act gave enhanced systemic risk regulatory authority to the Federal Reserve and to a new Financial Services Oversight Council (FSOC), including some oversight authority over insurers. The authority to oversee holding companies, including those with insurance subsidiaries, was consolidated in the Federal Reserve with additional capital requirements added. The Dodd-Frank Act also included measures affecting the states' oversight of surplus lines insurance and reinsurance and the creation of a new Federal Insurance Office (FIO) within the Treasury Department. Insurance regulatory issues before the 113 th Congress included overseeing the implementation of, and possible amendments to, the Dodd-Frank Act, including legislation such as H.R. 605 , which would remove insurers from the act's orderly liquidation authority; H.R. 2140 , H.R. 4510 , H.R. 5461 , S. 2102 , and S. 2270 , addressing the capital requirements and accounting standards to be used by the Federal Reserve in its oversight of some insurers; and S. 2726 / H.R. 5388 , which would exclude captive insurers from the definition of a nonadmitted insurer under the act. legislation that would narrowly reform the current regulatory system, such as S. 534 , S. 1926 , S. 2244 , H.R. 1155 / H.R. 1064 , and H.R. 4871 , which would attempt to harmonize the state regulation of insurance producer licensing, among other provisions. responding to international developments, such as the changes to the European Union's regulatory scheme known as Solvency II and the development of international standards by the International Association of Insurance Supervisors (IAIS). Recent insurance legislation that was not introduced in the 113 th Congress includes legislation to create a federal charter and regulatory apparatus for insurance ( H.R. 1880 in the 111 th Congress), remove or limit the McCarran-Ferguson Act's antitrust exclusion for the general business of insurance ( H.R. 1583 in the 111 th Congress), and expand the Liability Risk Retention Act, or LRRA ( H.R. 2126 in the 112 th Congress). Draft legislation to expand the LRRA was, however, the subject of a May 20, 2014, House Financial Services Subcommittee hearing. The National Association of Registered Agents and Brokers Reform Act of 2013 ( S. 534 ) was introduced in the Senate by Senator Jon Tester along with 13 cosponsors on March 12, 2013. The Senate Committee on Banking, Housing, and Urban Affairs' Subcommittee on Securities, Insurance, and Investment held a hearing on the bill on March 19, 2013. The full committee amended the bill and ordered it reported on June 6, 2013. Two identical bills, H.R. 1064 and H.R. 1155 , were introduced in the House by Representative Randy Neugebauer. H.R. 1155 was introduced on March 14, 2013, with 42 cosponsors and additional cosponsors added since introduction, whereas H.R. 1064 has not had additional cosponsors added since its introduction with 41 cosponsors on March 12, 2013. H.R. 1155 , with an amendment closely tracking the Senate committee amendment, was considered under suspension of rules and passed on a vote of 397-6 on September 10, 2013. The National Association of Registered Agents and Brokers Reform Act would establish a National Association of Registered Agents and Brokers (NARAB). Apparently because the 1999 Gramm-Leach-Bliley Act included provisions that could have created an identically named association, the current legislation is often referred to as "NARAB II." The NARAB II association would be a private, nonprofit corporation. Its members, required to be licensed as an insurance producer in a single state and meet other requirements, would be able to operate in any other state subject only to payment of the licensing fee in that state, rather than having to obtain a separate license in the additional states, as is often the case now. The association member would still be subject to each state's consumer protection and market conduct regulation, but individual state laws that treated out-of-state insurance producers differently from in-state producers would be preempted. The NARAB II association would be overseen by a board made up of five appointees from the insurance industry and eight from the state insurance commissioners. The appointments would be made by the President, and the President could dissolve the board as a whole or suspend the implementation of any rule or action taken by the association. S. 534 and H.R. 1155 as amended are nearly identical in structure, except for slightly different language relating to background checks. On January 29, 2014, the Senate added the text of S. 534 as amended to S. 1926 , a bill addressing flood insurance, by voice vote. S. 1926 as amended passed the Senate the following day by a vote of 67-32. The House, however, did not take up S. 1926 , and P.L. 113-89 addressing flood insurance was ultimately enacted on March 21, 2014, without containing any NARAB provisions. On June 19, 2014, the House Committee on Financial Services added the text of H.R. 1155 as amended to H.R. 4871 , a bill addressing terrorism risk insurance, by voice vote. H.R. 4871 as amended was ordered favorably reported the following day by a vote of 32-27. On July 17, 2014, the Senate adopted language nearly identical to H.R. 1155 as an amendment to S. 2244 , a bill addressing terrorism risk insurance, by voice vote. The change introduced was a new Section 335 that would sunset the NARAB language two years after the association approves its first member. S. 2244 as amended passed the Senate on a vote of 93-4. On December 10, 2014, the House passed a further amended version of S. 2244 , including NARAB language but not including the Section 335 sunset provisions. The bill also included a new Title III related to derivatives legislation that had not been included in the Senate passed version. The House and Senate each adjourned on December 16, 2014, without resolving the differences between the versions of S. 2244 or passing other NARAB legislation. H.R. 605 was introduced by Representative Bill Posey. This bill has been referred to the House Committee on Financial Services and was one of the bills that was the subject of a hearing on May 20, 2014. The Insurance Consumer Protection and Solvency Act of 2013 would amend the Dodd-Frank Act so that insurance companies would essentially no longer be subject to the resolution regime created in this law. It would strike the Federal Deposit Insurance Corporation's (FDIC's) backup authority in the case of inaction by state authorities to resolve the insurance subsidiaries of financial holding companies and also exclude insurance companies from the FDIC's assessment authority to cover the cost of FDIC resolution. See " Systemic Risk Provisions " below for more information on this resolution regime. H.R. 2156 was introduced on May 23, 2013, by Representative Stephen Fincher along with two cosponsors. It was referred to the House Committee on Financial Services. H.R. 2156 would encourage uniformity and reciprocity among states that license independent insurance claim adjusters, but would not apply to states that do not license adjusters. If, within four years of enactment, a state requiring licensure does not adopt laws providing for uniformity and reciprocity, as determined by the NAIC, H.R. 2156 would provide that any licensed adjuster from another state could operate within such a state without licensure by that state. Such out of state adjusters would still be liable to pay state fees as long as these fees were uniform regardless of the residency of the adjuster. H.R. 2140 was introduced by Representative Gary Miller on May 23, 2013. It has been referred to the House Committee on Financial Services. H.R. 2140 would create a presumption that insurance companies subject to Federal Reserve Board supervision are in compliance with the minimum capital standards set by Section 171 of the Dodd-Frank Act if they are in compliance with applicable state capital standards. The bill would permit the Federal Reserve, on a case-by-case basis, to overcome the presumption. To successfully overturn such a presumption, the bill would require the Federal Reserve to have in place and to follow duly promulgated regulations defining the applicable procedures and standards to be followed in determining that an insurance company is not in compliance with state minimum capital standards and to have completed a cost-benefit analysis and a quantitative impact study. The bill also stipulates that governing state law continues to apply and specifies that the Federal Reserve may not require insurance companies that it regulates to comply with any accounting standards differing from those applicable under state law. S. 2102 was introduced by Senator Susan Collins on March 10, 2014. The Senate Committee on Banking, Housing, and Urban Affairs held a hearing on the bill the following day. S. 2102 would "clarify" Section 171 of the Dodd-Frank Act, popularly known as the Collins amendment. Section 171 puts certain capital requirements on financial institutions under the oversight of the Federal Reserve. The Federal Reserve has indicated that it views this section as requiring that the same standards be applied to both banks and insurers. S. 2102 amends Section 171 to specify that the federal banking agencies are not required to include regulated insurance entities engaged in the business of insurance under the minimum capital requirements required by Section 171. S. 2102 , however, would not limit the authority of the Federal Reserve to apply capital standards. S. 2270 was introduced by Senator Susan Collins along with four cosponsors on April 29, 2014. An amended version of the bill was agreed to on the Senate floor by unanimous consent on June 3, 2014. Upon receipt in the House, it was referred to the House Committee on Financial Services. The bill was discharged from the committee and passed on the House floor without objection on December 10, 2014. S. 2270 was signed into law ( P.L. 113-279 ) by the President on December 18, 2014. H.R. 4510 was introduced by Representative Gary Miller along with one cosponsor on April 29, 2014. It has been referred to the House Committee on Financial Services. H.R. 5461 was introduced by Representative Andy Barr along with three cosponsors on September 15, 2014. Title I of the bill contains the Insurance Capital Standards Clarification Act as it was passed by the Senate, whereas Titles II, III, and IV contain other changes to the Dodd-Frank Act. The House passed H.R. 5461 on September 16, 2014, under suspension of the rules on a vote of 327-97. The Insurance Capital Standards Clarification Act is similar to S. 2102 . It addresses the question of whether banks and insurers are required under Section 171 to have the same capital standards applied by the Federal Reserve. The bill declares specifically that the same standards are not required under this section. In addition, the bill would prevent the Federal Reserve from requiring that an insurer files financial statements according to Generally Accepted Accounting Principles (GAAP) if the company currently files statements with state regulators solely using Statutory Accounting Principles (SAP). The amended version, which passed the Senate, adds the proviso that this provision would not limit the Federal Reserve from collecting information on an entity or group-wide basis. H.R. 4557 was introduced by Representative Bill Posey on May 1, 2014. The bill was the subject of a House Committee on Financial Services Subcommittee on Housing and Insurance hearing on May 20, 2014. H.R. 4557 would amend the Federal Deposit Insurance Act to declare that any regulation, order, or other action of the Board of Governors of the Federal Reserve System requiring a bank holding company to provide funds or other assets to a subsidiary depository institution shall not be effective nor enforceable with respect to an entity that is a savings and loan holding company that is also an insurance company, an affiliate of an insured depository institution that is an insurance company, or any other company that is an insurance company and that directly or indirectly controls an insured depository institution if (1) such funds or assets are to be provided by the entity and (2) the state insurance authority for the insurance company determines that such an action would have a materially adverse effect on the entity's financial condition. H.R. 4669 was introduced by Representative Edward Royce on May 19, 2014. The bill would preempt state or local laws that would require members of the U.S. military, their spouses, or their dependents to change their auto insurance policies when they have temporarily moved to comply with any temporary duty or permanent change of station order. It has been referred to the House Committee on Financial Services. S. 2726 and H.R. 5388 were introduced on July 31, 2014, by Senator Patrick Leahy and Representative Peter Welch, respectively. The bill was referred to the Senate Committee on Banking, Housing, and Urban Affairs and jointly to the House Committee on Financial Services and the House Committee on the Judiciary. S. 2726 / H.R. 5388 would amend the Dodd-Frank Act title on nonadmitted insurers to exclude captive insurers from the definition of a nonadmitted insurer. Title V, Subtitle A of the Dodd-Frank Act creates a Federal Insurance Office (FIO) headed by a director inside of the Department of the Treasury. FIO is to monitor all aspects of the insurance industry and coordinate and develop policy relating to international agreements. It has the authority to preempt state laws and regulations when these conflict with international agreements. This preemption authority is limited, applying only when the state measure (1) results in less favorable treatment of a non-U.S. insurer compared with a U.S. insurer, and (2) is inconsistent with a written international agreement regarding prudential measures. Such an agreement must achieve a level of consumer protection that is "substantially equivalent" to the level afforded under state law. FIO preemption authority does not extend to state measures governing rates, premiums, underwriting, or sales practices, nor does it apply to state coverage requirements or state antitrust laws. FIO preemption decisions are also subject to de novo judicial review under the Administrative Procedure Act. The monitoring function of FIO includes information gathering from both public and private sources. This is backed by subpoena power if the director issues a written finding that the information being sought is necessary and that the office has coordinated with other state or federal regulators that may have the information. In the 112 th Congress, H.R. 3559 , which would have limited this subpoena power, was marked up by the House Financial Services Subcommittee on Housing and Insurance but was not acted on by the full committee. In the 113 th Congress, a draft of this bill was the subject of a subcommittee hearing. Since the passage of the Dodd-Frank Act, the FIO has hired staff and appointed a director, Michael McRaith, a former Illinois insurance commissioner. The office has been active in international discussions with Director McRaith chosen to head a technical committee of the International Association of Insurance Supervisors (IAIS). The process of starting FIO, however, took longer than some hoped. Mr. McRaith did not take up the position of director until June 2011, nearly a year after the enactment of Dodd-Frank. FIO has released reports called for in Dodd-Frank, including an annual report and a report on regulatory modernization, but was criticized by several Members of Congress in a February 4, 2014, hearing for missing statutory reporting deadlines. The Dodd-Frank Act provides for systemic risk provisions that potentially affect the insurance industry through enhanced Federal Reserve oversight and higher prudential standards for all banks with greater than $50 billion in assets, as well as any other firms deemed systemically important financial institutions (SIFIs), and through financial resolution authority to be undertaken by the FDIC. Designation of SIFIs is to be done by the Financial Stability Oversight Council. FSOC is "charged with identifying risks to the financial stability of the United States; promoting market discipline; and responding to emerging risks to the stability of the United States' financial system." It includes a presidential appointee who is to be familiar with insurance issues, a state insurance commissioner, and the FIO director, with the latter two being non-voting members. The higher prudential standards may be set by the Federal Reserve based on various risk-related factors. The statutory standards include risk-based capital requirements that account for off-balance-sheet activities, leverage limits, liquidity requirements, risk management requirements, and exposure limits of 25% of a company's capital per counterparty. Other prudential standards may be applied at the Federal Reserve's discretion. The firms are required to submit resolution plans ("living wills") and credit exposure reports. Regulated subsidiaries continue to be regulated by their primary functional regulator, although the functional regulator may be overridden if the Federal Reserve believes the firm is not adhering to regulatory standards or poses a threat to financial stability. The Federal Reserve must conduct annual stress tests on systemically significant firms and, in consultation with the FSOC and the FDIC, issue regulations establishing remediation measures to be imposed at an early stage of a firm's "financial decline" in an effort to prevent insolvency and its potential impact on the financial system. A financial company could be subject to the act's special resolution regime based on a finding that its failure would cause systemic disruption. Any insurance subsidiaries of such a financial company, however, would not be subject to this regime. Instead, the resolution of insurance companies would continue to be conducted in accordance with the applicable state insurance resolution system, although the FDIC would have "backup authority" to resolve insurers if the state system has not acted within 60 days of a finding. With regard to funding for the resolution of systemically important financial firms, there is no pre-funded resolution mechanism under the act. Instead, the FDIC is to impose assessments on financial companies with more than $50 billion in assets, as well as other financial firms that are overseen by the Federal Reserve, to fund the resolution of a systemically important firm in the event the assets of the failed firm are insufficient to do so. The FDIC is to impose such assessments on a risk-adjusted basis. When imposing such assessments on an insurance company, the FDIC is to take into account the insurers' contributions to the state insurance resolution regimes. The FDIC has begun issuing rules regarding the new resolution regime. As detailed above, H.R. 605 would remove insurers from this resolution authority. FSOC held its first meeting on October 1, 2010, and has been issuing studies, rules, and determinations. Of particular significance to insurers was a final rule issued April 3, 2012, detailing the criteria the FSOC would use to judge nonbank financial companies systemically important and require additional oversight by the Federal Reserve. In general, most insurers have argued that they do not pose a systemic risk due to particular facets of insurance operations, such as the longer-term nature of risks faced by insurers, the lower likelihood of runs, and the levels of capital required by state insurance regulators. Three insurers, AIG, Prudential Financial, and MetLife have been designated as SIFIs. The designation of Prudential Financial and MetLife were not without some controversy, with two members of FSOC voting against the Prudential designation and one voting against the MetLife designation. The Dodd-Frank Act consolidated oversight of thrift holding companies and bank holding companies under the Federal Reserve. The act also strengthened the capital standards applied to these holding companies, particularly through Section 171, commonly known as the "Collins Amendment," after its sponsor, Senator Susan Collins. In tandem with the Dodd-Frank requirements, the Federal Reserve is also implementing higher capital standards for banks as put forth in the Basel III agreement. Although the provisions in Dodd-Frank and Basel III do not affect the business of insurance per se , a number of very large insurers, including AIG and State Farm, have depository subsidiaries and now fall under Federal Reserve oversight. In addition to the capital requirements, insurers may also be affected by accounting standards required by the Federal Reserve, which differ from the standards required by state insurance regulators. The application of Section 619 of Dodd-Frank, commonly known as the "Volcker Rule," could also affect insurers with banking subsidiaries. This section includes restrictions on proprietary trading that potentially could constrain the investment strategies of insurers. The language, however, includes an exemption for trading done "by a regulated insurance company directly engaged in the business of insurance for the general account of the company by any affiliate of such regulated insurance company, provided that such activities by any affiliate are solely for the general account of the regulated insurance company." The transactions must also comply with applicable law, regulation, or guidance. There must be no determination by the regulators that a relevant law, regulation, or guidance is insufficient to protect the safety and soundness of the banking entity or the financial stability of the United States. The FSOC released a study on the Volcker Rule required by Dodd-Frank, which includes a discussion of the insurance company exemption with a particular recommendation that "the appropriate Agencies should carefully monitor fund flows between banking entities and insurance companies, to guard against 'gaming' the Volcker Rule." The final Volcker Rule was published on December 13, 2013. Federal Reserve officials have indicated the recognition that insurers have a different composition of assets and liabilities than banks and that Federal Reserve oversight of insurers needs to account for this. Insurers, however, have expressed concern that capital rules proposed by the Federal Reserve do not take account of particular characteristics of the industry and describe the rules as "bank-centric." Several insurers who have operated under bank or thrift holding companies have sought to divest their depository subsidiaries to avoid Federal Reserve oversight and the resulting application of the various rules put forth in Dodd-Frank and Basel III. MetLife is the largest firm to divest its depository subsidiary, although such steps would not prevent the FSOC from designating an insurer as systemically important and thus subject to Federal Reserve oversight from this perspective. The FSOC designated MetLife as systemically important on December 18, 2014. Title V, Subtitle B of the Dodd-Frank Act, entitled the Nonadmitted and Reinsurance Reform Act (NRRA), addresses a relatively narrow set of insurance regulatory issues pre-dating the financial crisis. In the area of nonadmitted (or "surplus lines") insurance, the act harmonizes, and in some cases reduces, regulation and taxation of this insurance by vesting the "home state" of the insured with the sole authority to regulate and to collect the taxes on a surplus lines transaction. The taxes collected may be distributed according to a future interstate compact or agreement, but absent such an agreement their distribution would be within the authority of the home state. It also preempts any state laws on surplus lines eligibility that conflict with the National Association of Insurance Commissioners model law unless the states include alternative uniform requirements as part of an agreement on taxes and implement "streamlined" federal standards allowing a commercial purchaser to access surplus lines insurance. For reinsurance transactions, it vests the home state of the insurer purchasing the reinsurance with the authority over the transaction while vesting the home state of the reinsurer with the sole authority to regulate the solvency of the reinsurer. NAIC and the National Conference of Insurance Legislators (NCOIL) both developed interstate agreements that would supersede the federal provisions on tax distribution. The two models that were developed, however, differed significantly as to the extent of authority that would be ceded by the states to the new body overseeing the agreement. NCOIL's Surplus Lines Insurance Multistate Compliance Compact (SLIMPACT) is a broader agreement that would address surplus lines regulatory issues and taxes, whereas the NAIC's Nonadmitted Insurance Multi-State Agreement (NIMA) is more narrowly focused on tax allocation. Each approach has been ratified by some states, but most states have ratified neither. This lack of uniformity was addressed in congressional hearings, and representatives of the NAIC and NCOIL particularly pledged to address the issue, possibly through some sort of blending of the two approaches, before the House Financial Services Committee in 2011. It is unclear that significant uniformity has been achieved since this hearing, with relatively few states joining either SLIMPACT or NIMA. In the absence of some form of agreement between states, the federal requirement for home state regulation and taxation remains in effect. A 2012 report on U.S. surplus lines insurance by the insurance rating agency A.M. Best concluded that the "overall impression is that NRAA is helping lessen the paperwork load, but intermediaries wish for more consistency between the states." Although financial services is not an industry that produces a tangible good to be shipped across borders, the trade in such services makes up a large segment of international trade. The United States has generally experienced a surplus in trade in financial services, other than insurance, but in insurance services the United States has consistently run a deficit with the rest of the world. Consolidations in the insurance industry are creating larger international entities with growing market shares, particularly in the reinsurance market. Some have speculated that the growing "internationalization" of the financial services industry means governments may find it difficult to reform their regulation in isolation. The need for a single voice at the federal level to represent U.S. insurance interests on the international stage is a frequently heard argument for increased federal involvement in insurance regulation. The FIO is specifically tasked with developing federal policy in international insurance matters. The International Association of Insurance Supervisors (IAIS) is an international organization made up primarily of insurance regulators from around the world. Its mission is "to promote effective and globally consistent supervision of the insurance industry," including international standard setting and a variety of guidances and educational efforts. Any standards set by the IAIS would not take full effect until adoption by the sovereign entities with actual authority for regulating insurance. Thus, in some ways, the role of the IAIS could be seen as analogous to that of the NAIC within the United States. In the aftermath of the financial crisis, the IAIS is coordinating with the Financial Stability Board to identify and suggest policy measures to address global systemically important insurers (G-SIIs) and to develop a "Common Framework" (ComFrame) of capital standards for internationally active insurance groups (IAIG). Both the international standard setting by the IAIS and the G-SII designation process have raised concerns in Congress, particularly with regard to the effect these efforts might have on the competitiveness of U.S. insurers and possible weakening of the U.S. regulatory system. The House Financial Services Subcommittee on Housing and Insurance held two hearings in the 113 th Congress on international issues in insurance. The European Union (EU), the United States' biggest trading partner in insurance services, is implementing a comprehensive program to transform the EU into a single market for financial services. Part of this is an updated solvency regime for insurers—known as Solvency II—attempting to more closely match the capital required by regulators to the risks undertaken by insurers. It is an ambitious proposal that will completely overhaul the way we ensure the financial soundness of our insurers. We are setting a world-leading standard that requires insurers to focus on managing all the risks they face and enables them to operate much more efficiently. The European Parliament first passed Solvency II legislation in 2009. Implementation was originally expected in 2012, with the date then pushed to 2014. Currently, Solvency II is scheduled to be implemented in 2016. As part of the Solvency II project, the EU created a new European Insurance and Occupational Pensions Authority (EIOPA) with the ability to develop regulations and rules that are binding at a European level, in contrast to the advisory nature of its predecessor. A more efficient regulatory system in the EU could improve the competitive standing of EU insurers compared with U.S. insurers. Concerns have also been expressed that the new EU system might effectively discriminate against U.S. insurers, particularly if state supervision of U.S. insurers is judged insufficiently equivalent to allow the same access to all EU countries that EU insurers will enjoy. EIOPA has published reports on equivalence for Switzerland, Bermuda, and Japan and recommended equivalence for these countries, but has not done so for the United States. There have been suggestions in the past that an EU regulatory change might serve as "a useful tool in international trade negotiations as it could help improve access for European reinsurers to foreign markets," such as the United States. A June 6, 2014, letter from the European Commission to FIO and the NAIC drew an explicit connection between an equivalency designation applying to the United States and the U.S. removal of capital requirements. Just as U.S. insurers see access to the EU as a significant issue under Solvency II, access to the U.S. market for insurance is also a significant issue for EU insurers. Of particular concern have been the state regulatory requirements that reinsurance issued by non-U.S. or "alien" reinsurers must be backed by 100% collateral deposited in the United States. Non-U.S. reinsurers have asked state regulators to reduce this requirement to as low as 50% for insurers who meet particular criteria, pointing out, among other arguments, that U.S. reinsurers do not have any collateral requirements in many foreign countries and that the current regulations do not recognize when an alien reinsurer cedes some of the risk back to a U.S. reinsurer. In the past, the NAIC has declined to recommend a collateral reduction, citing fears of unpaid claims from non-U.S. reinsurers and an inability to collect judgments in courts overseas. In 2009, the NAIC put forth draft federal legislation to create a board with the power to enforce national standards for reinsurance collateral, including the reduction of collateral for highly rated reinsurers. In 2010, an NAIC Task Force approved recommendations to reduce required collateral based on the financial strength of the reinsurer involved. This proposal was adopted as a model law and regulation by the NAIC in November 2011. To take effect, however, these changes must be made to state law and regulation by the individual state legislatures and insurance regulators. According to the NAIC, 21 states, collectively representing 60% of the primary insurance premiums in the United States, have adopted revised statutes or regulations with respect to reinsurance collateral reduction. To date, nine states have approved 34 reinsurers for a reduction in collateral requirements. The NAIC's Reinsurance Financial Analysis Working Group has conducted peer reviews for more than 30 certifications issued thus far by various states, and has developed a process for certified reinsurers to be approved in multiple states on a streamlined basis (known as "passporting"). To receive the reduced collateral requirements, the reinsurer's home jurisdiction must also be reviewed and listed on the NAIC List of Qualified Jurisdictions. In January 2014, the Bermuda Monetary Authority (BMA), the German Federal Financial Supervisory Authority (BaFin), the Swiss Financial Market Supervisory Authority (FINMA), and the Prudential Regulation Authority of the Bank of England (PRA) were given conditional qualification on an expedited basis, with complete reviews conducted by year-end 2014. In addition, the NAIC is conducting reviews with respect to the French Autorité de Contrôle Prudentiel et de Résolution (ACPR), the Central Bank of Ireland, and the Financial Services Agency of Japan. Following the passage of GLBA, state insurance regulators working through the NAIC embarked on a regulatory modernization program. These efforts were in response to both the mounting criticisms of state insurance regulation and the recognition of the growing convergence of financial services and financial services products. In early 2000, NAIC members signed a Statement of Intent: The Future of Insurance Regulation , in which they pledged "to modernize insurance regulation to meet the realities of the new financial services marketplace." New NAIC working groups were formed addressing issues such as state privacy protections, reciprocity of state producer licensing laws, promotion of "speed to market" of new insurance products, development of state-based uniform standards for policy form filings, and other proposed improvements to state rate and form filing requirements. Highlights of the post-GLBA NAIC efforts include the following: Certification of 47 states (as of September 2008) as reciprocal jurisdictions for producer licensing laws, thus exceeding the GLBA requirements to prevent the establishment of NARAB. As discussed above, however, insurance producer groups have continued to raise issues about licensing, and "NARAB II" legislation is being considered by Congress. Growth of the System for Electronic Rate and Form Filing (SERFF), intended to be a single, one-stop point of entry for insurers to file changes to rates and forms. More than 648,000 filings were made through the system in 2013, up from about 3,700 in 2001, and 49 states participate in the system. State approvals of the Interstate Insurance Product Regulation Compact. This compact is intended to provide increased regulatory uniformity and a single point of product filing for four insurance lines—life, annuities, disability income, and long-term care. It came into effect in May 2006. Currently, 43 states representing over 70% of the insurance premium volume have joined the compact. The NAIC maintains that states are better positioned than the federal government to serve the interests of U.S. insurance consumers, emphasizing that state regulators are better suited to ensure that consumer interests are not lost in the arena of commercial competition. In 2013, according to the NAIC, the total budget for the state insurance departments was $1.29 billion. The states handled more than 260,000 official consumer complaints and nearly 2.1 million consumer inquiries regarding their policies and their treatment by insurance companies and agents. The states collectively employed more than 11,500 employees to handle these complaints and perform the other functions of the state insurance departments. Since the financial crisis, the NAIC has undertaken another round of regulatory changes. Three initiatives specifically identified by the NAIC are Holding company oversight reform . Historically, insurer oversight has focused on the individual legal entities and subsidiaries, but the financial crisis brought greater scrutiny on holding company and overall insurer group issues. In response, the NAIC adopted the revisions to model laws and regulations relating to holding company oversight. The revisions included " ... expanded ability to evaluate any entity within an insurance holding company system; enhancements to the regulator's rights to access books and records and compelling production of information; establishment of expectation of funding with regard to regulator participation in supervisory colleges; and enhancements in corporate governance, such as Board of Directors and Senior Management responsibilities." To date, the NAIC reports 30 states have adopted these changes. Enterprise risk management . As part of insurer solvency oversight, emphasis both internationally and in the United States has been placed on companies themselves assessing, and reporting, the risks they are taking. This is generally accomplished through an "Own Risk and Solvency Assessment" (ORSA). An ORSA requires insurers to "issue their own assessment of their current and future risk through an internal risk self-assessment process and it will allow regulators to form an enhanced view of an insurer's ability to withstand financial stress." In September 2012, the NAIC adopted a model law that would require an annual ORSA and has produced a guidance manual on the topic. To date the NAIC reports that 18 states have passed the ORSA legislation. Principle-based reserving (PBR) . State requirements for life insurance reserves have remained static for decades, while insurance products themselves have increased in complexity. In response, the NAIC created, and states have begun adopting, a revised model law to transition life insurance reserving to a principle-based approach, from the current formulaic approach. According to the NAIC, 18 states comprising 28.0% of premiums have enacted PBR legislation. To avoid market disruption or an un-level playing field, PBR does not become operational until 42 states comprising at least 75% of the U.S. market have approved the law. Appendix A. Evolution of Insurance Regulation Insurance companies, unlike banks and securities firms, have been chartered and regulated solely by the states for the past 150 years. One important reason for this is an 1868 U.S. Supreme Court decision. In Paul v. Virginia , the Court held that the issuance of an insurance policy was not a transaction occurring in interstate commerce and thus not subject to regulation by the federal government under the Commerce Clause of the U.S. Constitution. Courts followed that precedent for the next 75 years. In a 1944 decision, U.S. v. South-Eastern Underwriters Association , the Court found that the federal antitrust laws were applicable to an insurance association's interstate activities in restraint of trade. Although the 1944 Court did not specifically overrule its prior holding in Paul , South-Eastern Underwriters created significant apprehension about the continued viability of state insurance regulation and taxation of insurance premiums. By 1944, the state insurance regulatory structure was well established, and a joint effort by state regulators and insurance industry leaders to legislatively overturn the South-Eastern Underwriters decision led to the passage of the McCarran-Ferguson Act of 1945. The act's primary purpose was to preserve the states' authority to regulate and tax insurance. The act also granted a federal antitrust exemption to the insurance industry for "the business of insurance." After 1945, the jurisdictional stewardship entrusted to the states under McCarran-Ferguson was reviewed by Congress on various occasions. Some narrow exceptions to the 50-state structure of insurance regulation have been enacted, such as one for some types of liability insurance in the Liability Risk Retention Act created by Congress in 1981 and amended in 1986. In general, however, when proposals were made in the past to transfer insurance regulatory authority to the federal government, they were successfully opposed by the states as well as by a united insurance industry. Such proposals for increased federal involvement usually spurred a series of regulatory reform efforts at the individual state level and by state groups, such as the National Association of Insurance Commissioners and the National Conference of Insurance Legislators. Such efforts were directed at correcting perceived deficiencies in state regulation and forestalling federal involvement. They were generally accompanied by pledges from state regulators to work for more uniformity and efficiency in the state regulatory process. A major effort to transfer insurance regulatory authority to the federal government began in the mid-1980s and was spurred by the insolvencies of several large insurance companies. Former House Energy and Commerce Committee Chairman John Dingell, whose committee had jurisdiction over insurance at the time, questioned whether state regulation was up to the task of overseeing such a large and diversified industry. He chaired several hearings on the state regulatory structure and also proposed legislation that would have created a federal insurance regulatory agency modeled on the Securities and Exchange Commission (SEC). State insurance regulators and the insurance industry opposed this approach and worked together to implement a series of reforms at the state level and at the NAIC. Among the reforms implemented was a new state accreditation program setting baseline standards for state solvency regulation. Under the accreditation standards, to obtain and retain its accreditation, each state must have adequate statutory and administrative authority to regulate an insurer's corporate and financial affairs and the necessary resources to carry out that authority. In spite of these changes, however, another breach in the state regulatory system occurred in the late 1990s. Martin Frankel, an individual who had previously been barred from securities dealing by the SEC, slipped through the oversight of several states' insurance regulators and diverted more than $200 million in premiums and assets from a number of small life insurance companies into overseas accounts. Another state reform largely implemented in the late 1980s and early 1990s was the introduction of state insurance guaranty funds. These funds, somewhat analogous in function to the Federal Deposit Insurance Corporation for banks, provide protection for insurance consumers who hold policies from failed insurance companies. If an insurance company is judged by a state insurance regulator to be insolvent and unable to fulfill its commitments, the state steps in to rehabilitate or liquidate the insurer's assets. The guaranty fund then uses the assets to pay the claims on the company, typically up to a limit of $300,000 for property/casualty insurance and $300,000 for life insurance death benefits and $100,000 for life insurance cash value and annuities. In most states, the existing insurers in the state are assessed to make up the difference should the company's assets be unable to fund the guaranty fund payments. This after the fact assessment stands in contrast to the FDIC, which is funded by assessments on banks prior to a bank failure and which holds those assessments in a segregated fund until needed. Insurers who are assessed by guaranty funds generally are permitted to write off the assessments on future state taxes, which indirectly provide state support for the guaranty funds. The Gramm-Leach-Bliley Act The 1999 Gramm-Leach-Bliley Act significantly overhauled the general financial regulatory system in the United States. Support for GLBA came largely as a result of market developments frequently referred to as "convergence." Convergence in the financial services context refers to the breakdown of distinctions separating different types of financial products and services, as well as the providers of once separate products. Drivers of such convergence include globalization, new technology, e-commerce, deregulation, market liberalization, increased competition, tighter profit margins, and the growing number of financially sophisticated consumers. GLBA intended to repeal federal laws that were inconsistent with the way that financial services products were actually being delivered, and it removed many barriers that kept banks or securities firms from competing with, or affiliating with, insurance companies. The result was the creation of a new competitive paradigm in which insurance companies found themselves in direct competition with brokerages, mutual funds, and commercial banks. GLBA did not, however, change the basic regulatory structure for insurance or other financial products. Instead, it reaffirmed the McCarran-Ferguson Act, recognizing state insurance regulators as the "functional" regulators of insurance products and those who sell them. Some insurance companies believe that in the post-GLBA environment, state regulation places them at a competitive disadvantage in the marketplace. They maintain that their non-insurer competitors in certain lines of products have federally based systems of regulation that are more efficient, while insurers remain subject to perceived inefficiencies of state insurance regulation, such as the regulation of rates and forms as well as other delays in getting their products to market. For example, life insurers with products aimed at retirement and asset accumulation must now compete with similar bank products. Banks can roll out such new products nationwide in a matter of weeks, while some insurers maintain that it can take as long as two years to obtain all of the necessary state approvals for a similar national insurance product launch. In the aftermath of GLBA, the largely united industry resistance to federal intervention in insurance changed. Many industry participants, particularly life insurers, larger property/casualty insurers, and larger insurance brokers, began supporting broad regulatory change for insurance in the form of an optional federal charter for insurance patterned after the dual chartering system for banks. GLBA also addressed the issue of modernizing state laws dealing with the licensing of insurance agents and brokers and made provision for a federally backed licensing association, the National Association of Registered Agents and Brokers. NARAB would have come into existence three years after the date of GLBA's enactment if a majority of the states failed to enact the necessary legislation for uniformity or reciprocity at the individual state level. The requisite number of states enacted this legislation within the three-year period, and thus the NARAB provisions never came into effect. The issue of insurance producer licensing reciprocity or uniformity continued, as some saw and continue to see problems in the actions taken by the individual states. Not every state has passed legislation implementing reciprocity, and some have argued that it has not always been implemented as smoothly as desired even in those states that did. Insurance after the Gramm-Leach-Bliley Act Congress passed the Gramm-Leach-Bliley Act to enhance competition among financial services providers. Though many observers expected banks, securities firms, and insurers to converge as institutions after it passed, this has not occurred as expected. In fact, the major merger between a large bank, Citibank, and a large insurer, Travelers, which partially motivated the passage of GLBA, has effectively been undone. The corporation that resulted from the merger, Citigroup, has divested itself of almost all of its insurance subsidiaries. Although large bank-insurer mergers did not occur as expected, significant convergence continued. Instead of merging across sectoral lines, banks began distributing—but not "manufacturing"—insurance, and insurers began creating products that closely resembled savings or investment vehicles. Consolidation also continued within each sector, as banks merged with banks and insurers with insurers. In addition, although Congress instituted functional regulation in GLBA, regulation since has still tended to track institutional lines. From the 107 th through the 110 th Congresses, congressional interest in insurance regulatory issues continued. A number of broad proposals for some form of federal chartering or other federal intervention in insurance regulation were put forward in both houses of Congress and by the Administration, but none were marked up or reported by the various committees of jurisdiction. In the same time frame, a number of narrower bills affecting different facets of insurance regulation and regulatory requirements were also introduced in Congress, including bills addressing surplus lines and reinsurance, insurance producer licensing, and expansion of the Liability Risk Retention Act beyond liability insurance. Insurance and the Financial Crisis As the 110 th Congress approached its close, the financial crisis that began in 2007 reached panic proportions with the conservatorship of Fannie Mae and Freddie Mac, the failure of Lehman Brothers, and the government rescue of American International Group (AIG) in September 2008. This crisis overlaid a range of new issues and arguments to the previously existing debate on insurance regulatory reforms. The financial crisis grew largely from sectors of the financial industry that had previously been perceived as presenting little systemic risk, including insurers. Some saw the crisis as resulting from failures or holes in the financial regulatory structure, particularly a lack of oversight for the system as a whole and a lack of coordinated oversight for the largest actors in the system. Those holding this perspective increased the urgency in calls for overall regulatory changes, such as the implementation of increased systemic risk regulation and federal oversight of insurance, particularly larger insurance firms. The generally good performance of insurers in the crisis, however, also provided additional affirmation to those seeking to retain the state-based insurance system. Although insurers in general are considered to have weathered the financial crisis reasonably well, the insurance industry saw two notable failures—one general and one specific. The first failure was spread across the financial guarantee or monoline bond insurers. Before the crisis, there were about a dozen bond insurers in total, with four large companies dominating the business. This type of insurance originated in the 1970s to cover municipal bonds but the insurers expanded their businesses since the 1990s to include significant amounts of mortgage-backed securities. In late 2007 and early 2008, strains began to appear due to this exposure to mortgage-backed securities. Ultimately some bond insurers failed and others saw their previously triple-A ratings cut significantly. These downgrades rippled throughout the municipal bond markets, causing unexpected difficulties for both individual investors and municipalities who might have thought they were relatively insulated from problems stemming from rising mortgage defaults. The second failure in the insurance industry was that of a specific company, American International Group. AIG had been a global giant of the industry, but it essentially failed in mid-September 2008. To prevent bankruptcy in September and October 2008, AIG sought more than $100 billion in assistance from the Federal Reserve, which received both interest payments and warrants for 79.9% of the equity in the company in return. Multiple restructurings of the assistance followed, including nearly $70 billion through the U.S. Treasury's Troubled Asset Relief Program (TARP). The rescue ultimately resulted in the U.S. government owning 92% of the company. The assistance for AIG has ended with all the Federal Reserve assistance repaid and the sale by the U.S. Treasury of all of its equity stake in the company. The near collapse of the bond insurers and AIG could be construed as regulatory failures. One of the responsibilities of an insurance regulator is to make sure the insurer remains solvent and is able to pay its claims. Because the states are the primary insurance regulators, some may go further and argue that these cases specifically demonstrate the need for increased federal involvement in insurance. The case of AIG, however, is a complicated one. Although AIG was primarily made up of state-chartered insurance subsidiaries, at the holding company level it was a federally regulated thrift holding company with oversight by the Office of Thrift Supervision. The immediate losses that caused AIG's failure came from both derivatives operations overseen by OTS and from securities lending operations that originated with securities from state-chartered insurance companies. The 111 th Congress responded to the financial crisis with the Dodd-Frank Wall Street Reform and Consumer Protection Act, which enacted broad financial regulatory reform as detailed above. Attention on insurance regulation in the 112 th Congress was largely occupied with follow-up to the Dodd-Frank Act. The Dodd-Frank Act left many of the specifics up to regulatory rulemaking, and this rulemaking is still ongoing. Of particular concern was the specific approach that the Federal Reserve may take to bank or thrift holding companies who are primarily involved in insurance and the possibility of FSOC designating some insurers as systemically important and thus subject to additional oversight. Neither issue reached a resolution during the 112 th Congress. Appendix B. Constitutional Authority for Federal Regulation of the Business of Insurance Pursuant to the Commerce Clause of the U.S. Constitution, it is generally constitutional for the federal government to regulate the business of insurance because, according to relevant Supreme Court precedent and subsequent decisions explaining the controlling case, the business of insurance is commerce. It therefore may be regulated by the federal government in a manner coextensive with Congress's constitutional authority to regulate any other economic activity with international and interstate aspects. The authority of the federal government to regulate the business of insurance as interstate commerce was not always clear. The Supreme Court in Paul v. Virginia had previously held that "[issuing] a policy of insurance is not a transaction of interstate commerce." The case challenged the constitutionality of a Virginia law that made it more difficult for insurance companies incorporated outside of Virginia to do business within the commonwealth. The insurance industry argued that the statute violated the dormant commerce clause, a legal concept rooted in the Commerce Clause of the Constitution, which prohibits states from discriminating against "foreign" (out-of-state) corporations. The Court found that the Virginia law could not violate the Commerce Clause because insurance was not commerce. In making this determination, the Court appeared to rely on a rather narrow and mechanical definition of commerce. These contracts are not articles of commerce in any proper meaning of the word. They are not subjects of trade and barter offered in the market as something having an existence and value independent of the parties to them ... They are not commodities to be shipped or forwarded from one State to another ... They are like other personal contracts between parties which are completed by their signature and transfer of consideration. Such contracts are not inter-state transactions, though the parties may be domiciled in different States. Subsequent Supreme Court decisions affirmed the holding in Paul that the business of insurance was not commerce, and states relied upon this interpretation as they built regulatory systems for the business of insurance. Seventy-five years after Paul , in United States v. South-Eastern Underwriters Associations , the Supreme Court ruled differently, holding that the business of insurance is, in fact, commerce and its interstate characteristics may be subject to federal regulation. The case, while not explicitly overruling Paul v. Virginia , abrogated the Paul decision considerably. South-Eastern Underwriters presented the Supreme Court squarely with the question of whether Congress had the power to directly regulate the insurance industry for the first time. In the case, the Department of Justice had brought suit against certain insurance companies for violations of the Sherman Antitrust Act. The insurance companies that were accused of violating the antitrust laws argued that because the business of insurance was not interstate commerce, the Sherman Antitrust Act did not apply to the activities of the companies. In deciding that the business of insurance is commerce and that it is also interstate commerce to which the federal antitrust laws did apply, the majority of the Court took a more practical and less mechanical view of commerce, generally, and the insurance industry, in particular, than the Court in Paul . The South-Eastern Underwriters Court began by describing the enormity of the insurance business as a portion of the U.S. economy and noted that many insurance companies operated out of the northeastern region of the country, but did business in multiple states, lending credence to the argument that insurance was, indeed, an interstate commercial enterprise. Furthermore, since the Paul decision, other Supreme Court cases had made clear that intangible items, such as contracts not unlike insurance contracts, are items of commerce that can be regulated by Congress. While the Court was willing to concede that "a contract of insurance, considered as a thing apart from negotiation and execution, does not itself constitute interstate commerce," the Court found, nonetheless, that "a nationwide business is not deprived of its interstate character merely because it is built upon sales contracts which are local in nature. Were the rule otherwise, few businesses could be said to be engaged in interstate commerce." The Court concluded its analysis of the Commerce Clause question with a strong endorsement of a broad reading of the powers of Congress to regulate the business of insurance as interstate commerce. "No commercial enterprise of any kind which conducts its activities across state lines has been held to be wholly beyond the regulatory power of Congress under the Commerce Clause. We cannot make an exception of the business of insurance." Shortly after the decision was issued in South-Eastern Underwriters , Congress passed the McCarran Ferguson Act as a direct response to that decision. The first section of the act explicitly declares it to be the policy of the United States "that the continued regulation and taxation by the several States of the business of insurance is in the public interest, and that silence on the part of the Congress shall not be construed to impose any barrier to the regulation or taxation of such business by the several States." The act goes on to ensure state regulatory authority over the business of insurance by preventing federal preemption of state insurance regulations, with some notable exceptions. Specifically, McCarran Ferguson says that "[no] act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance ." Based upon the emphasized language, it appears that, even within McCarran-Ferguson, Congress has reserved for itself the right to directly regulate the business of insurance when appropriate. And the Supreme Court has upheld Congress's authority to do so. For example, in Barnett Bank of Marion County v. Nelson , the Supreme Court held that a federal law granting national banks the ability to sell insurance preempted a Florida statute that forbid banks from selling insurance. The Court reviewed whether McCarran-Ferguson prevented the Florida statute from being superseded by the federal law, and found that because the federal law specifically related to the business of insurance, McCarran-Ferguson's provision preventing state insurance law preemption by federal statute did not apply. In this way, the Supreme Court upheld a federal regulation of the business of insurance, affirming that the business of insurance is commerce under the Constitution, and its interstate aspects may be regulated by Congress. Congress's authority to regulate the business of insurance under the Commerce Clause extends only so far as Congress's authority to regulate interstate commerce. In the Patient Protection and Affordable Care Act, Congress enacted a requirement for all U.S. citizens to purchase health insurance, commonly known as the "individual mandate." The requirement was challenged by a number of states as an unconstitutional exercise of Congress's powers to regulate interstate commerce. The Supreme Court agreed that the individual mandate was not a valid exercise of Congress's Commerce Clause power in a 2011 decision. In his controlling opinion, Chief Justice Roberts held that while the Commerce Clause granted Congress broad authority to regulate economic activity, it did not grant Congress the power to compel individuals to engage in economic activity. Therefore, though the Chief Justice found that Congress did not have the authority to impose the individual mandate under the Commerce Clause, Chief Justice Roberts ruled in this manner not because Congress does not have the power to regulate the business of insurance, but because the Commerce Clause does not grant Congress the authority to compel individuals to participate in economic activity. While the individual mandate was ruled not to be a valid exercise of Congress's power to regulate interstate commerce, the Chief Justice went on to uphold the individual mandate under Congress's power to levy taxes. Appendix C. Past Insurance Regulatory Legislation and Proposals Unenacted Legislation in the 112 th Congress Several pieces of legislation addressing insurance regulation or regulatory requirements were introduced and not enacted in the 112 th Congress, including both broad and narrow proposals. This legislation included the following: The National Association of Registered Agents and Brokers Reform Act of 2011 ( H.R. 1112 ) H.R. 1112 was introduced by Representative Randy Neugebauer along with 47 cosponsors on March 16, 2011. A similar bill was introduced in the 110 th and 111 th Congresses and passed the House in each Congress, but was not acted upon by the Senate. H.R. 1112 was referred to the House Committee on Financial Services. H.R. 1112 would have established a National Association of Registered Agents and Brokers (NARAB). NARAB was to be a private, nonprofit corporation, whose members, required to be licensed as an insurance producer in a single state and meet other standards, would be able to operate in any other state subject only to payment of the licensing fee in that state. The NARAB member would still be subject to each state's consumer protection and market conduct regulation, but individual state laws that treated out-of-state insurance producers differently from in-state producers would be preempted. NARAB would be overseen by a board made up of five appointees from the insurance industry and four from the state insurance commissioners. The appointments would be made by the President, and the President could dissolve the board as a whole or suspend the effectiveness of any action taken by NARAB. NARAB dates back to the Gramm-Leach-Bliley Act of 1999, and the new legislation is often referred to as "NARAB II." GLBA included the provisional creation of a NARAB to streamline state insurance producer licensing for agents and brokers. The GLBA NARAB provisions, however, were not to go into effect if a majority of the states enacted uniformity in their insurance producer licensing laws and reciprocity for nonresident producer licensing laws. The states met these GLBA requirements. However, some states have not implemented uniformity and reciprocity laws. The Risk Retention Modernization Act of 2011 ( H.R. 2126 ) H.R. 2126 was introduced by Representative John Campbell along with Representative Peter Welch on June 3, 2011. It was referred to the House Committee on Financial Services. This bill would have expanded the Liability Risk Retention Act (LRRA) federal preemption of state insurance laws, allowing risk retention groups (RRGs) to cover commercial property risks and risk purchasing groups (RPGs) to purchase coverage for commercial property risks. The bill would also have changed the enforcement mechanism for federal preemptions in the LRRA and added additional federal corporate governance, disclosure, and fiduciary duty requirements for RRGs under the act. Under existing law, the federal preemptions in the LRRA are enforced through court action. If a risk retention group believes a state is attempting to regulate in a manner counter to the LRRA, it can bring suit in a federal court. H.R. 2126 would have created a process under which the director of the Federal Insurance Office could issue determinations as to whether a state's regulation of a RRG or RPG is preempted by the act. In addition, the director was to study and issue reports to Congress on the states' regulation of RRGs and RPGs and the compliance with the LRRA. The corporate governance standards to be issued by the director of the FIO would have included requirements that (1) a majority of directors on an RRG's board be independent, (2) any audit committee be made up of independent directors, written governance standards be in place, and (3) contracts with service providers be limited to less than five years and be approved by the state insurance commissioner. Additional specific amendments to the LRRA would have expanded the consumer disclosure required in the act and imposed a fiduciary duty on the board of directors of a risk retention group. The Insurance Data Protection Act ( H.R. 3559 ) H.R. 3559 was introduced by Representative Steve Stivers on December 5, 2011. It was marked up by the Subcommittee on Insurance, Housing and Community Opportunity of the House Committee on Financial Services on December 8, 2011, and approved for consideration by the full committee on a vote of seven to five. The bill was not brought before the full committee prior to close of the 112 th Congress. H.R. 3559 was also referred to the House Committee on Agriculture, which did not act on the legislation. This bill would have removed the Federal Insurance Office's authority to issue subpoenas in its information gathering efforts and exclude insurance companies from the Office of Financial Research's subpoena authority. It also would have extended existing FIO confidentiality requirements that apply to insurance information gathered by FIO to the sharing of such data by FIO or the gathering of such data by federal financial regulators. The Insurance Consumer Protection and Solvency Act ( H.R. 6423 ) H.R. 6423 was introduced by Representative Bill Posey along with Representative Judy Biggert on September 14, 2012. It was referred to the House Committee on Financial Services. Although no hearings directly on H.R. 6423 were held, the bill in draft form was discussed in a subcommittee hearing in November 2011. H.R. 6423 would have amended Dodd-Frank so that insurance companies would essentially no longer be subject to the resolution regime created in this law. It would have struck the FDIC's backup authority to resolve insurance subsidiaries in the case of inaction by state authorities and excluded insurance companies from the FDIC's assessment authority to cover the cost of FDIC resolution. Unenacted Legislation in the 111 th Congress Several pieces of legislation addressing insurance regulation or regulatory requirements were introduced and not enacted in the 111 th Congress, including both broad and narrow proposals. This legislation included the following: The Insurance Industry Competition Act of 2009 ( H.R. 1583 ) Representative Peter DeFazio and five cosponsors introduced H.R. 1583 in the House on March 18, 2009. H.R. 1583 was referred to the House Judiciary Committee, House Financial Services Committee and House Energy and Commerce Committee. No hearings or markups were held on the bill. H.R. 1583 would have abolished the current exemption from federal antitrust laws for the "business of insurance" that dates to the McCarran-Ferguson Act of 1945 and removed a prohibition on investigations of insurance companies by the Federal Trade Commission. It would not have changed the sections of the McCarran-Ferguson Act that give preeminence to state insurance regulators. The National Insurance Consumer Protection Act ( H.R. 1880 ) Representatives Melissa Bean and Edward Royce introduced H.R. 1880 in the House on April 2, 2009. The bill was referred to the House Financial Services Committee, House Judiciary Committee, and House Energy and Commerce Committee. No further action was taken on the bill. This bill would have created a federal charter for the insurance industry, including insurers, insurance agencies, and independent insurance producers. The federal insurance regulatory apparatus was to be an independent entity under the Department of the Treasury, and the federal law would have preempted most state insurance laws for nationally regulated entities. Thus, nationally licensed insurers, agencies, and producers would have been able to operate in the entire United States without fulfilling the requirements of each of the 50 states' individual insurance laws. H.R. 1880 also addressed the issue of systemic risk by designating another entity to serve as a systemic risk regulator for insurance. The systemic risk regulator was to have the power to compel systemically significant insurers to be chartered by the federal insurance regulator. Thus, although the bill shared some similarities with past optional federal charter legislation, and would have allowed some insurers to choose whether to obtain a federal charter, it was not purely an optional federal charter bill. The National Association of Registered Agents and Brokers Reform Act of 2009 ( H.R. 2554 ) This bill was introduced by Representative David Scott along with 34 cosponsors on May 21, 2009. A similar bill was introduced in the 110 th Congress, where it passed the House but was not acted upon by the Senate. H.R. 2554 passed the House on March 3, 2011, and was subsequently referred to the Senate Committee on Banking, Housing, and Urban Affairs, but was not acted upon by the Senate. H.R. 2554 would have established a National Association of Registered Agents and Brokers (NARAB). NARAB was to be a private, nonprofit corporation, whose members, once licensed as an insurance producer in a single state, would be able to operate in any other state subject only to payment of the licensing fee in that state. The NARAB member was still to be subject to each state's consumer protection and market conduct regulation, but individual state laws that treated out-of-state insurance producers differently than in-state producers would be preempted. NARAB would have been overseen by a board made up of five appointees from the insurance industry and four from the state insurance commissioners. The appointments were to be made by the President, and the President would have had the power to dissolve the board as a whole or suspend the effectiveness of any action taken by NARAB. The Risk Retention Modernization Act of 2010 ( H.R. 4802 ) H.R. 4802 was introduced by Representative Dennis Moore (along with Representatives John Campbell and Suzanne Kosmas) on March 10, 2010. It was referred to the House Committee on Financial Services but was not acted upon further. This bill would have expanded the federal preemption of state insurance laws, allowing risk retention groups to cover commercial property risks and risk purchasing groups to purchase coverage for commercial property risks. The bill would also have changed the enforcement mechanism for federal preemptions in the LRRA, and added additional federal corporate governance, disclosure, and fiduciary duty requirements for risk retention groups under the act. Under existing law, the federal preemptions in the LRRA are enforced through court action. If a risk retention group believes a state is attempting to regulate in a manner counter to the LRRA, it can bring suit in a federal court. H.R. 4802 would have created a process under which the Secretary of the Treasury could issue determinations as to whether a state's regulation of a RRG or RPG is preempted by the act. In addition, the Secretary of the Treasury and the Comptroller General would have studied and issued reports to Congress on the states' regulation of RRGs and RPGs and the compliance with the LRRA. The corporate governance standards to have been put into place by the bill would have included requirements that a majority of directors on an RRG's board be independent; any audit committee be made up of independent directors; written governance standards be in place; and contracts with service providers be limited to less than five years and be approved by the state insurance commissioner. Specific amendments to the LRRA would have expanded the consumer disclosure required in the act and imposed a specific fiduciary duty on the board of directors of a risk retention group. The Federal License for Reinsurers Act of 2010 ( H.R. 6529 ) Representative Dennis Moore introduced H.R. 6529 on December 16, 2010. It was referred to the House Committee on Financial Services but no hearings or markups were held on the bill. H.R. 6529 would have created a federal license for reinsurers. The licensing and regulatory authority would rest with the FIO, which was created under the Dodd-Frank Act, which would have the authority to determine that state laws were inconsistent with federal law and thus preempted. Administration Proposals 2008 Treasury Blueprint In March 2008, then-Secretary of the Treasury Henry Paulson released a Blueprint for a Modernized Financial Regulatory Structure . Although the financial crisis had begun at that time, the Treasury blueprint was not primarily a response to the crisis, but instead an attempt to create "a more flexible, efficient and effective regulatory framework." A wide-ranging document, the blueprint foresaw a completely revamped regulatory structure for financial services. The 2008 Treasury model proposed a prudential regulator to oversee the solvency of individual companies, a business conduct regulator to oversee consumer protection, and a market stability regulator to oversee risks to the entire system. As an intermediate step, it made two specific recommendations on insurance regulation. First, it called for the creation of a federal insurance regulator to oversee an optional federal charter for insurers as well as federal licensing for agents and brokers. Second, recognizing that the debate over an optional federal charter was ongoing in Congress, it recommended the creation of an "Office of Insurance Oversight" in the Department of the Treasury as an interim step. This office would be charged with two primary functions: (1) dealing with international regulatory issues, including the power to preempt inconsistent state laws; and (2) collecting information on the insurance industry and advising the Secretary of the Treasury on insurance matters. President Obama's Financial Regulatory Reform Plan In June 2009, the Treasury Department under Secretary Timothy Geithner released a whitepaper entitled Financial Regulatory Reform: A New Foundation , outlining President Obama's plan to reform financial regulation in the United States. The plan did not foresee as complete an overhaul as did the 2008 blueprint, but it would have substantially changed the financial regulatory system. Specific changes called for included explicitly introducing systemic risk oversight by the Federal Reserve, combining the Office of Comptroller of the Currency and the Office of Thrift Supervision into a single banking regulator, and creating a new Consumer Financial Protection Agency. Although the June report stated that the Administration was open to additional changes in the insurance regulatory system, the specific regulatory changes called for in the released legislative language were focused on areas other than insurance. Most insurance products, for example, were excluded from the jurisdiction of the new federal consumer protection agency. In general, the states were to continue to have a preeminent role in insurance regulation. Insurance regulation, however, would have been specifically affected through two other aspects of the President's plan: the regulation of large financial companies presenting systemic risk and the creation of a new Office of National Insurance within the Treasury. Systemic risk regulation as proposed in the legislation would have been the primary responsibility of the Federal Reserve in conjunction with a new Financial Services Oversight Council made up of the heads of most of the federal financial regulators. The powers to regulate for systemic risk enumerated in the draft legislation extended to all companies in the United States engaged in financial activities. Although the draft legislation did not specifically name insurers as subject to federal systemic risk regulation, it would seem to have included them under federal jurisdiction. Companies judged to be a possible threat to global or U.S. financial stability could be designated Tier 1 Financial Holding Companies and made subject to stringent solvency standards and additional examinations. Such companies would also be subject to enhanced resolution authority rather than standard bankruptcy provisions. Although the draft language did make reference in some places to state functional regulatory agencies, it was left open exactly how the Federal Reserve as regulator of the financial holding company would interact with the state regulators of the individual insurance subsidiaries. Whether federal regulatory deferral to state regulators would have continued under the proposed legislation seemed an unresolved question. Although systemic risk regulation would likely apply to a relatively small number of insurers, the called-for creation of an Office of National Insurance could have had a broader impact. Unlike the similarly named office in other legislation, such as H.R. 1880 in the 111 th Congress, President Obama's Office of National Insurance would not have overseen a federal insurance charter or have had direct regulatory power over insurers. Rather, this office was to operate as a broad overseer and voice for insurance at the federal level, including collecting information on insurance issues, setting federal policy on insurance, representing the United States in international insurance matters, and preempting some state laws where these laws are inconsistent with international agreements.
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The individual states have been the primary regulators of insurance since 1868. Following the 1945 McCarran-Ferguson Act, this system has operated with the explicit blessing of Congress, but has also been subject to periodic scrutiny and suggestions that the time may have come for Congress to reclaim the regulatory authority it granted to the states. In the late 1980s and early 1990s, congressional scrutiny was largely driven by the increasing complexities of the insurance business and concern over whether the states were up to the task of ensuring consumer protections, particularly insurer solvency. Immediately prior to the recent financial crisis, congressional attention to insurance regulation focused on the inefficiencies in the state regulatory system. A major catalyst was the aftermath of the Gramm-Leach-Bliley Act of 1999 (GLBA), which overhauled the regulatory structure for banks and securities firms, but left the insurance sector largely untouched. Many larger insurers, and their trade associations, had previously defended state regulation but considered themselves at a competitive disadvantage in the post-GLBA regulatory structure. Some advocated for an optional federal charter similar to that available to banks. Various pieces of insurance regulatory reform legislation were introduced, including bills establishing a broad federal charter for insurance as well as narrower, more targeted bills. The states, particularly working through the National Association of Insurance Commissioners (NAIC), were not idle following congressional attention. They reacted quickly to GLBA requirements that related to insurance agent licensing and have since embarked on a wider-ranging project to modernize insurance regulation. This has included both regulatory aspects, such as streamlining the process for rate and form filing, and more basic legal aspects, such as the creation of an interstate compact to provide uniformity across states for some life insurance products. Because enactment by the state legislature is necessary before the legal changes suggested by the NAIC can take effect in that state, the process typically does not move rapidly. The recent financial crisis refocused the debate surrounding insurance regulatory reform. Unlike many financial crises in the past, insurers played a large role in this crisis. In particular, the failure of the large insurer American International Group (AIG) spotlighted sources of risk that had gone unrecognized. The need for a systemic risk regulator for the entire financial system was a common thread in many of the post-crisis financial regulatory reform proposals. The Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203), enacted following the crisis, gave enhanced systemic risk regulatory authority to the Federal Reserve and to a new Financial Services Oversight Council (FSOC), including some oversight authority over insurers. The Dodd-Frank Act also included measures affecting the states' oversight of surplus lines insurance and reinsurance and the creation of a new Federal Insurance Office (FIO) within the Treasury Department. Among the insurance regulatory issues addressed by legislation in the 113th Congress are the application of federal orderly liquidation authority to insurers (addressed in H.R. 605); the supervision of some insurers by the Federal Reserve (addressed in H.R. 2140, H.R. 4510, H.R. 5461, S. 2102, and S. 2270/P.L. 113-279); and the licensing of insurance agents and brokers (addressed in S. 534, S. 1926, S. 2244, H.R. 1155/H.R. 1064, and H.R. 4871). In addition, various international issues may be of concern to Congress, such as the European Union's Solvency II project to overhaul the European insurance regulatory system and general international standards for insurance regulation.
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Congress established the Stockpile Stewardship Program in the FY1994 National Defense Authorization Act ( P.L. 103-160 ). The goal of the program, as amended by the FY2010 National Defense Authorization Act ( P.L. 111-84 , §3111), is to ensure "that the nuclear weapons stockpile is safe, secure, and reliable without the use of underground nuclear weapons testing." The program is operated by the National Nuclear Security Administration (NNSA), a separately organized agency within DOE that Congress established in the FY2000 National Defense Authorization Act ( P.L. 106-65 , Title XXXII). NNSA also manages two other programs, Defense Nuclear Nonproliferation and Naval Reactors. Stockpile stewardship consists of all activities in NNSA's Weapons Activities account. It consists of four programs with funding of over $1 billion each and several smaller programs, all of which are discussed in detail below. Table 1 presents Weapons Activities funding. Most stewardship activities take place at the nuclear weapons complex (the "complex"), which consists of three laboratories (Los Alamos National Laboratory, NM; Lawrence Livermore National Laboratory, CA; and Sandia National Laboratories, NM and CA); four production sites (Kansas City Plant, MO; Pantex Plant, TX; Savannah River Site, SC; and Y-12 National Security Complex, TN); and the Nevada National Security Site (formerly Nevada Test Site). NNSA manages and sets policy for the complex; contractors to NNSA operate the eight sites. While the nuclear weapons complex currently consists of eight sites, it had many more personnel and sites during the Cold War. Despite post-Cold War reductions, many in Congress have for years wanted the complex to change further, in various ways: fewer personnel, greater efficiency, smaller footprint at each site, increased security, and the like. After numerous exchanges between DOE and the appropriating and authorizing committees, such issues still remain. According to a White House document of May 2010, the President provided Congress with a classified report (the "1251 report") required by the FY2010 National Defense Authorization Act, Section 1251, "on the comprehensive plan to: (1) maintain delivery platforms [that is, bombers, missiles, and submarines that deliver nuclear weapons]; (2) sustain a safe, secure, and reliable U.S. nuclear weapons stockpile; and (3) modernize the nuclear weapons complex." According to that document, "the Administration intends to invest $80 billion in the next decade to sustain and modernize the nuclear weapons complex." The Administration submitted a revised Section 1251 report in November 2010, projecting weapons stockpile and infrastructure costs for FY2011-FY2020 at between $85.4 billion and $86.2 billion. The request for FY2015 was below the 1251 report figure; in contrast, the request for FY2016 is about at the 1251 report's figure for that year, and projections for FY2017-FY2020 are above the figures in the 1251 report, as Table 2 shows. Along with reconfiguring the nuclear weapons complex, there have been concerns for decades about the proper organization of the federal agency responsible for managing it. While the Army managed the nuclear weapons program during World War II, Congress, in the Atomic Energy Act of 1946, created the Atomic Energy Commission (AEC) as an independent civilian agency to manage that program. In the Energy Research and Development Act of 1974, Congress dissolved the AEC and created the Nuclear Regulatory Commission and the Energy Research and Development Administration (ERDA), which among other functions managed the nuclear weapons program. That program was moved again by the Department of Energy Organization Act of 1977, which dissolved ERDA and created DOE. In 2000, as noted above, Congress created NNSA as a separately organized agency within DOE. In part, these reorganizations stem from long-standing concerns about the management of the nuclear weapons complex. Many reports have been written over the past several decades to address this issue. Most recently, in the FY2013 National Defense Authorization Act, P.L. 112-239 , Congress established the Congressional Advisory Panel on the Governance of the Nuclear Security Enterprise and directed the panel to make recommendations on "the most appropriate governance structure, mission, and management of the nuclear security enterprise." In its report to Congress, the panel stated: the panel finds that the existing governance structures and many of the practices of the enterprise are inefficient and ineffective, thereby putting the entire enterprise at risk over the long term. These problems have not occurred overnight; they are the result of decades of neglect. This is in spite of the efforts of many capable and dedicated people who must nonetheless function within the confines of a dysfunctional system.… One unmistakable conclusion is that NNSA governance reform, at least as it has been implemented, has failed to provide the effective, mission-focused enterprise that Congress intended. The panel's recommendations included strengthening presidential guidance and oversight of the nuclear enterprise; establishing new congressional mechanisms for leadership and oversight of the enterprise; replacing NNSA with a new Office of Nuclear Security within DOE, renamed to the Department of Energy and Nuclear Security, with the Secretary responsible for the mission; and building a culture of performance, accountability, and credibility. Owing to concerns about cost growth and transparency, P.L. 113-235 contained several sections relating to cost and oversight. Section 304 required construction of high-hazard nuclear facilities to have independent oversight by the Office of Independent Enterprise Assessments "to ensure the project is in compliance with nuclear safety requirements." Section 305 required an independent cost estimate for approving performance baseline and starting construction for projects with total cost over $100 million. Section 308 required the Secretary of Energy to provide an analysis of alternatives for each major warhead refurbishment program reaching the development engineering stage. Similarly, in its FY2016 report on energy and water development appropriations, S.Rept. 114-54 , the Senate Appropriations Committee expressed its concern "with the continued poor cost estimating by the Department, particularly within the NNSA," and directed the Secretary of Energy to "provide a report … that outlines the Department's plan for improving cost estimating for major projects and programs." This program involves work directly on nuclear weapons in the stockpile, such as monitoring their condition; maintaining them through repairs, refurbishment, life extension, and modifications; conducting R&D in support of specific warheads; and dismantlement. The FY2016 request was $3,187.3 million; the enacted amount, on a comparable basis, for FY2015 was $2,797.2 million. The House Appropriations Committee recommended $3,354.3 million for FY2016. The House passed H.R. 2028 , Energy and Water Development and Related Agencies Appropriations Act, 2016, by a vote of 240-177, without amendments to the Weapons Activities section of the bill as reported from committee. The Senate Appropriations Committee recommended $3,039.5 million for FY2016. Specific items under DSW include the following: These programs aim to extend the life of existing warheads through design, certification, manufacture, and replacement of components. An LEP for the W76 warhead for the Trident II submarine-launched ballistic missile (SLBM) is ongoing, as is an LEP for the B61 mod 12. (A "mod," such as B61 mod 12 or B61-12, is a modification or version of a bomb or warhead type.) For FY2016, the amounts requested by NNSA for LEPs are as follows. H.R. 2028 , as passed by the House, provided the requested amounts; the Senate Appropriations Committee likewise recommended providing the requested amounts. The omnibus appropriations bill also approved these amounts. $244.0 million for the W76-1 LEP. The first production unit (FPU) was completed in FY2008, with production scheduled to be completed by FY2019. $643.3 million for the B61-12 LEP, with the FPU by the second quarter of FY2020. $220.2 million for the W88 Alt [Alteration] 370, to provide an arming-fuzing-firing system among other things, with the FPU in the first quarter of FY2020. The House Appropriations Committee, noting a growth in scope of work planned for the W88, directed NNSA to integrate the cost of certain other work to refurbish this warhead into selected acquisition reports for the W88 LEP. In contrast, the Senate Appropriations Committee, in commenting on the Alt 370, noted that alterations are "much less intensive" than LEPs and stated that the distinction between the two "is important, and should be maintained." The omnibus appropriations bill directed NNSA to "clearly account for all costs of any major multi-year stockpile refurbishment activity with a total cost greater than $1,000,000,000" and to "ensure a formal and comprehensive acquisition management plan is in place to manage such efforts." $195.0 million for the W80-4, a cruise missile warhead LEP. FY2015 was the first year for which NNSA requested funds for this warhead under the LEP heading. The LEP would seek to use common components from other LEPs and to improve warhead safety and security. The FPU is scheduled for FY2025. The House Appropriations Committee expressed its concern "that the NNSA has already settled on two alternatives for the W80-4 that are more expensive than the B61 life extension program … [and] has a history of spending large amounts of funding to develop alternatives that are tabled in order to pursue a more affordable option." Accordingly, the committee directed NNSA to task an independent group "to perform a red team assessment of the NNSA's alternatives selected for the W80-4 life extension program." The omnibus appropriations bill retained the request for this assessment. The FY2016 budget request proposed suspending activities for an interoperable warhead (W78/88-1) that could be used on land-based intercontinental ballistic missiles (ICBMs) and SLBMs, and projected a 2030 FPU. Neither the House Appropriations Committee nor the Senate Appropriations Committee commented on this change. P.L. 113-235 , the FY2015 Consolidated and Further Continuing Appropriations Act, had also provided full funding for the B61 LEP, the W76 LEP, the W88 Alt 370, and the cruise missile warhead life extension study. Regarding the latter, the Explanatory Statement noted a requirement for NNSA to provide a report on military requirements, cost, and schedule at the start of a design definition and cost study, should those activities be requested subsequently. This program involves routine maintenance, replacement of limited-life components, surveillance, assessment, and the like for all weapon types in the stockpile. The FY2015 request was $531.1 million, and P.L. 113-235 provided that amount. The FY2016 request was $482.4 million. The omnibus appropriations bill for FY2016 provided this amount. The number of warheads has fallen sharply since the end of the Cold War, and continues to decline. WDD involves interim storage of warheads to be dismantled; dismantlement; and disposition (i.e., storing or eliminating warhead components and materials). The FY2015 request was $30.0 million, and P.L. 113-235 provided $50.0 million; the Explanatory Statement directed NNSA to "report on the options available to avoid a dismantlement workload gap in the mid-2020s while still meeting the 2022 dismantlement goal." The FY2016 request was $48.0 million. H.R. 2028 , as passed by the House, provided the requested amount. The Senate Appropriations Committee recommended $52.0 million, and the omnibus appropriations bill provided this amount. This category includes Production Support; R&D Support; R&D Certification and Safety; Management, Technology, and Production; and Plutonium Infrastructure Sustainment. NNSA states, "Stockpile Services provides the foundation for the production capability and capacity within the nuclear security enterprise. All enduring systems, LEPs, and dismantlements rely on Stockpile Services to provide the base development, production and logistics capability needed to meet program requirements. In addition, Stockpile Services funds research, development, and production activities that support two or more weapons-types, and work that is not identified or allocated to a specific weapon-type." The FY2015 request was $1,108.5 million; P.L. 113-235 provided $1,034.5 million. The FY2016 request for Stockpile Services was $939.3 million. The FY2016 budget proposed moving some programs that had been in Stockpile Services to a new account, Nuclear Material Commodities, discussed below. The FY2015-enacted amount for Stockpile Services comparable to the FY2016 budget structure (i.e., minus programs transferred to Nuclear Material Commodities) was $762.4 million. For FY2016, H.R. 2028 , as passed by the House, provided $932.1 million for Stockpile Services. The Senate Appropriations Committee recommended $858.0 million for that program. The committee supported a higher rate of subcritical experiments, which study how plutonium—in configurations that cannot go critical, hence "subcritical"—behaves under pressures generated by a conventional explosion. These experiments, the committee said, "provide the validation data for weapons simulation codes and enhance the ability to predict the behavior of aging weapons." The committee, noting that NNSA conducts one such experiment every 18 months, directed NNSA to plan for two per year. The omnibus appropriations bill provides $938.6 million for Stockpile Services. This program, new for FY2016, "consolidates funding for key material and production capabilities for plutonium, uranium, tritium, and enriched uranium for tritium production." The latter capability is Domestic Uranium Enrichment (DUE). These capabilities were previously a part of Stockpile Services. The FY2016 request was $415.0 million; the comparable FY2015 amount was $376.7 million. For FY2016, the House Appropriations Committee recommended $589.2 million and stated, "The recommendation further expands the request to specify funds for the management of nuclear materials to other materials of strategic significance by including funding requested for Material Recycling and Recovery, Storage, Nuclear Materials Integration, and other planning efforts within Strategic Materials Sustainment." It termed the enlarged category "Strategic Materials." The Senate Appropriations Committee recommended $344.5 million. The omnibus appropriations bill, using the House budget structure and the title "Strategic Materials," provides $612.3 million for this program area. This includes $250 million for Strategic Materials Sustainrnent, which, as the House had directed, consolidates funding for activities needed to manage NNSA's inventory of strategic materials. The FY2016 request included $100.0 million within Nuclear Materials Commodities for DUE. The House Appropriations Committee recommended $50.0 million for DUE and provided reprogramming authority for another $50.0 million. The committee awaited a study on tritium and low enriched uranium requirements and a preferred approach to meeting them, but saw little value to operating a centrifuge demonstration project indefinitely if DOE "cannot identify a near-term need to construct a national security train of centrifuges." H.R. 2028 , as passed by the House, did not amend these provisions and provided the amount recommended by the House Appropriations Committee. The Senate Appropriations Committee also recommended $50.0 million for DUE, with reprogramming authority for another $50.0 million. "The Committee directs that the Department of Energy shall use these funds only to maintain existing centrifuges and facilities associated with domestic enrichment capabilities and safeguard intellectual property rights." The omnibus appropriations bill accepted this funding level. RDT&E includes five programs. According to NNSA, they "[focus] on RDT&E efforts to develop and maintain critical capabilities, tools, and processes needed to support science based stockpile stewardship, refurbishment, and continued certification of the stockpile over the long-term in the absence of underground nuclear testing." Many of these programs have significance for policy decisions. For example, the Science Program's goals include improving the ability to assess warhead performance without nuclear testing, improving readiness to conduct nuclear tests should the need arise, and maintaining the scientific infrastructure of the nuclear weapons laboratories. Other programs fund large experimental facilities, such as the National Ignition Facility at Lawrence Livermore National Laboratory. RDT&E Programs was formerly named Campaigns. The FY2016 request was $1,776.5 million. H.R. 2028 , as passed by the House, provided $1,774.2 million. The Senate Appropriations Committee recommended $1,766.3 million. The omnibus appropriations bill provides $1,818.5 million. The programs are: This program "provides the expertise and confidence needed to maintain the nuclear stockpile," including identification of "future risks to the performance of the stockpile." FY2015-enacted funding was $412.1 million, of which P.L. 113-235 designated $21.0 million for designing new radiography capabilities at U1a, the part of the Nevada National Security Site where certain weapons-related experiments are conducted. The FY2016 request was $389.6 million; the House Appropriations Committee recommended $412.9 million, which would, among other things, provide funds "to better understand the properties of plutonium and to advance concepts for pit reuse" and "to enhance U.S. capabilities to assess foreign state weapons activities." The recommendation did not include funding for new radiography capabilities: "The NNSA did not provide a project data sheet with a multi-year funding plan as required by the Committee." H.R. 2028 , as passed by the House, provided the amount recommended by the House Appropriations Committee. The Senate Appropriations Committee recommended the requested amount. The omnibus appropriations bill provided $423 million for the science program, which includes $45.7 million for advanced radiography capabilities. The bill directs NNSA to provide an "estimate of the cost to develop new radiography capabilities at U1a and detail the costs of any Major Items of Equipment in its budget request." This program "matur[es] advanced technologies to improve weapon surety; provid[es] the tools for qualifying weapon components and certifying weapons without underground testing; and support[s] annual stockpile assessments." FY2015-enacted funding was $136.0 million; the FY2016 request was $131.4 million. The omnibus appropriations bill provided the requested funding for this program area. This program is developing tools to create extremely high temperatures and pressures in the laboratory—approaching those of a nuclear explosion—to support weapons-related research and attract scientific talent to the Stockpile Stewardship Program. The centerpiece of this campaign is the National Ignition Facility (NIF), the world's largest laser. NIF is intended to produce "ignition," the point at which a nuclear fusion reaction generates more energy than is used by the lasers to create the reaction. While achieving ignition has been delayed, NIF has nonetheless proven to be of value to stockpile stewardship at energy levels that do not reach ignition. NIF was controversial in Congress for many years, but controversy waned as the program progressed. NIF was dedicated in May 2009. The FY2015-enacted amount was $512.9 million; the Explanatory Statement to P.L. 113-235 directed NNSA to provide "an assessment on whether the likelihood of achieving ignition at the NIF has increased since December 2012 and the level of confidence that the NNSA will achieve ignition at the NIF by December 2015." The FY2016 request was $502.5 million; H.R. 2028 , as passed by the House, provided $511.1 million. The Senate Appropriations Committee recommended $511.1 million. It supported "ongoing efforts at NIF to operate more efficiently and expand the base of academic users in order to help attract top talent to stockpile stewardship." The omnibus appropriations bill provides $511.1 million for this program area and specifies, that within this total, $329 million will be used for NIF. This program develops computation-based models of nuclear weapons that integrate data from other campaigns, past test data, laboratory experiments, etc., to create what NNSA calls "the computational surrogate for nuclear testing to determine weapon behavior." ASC also supports nonproliferation, emergency response, and nuclear forensics. Some analysts doubt that simulation can be relied upon to provide the confidence needed to certify the safety, security, and reliability of warheads, and advocate a return to testing. The FY2015-enacted amount was $598.0 million, of which $50.0 million was for the exascale initiative, which is intended to further increase computing capability. The FY2016 request was $623.0 million; H.R. 2028 , as passed by the House, provided $605.0 million. The Senate Appropriations Committee recommended the requested amount. Within that amount, it recommended at least $64.0 million, the amount in the NNSA budget request, for activities associated with the exascale initiative. Exascale computers would perform at least 1 billion (10 18 ) calculations per second, much faster than current supercomputers. The omnibus appropriations bill approved the requested amount. Through FY2015, this program was the Readiness Campaign. It had several subprograms, but the entire FY2015 request was for the Nonnuclear Readiness subprogram, which "develops capabilities to manufacture components used for Directed Stockpile Work." The House Appropriations Committee recommended no funds for this campaign. Instead, it recommended establishing an Advanced Manufacturing Campaign "to develop, demonstrate, and utilize advanced technologies that are needed to enhance the NNSA's secure manufacturing capabilities and ensure timely support for the production of nuclear weapons and other critical national security components." The Senate Appropriations Committee recommended $70.0 million. P.L. 113-235 provided no funds for the Readiness Campaign; instead, it provided $107.2 million (the enacted amount) for Advanced Manufacturing Development, the subprograms of which are additive manufacturing, component manufacturing development, and process technology development. The Explanatory Statement directed NNSA to provide "a ten-year strategic plan for using additive manufacturing to reduce costs at NNSA production facilities while meeting stringent qualification requirements." The FY2016 request, $130.1 million, was for Advanced Manufacturing Development, with the three subprograms listed in P.L. 113-235 . The request included no funds for additive manufacturing (AM). The House Appropriations Committee recommended $113.8 million, including $16.0 million for AM. The committee expressed concern that the budget request, by applying development of AM capabilities "holistically across the enterprise ... reduces transparency into how well and how fast the NNSA is developing these advanced production technologies." H.R. 2028 , as passed by the House, provided the amount recommended by the House Appropriations Committee. The Senate Appropriations Committee recommended $111.2 million, with no funds for AM. The omnibus appropriations bill provides $130 million, the requested amount. This program used to fund infrastructure and operations at nuclear weapons complex sites. However, beginning in FY2016, its main funding elements were material recycle and recovery, recapitalization of facilities, and construction of facilities. The latter included two controversial and expensive projects, the Uranium Processing Facility (UPF) at the Y-12 National Security Complex (TN) and the Chemistry and Metallurgy Research Replacement (CMRR) Project, which deals with plutonium, at Los Alamos National Laboratory (NM). Both have been significantly revised over the past several years due to cost growth and schedule slippage. The FY2016 budget structure transferred certain functions from RTBF to Infrastructure and Safety, described below. Of the FY2015 appropriation, the amount comparable to FY2016 RTBF was $688.0 million; the Explanatory Statement directed NNSA to provide "a ten-year strategic plan that would reduce the deferred maintenance backlog below fiscal year 2014 baseline levels and dispose of unneeded facilities." The FY2016 request was $1,054.5 million. The House Appropriations Committee recommended consolidating funding for RTBF, Infrastructure and Safety, and Site Stewardship into a new category, Infrastructure and Operations (I&O), for which it recommended $2,228.2 million. Its goal was to eliminate duplication. It "does not support changing the budget structure each year to conform to internal organizational changes." I&O, as recommended by the committee, included, among other things, Operation of Facilities, Maintenance and Repair of Facilities, and Recapitalization. H.R. 2028 , as passed by the House, provided the amount recommended by the House Appropriations Committee and did not amend the committee's recommendation on consolidation. The House Appropriations Committee expressed its concern about requests for construction funding. The Committee is concerned that there is little accountability for advancing construction projects at the early design stages and that advance funds are being requested to initiate new construction without providing the cost and schedule projections for which the NNSA is accountable. Without this information, the Committee cannot determine whether the projects requested are affordable and are being managed appropriately so that it may approve new start authority. … The Committee will consider a request to initiate a new construction start when the Department is prepared to provide an accurate multi-year cost and schedule estimate with its budget request. As part of construction funding, the committee recommended the amounts requested for UPF and CMRR, $$430.0 million and $155.6 million, respectively. H.R. 2028 , as passed by the House, provided the amounts recommended by the committee. The Senate Appropriations Committee recommended $1,021.1 billion for RTBF. It recommended the requested amounts for UPF and CMRR, in the latter case "to maximize the use of the newly constructed Radiological Laboratory Utility Office Building [RLUOB] and reuse laboratory space in PF–4 to transition plutonium capabilities out of the aging Chemistry and Metallurgy Research [CMR] building by 2019." As was noted above, the omnibus appropriations bill adopts the budget structure outlined in the House version of the bill. Within the Infrastructure and Operations budget area, it provides $430 million for UPF and $155.6 million for CMRR. It also directs NNSA to submit the results of the Department's Independent Cost Review of the UPF project and a multiyear funding profile with the FY2017 budget request. Infrastructure and Safety (I&S), a new program in the FY2016 budget request, included parts of RTBF and another program, Site Stewardship, described below. "The mission is to maintain, operate, and modernize" NNSA's infrastructure. It has five elements: Operations of Facilities, Safety Operations, Maintenance, Recapitalization, and Line Item Construction. According to NNSA, "Together these elements provide a comprehensive approach to arresting the declining state of NNSA infrastructure." The FY2016 request was $1,466.1 million; the comparable FY2015-enacted funding was $1,386.7 million. While NNSA states that "construction investments will replace obsolete and unreliable facilities and infrastructure," NNSA requested the bulk of FY2016 construction funds, $660.2 million, under RTBF, compared with $42.9 million for I&S construction. The House Appropriations Committee recommended $660.1 million for the funds requested under RTBF construction. As noted in the previous paragraph, the committee recommended consolidating I&S into I&O. H.R. 2028 , as passed by the House, provided the amount recommended by the committee and did not amend the consolidation provision. The Senate Appropriations Committee recommended the requested amount for I&S. The omnibus appropriations bill followed the House lead and appropriated $2,279.1 million for Infrastructure and Operations. Weapons Activities has several smaller programs, including the following: This program provides for safe and secure transport of nuclear weapons, components, and materials. It includes special vehicles for this purpose, communications and other supporting infrastructure, and threat response. The FY2015 comparable enacted amount was $219.0 million; the FY2016 request was $251.6 million. The House Appropriations Committee recommended $232.0 million, and stated, "The budget request included a significant ramp up in the size of the federal workforce, but the NNSA has not provided any information to justify such an increase and reductions in the planned transport of mixed oxide feedstock will reduce requirements." H.R. 2028 , as passed by the House, provided the amount recommended by the committee. The Senate Appropriations Committee recommended $219.0 million. Like the House, it expressed concern over justification: "The budget request proposes a nearly 15% increase in funding for STA [Secure Transportation Asset], but does not provide adequate justification for the increase." The omnibus appropriations bill provides $237.1 million for this program area. This program "responds to and mitigates nuclear and radiological incidents worldwide and has a lead role in defending the Nation from the threat of nuclear terrorism." For FY2014, NNSA proposed transferring this program to Defense Nuclear Nonproliferation "to align all NNSA funding for reducing global nuclear dangers in one appropriation." Congress rejected this approach; P.L. 113-76 provided $228.2 million and retained the program in Weapons Activities. For FY2015, NNSA requested $173.4 million, and the House provided $202.9 million. Among other things, the bill provided $25.0 million for certain emergency response-related R&D that had been traditionally funded in Weapons Activities; the Administration requested no funds in the Nuclear Counterterrorism Incident Response Program for this R&D. The Senate Appropriations Committee draft recommended providing the requested amount. P.L. 113-235 provided $177.9 million, of which $142.6 million "is for emergency response activities to fully support the ninth stabilization city"—an additional city that would receive counterterrorism training and equipment. The Administration requested no funds for this program for FY2016 in Weapons Activities. Instead, NNSA proposed to "merge the Nuclear Counterterrorism Incident Response (NCTIR) and the Counterterrorism and Counterproliferation (CTCP) Programs to eliminate confusion about NNSA nuclear counterterrorism programs and activities, change the NCTIR name to Nuclear Counterterrorism and Incident Response Program, and move to the Defense Nuclear Nonproliferation (DNN) appropriation." H.R. 2028 , as passed by the House, provided no funds for FY2016 for this program under Weapons Activities. In contrast, the Senate Appropriations Committee provided $234.4 million for NCTIR under Weapons Activities, the amount NNSA had requested for it in the DNN account. The omnibus appropriations bill followed the budget structure of the request and funded this program under the DNN account. This program "sustain[s] and exercise[s] the U.S. Government's ability to understand nuclear terrorism and to counter nuclear device proliferation." It conducts "national and international outreach to strengthen nuclear counterterrorism capabilities" and is "a key nexus to coordinate and integrate other nuclear technical counterterrorism efforts existing within the Federal government." FY2015 was the first year for which NNSA requested funding, $76.9 million, for this program in Weapons Activities. The House Appropriations Committee recommended no funding for this program under Weapons Activities, maintaining that it and similar programs should be located in DNN instead of Weapons Activities. The Senate Appropriations Committee draft recommended providing $70.0 million. P.L. 113-235 provided $46.1 million. As just noted, NNSA, in its FY2016 request, proposed moving this and another program to DNN. H.R. 2028 , as passed by the House, provided no funds for FY2016 for this program under Weapons Activities. Similarly, the Senate Appropriations Committee recommended no funds for it under Weapons Activities. This program has two subprograms. Nuclear Materials Integration funds "stabilization, consolidation, packaging and disposition of nuclear materials," and maintains a system to track and account for nuclear materials at DOE sites and sites licensed by the Nuclear Regulatory Commission. The Minority Serving Institution Partnership "funds research and education enhancements at under-represented colleges and universities in order to increase the number of people with the needed skills and talent to support NNSA's enduring technical workforce." For FY2016, NNSA proposed to move part of this program to Infrastructure and Safety. The FY2016 request for the remaining Site Stewardship program was $36.6 million; the comparable amount for FY2015 was $27.8 million. The House Appropriations Committee recommended no funds for this program under Site Stewardship; instead, as noted, it recommended including this program in Infrastructure and Operations. H.R. 2028 , as passed by the House, provided no funds for this program under Site Stewardship and did not amend the committee's recommendation on consolidation. The Senate Appropriations Committee recommended $36.6 million, the amount requested, for Site Stewardship. The omnibus appropriations bill followed the House budget structure and funded this program under the I&O account. This program provides operations, maintenance, and construction funds for protective forces, physical security systems, personnel security, and the like. Its "core mission is to develop and implement security programs, including protection, control and accountability of materials, as well as the physical security of all NNSA facilities." The FY2016 request was $632.9 million; the comparable amount for FY2015 was $636.1 million. The House Appropriations Committee recommended $682.9 million, with the funding above the request intended "to replace security cameras and meet shortfalls anticipated in funding for protective forces at Y-12 and other NNSA sites." The committee also recommended $35.0 million to start a Security Improvements Program "that is intended to address the backlog of security projects that must be performed over the next several years. The NNSA has identified over $2,000,000,000 in security infrastructure upgrades that are needed, but the NNSA has not adequately prioritized these upgrades in its budget request." It also expressed concern that NNSA terminated a Security Improvements Program at Y-12 before completing the planned work. H.R. 2028 , as passed by the House, provided the amounts that the committee recommended. The Senate Appropriations Committee recommended $657.9 million, with the increase "to meet shortfalls anticipated for the protective forces at Y–12 and other NNSA sites, and the need to replace vital security infrastructure." Further, "The Committee is concerned that the NNSA terminated the Y–12 Security Improvements Project without completing the full scope of work planned." The omnibus appropriations bill provides $682.9 million for Defense Nuclear Security and directed that $30 million should be used for the Security Improvements Program that will address the backlog of security projects, as directed in the House report. This program "is focused on the development of a suite of IT initiatives that provide a state-of-the-art technology infrastructure for enabling the nuclear security mission and future nuclear security enterprise shared services." Elements include cybersecurity, enterprise secure computing, and Federal Unclassified Information Technology. The latter will provide "commodity computing infrastructure" to support a "shift from a traditional, costly desktop support model to a cloud-provisioned virtualized desktop-based solution." The FY2016 request was $157.6 million; the comparable amount for FY2015 was $179.6 million. The omnibus appropriations bill provides the requested amount. For many decades, the University of California (UC) operated Los Alamos and Lawrence Livermore National Laboratories. Laboratory employees, as UC employees, could participate in the UC pension plan. When the operation of the two labs was privatized, the contracts between DOE and the new laboratory operators included provisions that mirrored the pension that lab staff who were UC employees when the labs were privatized would have received had the labs remained with UC. These pensions were larger than those provided to employees hired after privatization. To make up the difference, NNSA paid into the pension plan for the UC employees. For Weapons Activities, the FY2016 request was $283.9 million; the comparable enacted amount for FY2015 was $307.1 million. For FY2016, H.R. 2028 , as passed by the House, provided the requested amount. (NNSA requested an additional amount for Legacy Contractor Pensions under Defense Nuclear Nonproliferation.) The Senate Appropriations Committee recommended the requested amount, and the omnibus appropriations bill provided this amount. NNSA projects that requests for this program will decline, falling to $87.4 million in FY2019 and FY2020.
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The annual Energy and Water Development appropriations bill provides funding for civil works projects of the Army Corps of Engineers, the Department of the Interior's Bureau of Reclamation, the Department of Energy (DOE), and several independent agencies. The DOE budget includes funding for the National Nuclear Security Administration (NNSA), a separately organized agency within DOE. NNSA operates three programs: Defense Nuclear Nonproliferation, which secures nuclear materials worldwide, conducts R&D into nonproliferation and verification, and operates the Nuclear Counterterrorism and Incident Response Program; Naval Reactors, which "is responsible for all U.S. Navy nuclear propulsion work"; and Weapons Activities. The latter is the subject of this report. It operates the Stockpile Stewardship Program, which maintains the U.S. nuclear gravity bombs and missile warheads and has science and infrastructure programs that support that mission. (The Department of Defense [DOD] operates the bombers and missiles that would deliver nuclear weapons; it is funded in the Department of Defense appropriations bill.) The Armed Services Committees authorize funds for DOD and NNSA programs. The FY2016 request proposed moving counterterrorism programs from Weapons Activities to Defense Nuclear Nonproliferation. On a basis comparable to the FY2016 budget structure, the FY2015 Consolidated and Further Continuing Appropriations Act (H.R. 83/P.L. 113-235) provided $8,007.7 million for Weapons Activities. The FY2016 request was $8,846.9 million, a 10.5% increase over FY2015. The House Appropriations Committee recommended providing $8,713.0 million for FY2016. The House passed H.R. 2028, Energy and Water Development and Related Agencies Appropriations Act, 2016, by a vote of 240-177 on May 1. The bill as passed by the House made no changes to the Weapons Activities section of the committee bill. The Senate Appropriations Committee reported the bill on May 21. It recommended providing $8,882.4 million. Congress provided 8,846.9 million for Weapons Activities in the omnibus appropriations bill for FY2016 (H.R. 2029). Weapons Activities has four main programs, each with a request of over $1 billion for FY2016, as follows. FY2015-enacted amounts included below are comparable to the FY2016 budget structure. Directed Stockpile Work works directly on nuclear weapons. It includes life extension programs, maintenance, and others. The FY2015-enacted amount was $2,797.2 million; the FY2016 request was $3,187.3 million, a 13.9% increase. H.R. 2028, as passed by the House, provided $3,354.3 million. The Senate Appropriations Committee recommended $3,039.5 million. The omnibus appropriations bill provided $3,387.8 million. Research, Development, Test and Evaluation Programs, which advances the science, engineering, computation, and manufacturing that support Directed Stockpile Work. The FY2015-enacted amount was $1,766.2 million; the FY2016 request was $1,776.6 million, a 0.6% increase. H.R. 2028, as passed by the House, provided $1,774.2 million. The Senate Appropriations Committee recommended $1,766.3 million. The omnibus appropriations bill provided $1,818.5 million. Infrastructure and Safety (I&S), a budget category that NNSA proposed in its FY2016 request, includes operations of facilities, recapitalization, maintenance, safety operations, and other programs. The FY2015-enacted comparable amount was $1,386.7 million; the FY2016 request was $1,466.1 million, a 5.7% increase. The House Appropriations Committee recommended consolidating I&S into Infrastructure and Operations. The Senate Appropriations Committee recommended $1,466.1 million for I&S. The omnibus appropriations bill accepted the House budget structure and consolidated I&S into Infrastructure and Operations, as described next. Readiness in Technical Base and Facilities (RTBF) funds material recycle and recovery, recapitalization of facilities, and construction of facilities. Prior to FY2016, it also funded operations of the nuclear weapons complex. The FY2015-enacted amount was $2,033.4 million; the FY2016 request was $1,054.5 million, with the decrease due to transferring funds to I&S. The FY2015 comparable request for RTBF was $688.0 million, so on a comparable basis FY2016 RTBF increased by 53.3%. The House Appropriations Committee recommended consolidating funding for RTBF, Infrastructure and Safety, and Site Stewardship into a new category, Infrastructure and Operations (I&O), for which it recommended $2,228.2 million. H.R. 2028, as passed by the House, accepted this budget structure. The Senate Appropriations Committee recommended keeping I&S and Site Stewardship as separately funded categories, and providing $1,021.1 million for I&O and $36.6 million for Site Stewardship. The omnibus appropriations bill accepted the consolidated funding structure, and provided $2,279.1 million for Infrastructure and Operations (I&O). Weapons Activities also includes several smaller programs, all of which are described in this report: Secure Transportation Asset, Site Stewardship, Defense Nuclear Security, Information Technology and Cybersecurity, and Legacy Contractor Pensions.
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The Congressional Review Act ("CRA," 5 U.S.C. §§801-808) requires federal agencies to submit all of their final rules to both houses of Congress and the Government Accountability Office (GAO) before they can take effect. The act also establishes a special set of expedited or "fast track" legislative procedures, primarily in the Senate, through which Congress may enact joint resolutions disapproving agencies' final rules. Although the general powers of Congress permit it to overturn agency rules by legislation, the CRA is unique in permitting the use of expedited procedures for this purpose. If a rule is disapproved through the CRA procedures, the act specifies not only that the rule "shall not take effect" (or shall not continue, if it has already taken effect), but also that the rule may not be reissued in a "substantially" similar form without subsequent statutory authorization. The CRA was initially considered a reassertion of congressional authority over rulemaking agencies, but thus far it has had little direct effect on agency rules. After enactment, a CRA joint resolution of disapproval must be presented to the President for signature or veto. Under most circumstances, it is likely that the President would veto the resolution to protect rules developed under his own administration, and it may also be difficult for Congress to muster the two-thirds vote in both houses needed to overturn the veto. Of the nearly 50,000 final rules that have been submitted to Congress since the legislation was enacted in March 1996, the CRA has been used to disapprove only one rule—the Occupational Safety and Health Administration's November 2000 final rule on ergonomics. The March 2001 rejection of the ergonomics rule was the result of a specific set of circumstances created by a transition in party control of the presidency. The majority party in both houses of Congress was the same as the party of the incoming President (George W. Bush). When the new Congress convened in 2001 and adopted a resolution disapproving the rule published under the outgoing President (William J. Clinton), the incoming President did not veto the resolution. Congress may be most able to use the CRA to disapprove rules in similar, transition-related circumstances. This report addresses some of the implications of the CRA with regard to agency rulemaking in the final months of a presidential administration. It first notes the practice of increased rulemaking activity during this period, and describes how this practice has been addressed by two White House memoranda issued during the current Bush Administration. The report then briefly identifies key elements of the complex set of time periods established by the CRA—elements that define points during the disapproval process at which various actions may occur. This discussion focuses on the CRA provisions for carrying over the disapproval process into a subsequent session of Congress, and indicates how rules submitted at the end of a Congress may be affected by these provisions. Then, the report identifies the dates in previous sessions of Congress after which rules have (since the enactment of the CRA) been subject to these carryover provisions, and identifies some of the rules that may be issued in the final months of the current Bush Administration. At the conclusion of most recent presidential administrations, the volume of agency rulemaking has increased noticeably—a phenomenon that has been characterized as "midnight rulemaking." As one observer stated, putting rules into effect before the end of a presidency is "a way for an administration to have life after death," for the only way that a subsequent administration can change or eliminate the rule is by going back through the often lengthy rulemaking processes that are required by the Administrative Procedure Act (5 U.S.C. §551 et seq. ) and various other statutes and executive orders. The current Bush Administration has responded to this situation by delaying and ultimately reducing the volume of effective rules issued in the last months of the Clinton Administration, and by protecting rules issued in its own last months from the possibility of similarly being rendered ineffective. During the final months of the Clinton Administration, federal agencies issued hundreds of final rules—a number of which were considered "major" under the CRA. In response to this action, on January 20, 2001, the Chief of Staff and Assistant to the new President, Andrew H. Card, Jr., sent a memorandum to the heads of all executive departments and agencies generally directing them to (1) not send proposed or final regulations to the Office of the Federal Register (OFR), (2) withdraw regulations that had been sent to the OFR but not published in the Federal Register , and (3) postpone for 60 days the effective date of regulations that had been published in the Federal Register but had not yet taken effect. The memorandum cited the desire to "ensure that the President's appointees have the opportunity to review any new or pending regulations." In 2002, GAO reported that 90 final rules had their effective dates delayed as a result of the Card memorandum, and 15 rules still had not taken effect one year after the memorandum was issued. The Bush Administration has also taken action in anticipation of possible "midnight rules" at the end of the current President's term. On May 9, 2008, White House Chief of Staff Joshua B. Bolten issued a memorandum to the heads of executive departments and agencies stating that the Administration needed to "resist the historical tendency of administrations to increase regulatory activity in their final months." Therefore, Bolten said that, except in "extraordinary circumstances, regulations to be finalized in this Administration should be proposed no later than June 1, 2008, and final regulations should be issued no later than November 1, 2008." He also said that the Administrator of the Office of Information and Regulatory Affairs (OIRA) within the Office of Management and Budget would "coordinate an effort to complete Administration priorities in this final year," and the OIRA Administrator would "report on a regular basis regarding agency compliance with this memorandum." The CRA is a complex statute, and among the act's chief complexities is its use of at least four different ways to measure the passage of time, each for different purposes: calendar days ; days of continuous session , which excludes all days when either the House of Representatives or the Senate is adjourned for more than three days; session days , which include only calendar days on which a chamber is in session; and legislative days , which end each time a chamber adjourns and begin each time it convenes after an adjournment. The following sections describe how the CRA uses each of these measures of time, focusing especially on the way in which they affect Congress's ability to use the CRA disapproval process for rules submitted toward the end of a session of Congress, and especially toward the end of a presidential term. Section 801(a)(3) of the CRA generally requires that the effective dates of all "major" rules be delayed for 60 calendar days after the date they are provided to Congress or published in the Federal Register , whichever is later. This delay in the effective dates helps to ensure that Congress has an opportunity to review and, if necessary, disapprove these major rules before they take effect. All non-major rules are allowed to take effect as stipulated in the rules themselves. Nevertheless, even if a rule has already taken effect, the CRA can still be used to disapprove it if time remains in the periods established for congressional proceedings. Section 802(a) of the CRA states that a joint resolution of disapproval may be introduced as soon as a rule is received by Congress, but the resolution must be introduced no later than 60 days after that date, "excluding days either House of Congress is adjourned for more than 3 days during a session of Congress." This 60 days of continuous session defines the "initiation period" for CRA resolutions of disapproval. For example, if the House of Representatives and the Senate adjourn on a Friday and both reconvene on the following Monday or Tuesday, the 60-day "clock" for the introduction of resolutions of disapproval continues to run throughout the weekend because neither house was out of session for more than three days. On the other hand, if the House is in recess for a month but the Senate continues in session, then the 60-day "clock" for this "initiation period" stops until the House comes back into session. Once introduced, resolutions of disapproval are referred to the committees of jurisdiction in each house of Congress. The House of Representatives would consider the resolution under its general procedures, very likely as prescribed by a special rule reported from the Committee on Rules. In the Senate, however, if the committee has not reported a disapproval resolution within 20 calendar days after the regulation has been submitted and published, then the committee may be discharged of its responsibilities and the resolution placed on the Senate calendar if 30 Senators submit a petition to do so. Once the Senate committee has reported or been discharged, the CRA makes consideration of the measure privileged, prohibits various other dilatory actions, disallows amendment, and limits floor debate to 10 hours. Section 802(e) of the CRA states that the Senate has 60 session days from the date a rule is submitted to Congress or published in the Federal Register to use these expedited procedures and act on a joint resolution of disapproval. This "action period" for the Senate includes only the calendar days on which the Senate is actually in session, in contrast to the "days of continuous session" for the initiation period, which includes all days other than those when either house is in adjournment lasting more than three days. Because of this difference in which days are counted, the "action period" will normally last longer than the "initiation period." Section 801(d) of the CRA provides that, if Congress adjourns its annual session sine die less than 60 legislative days in the House of Representatives or 60 session days in the Senate after a rule is submitted to it, then the rule is subject, during the following session of Congress, to (1) a new initiation period in both chambers and (2) a new action period in the Senate. The purpose of this provision is to ensure that both houses of Congress have sufficient time to consider disapproving rules submitted during this end-of-session "carryover period." In any given year, the carryover period begins after the 60 th legislative day in the House or session day in the Senate before the sine die adjournment, whichever date is earlier . The renewal of the CRA process in the following session occurs even if no resolution to disapprove the rule had been introduced during the session when the rule was submitted. For purposes of this new initiation period and Senate action period, a rule originally submitted during the carryover period of the previous session is treated as if it had published in the Federal Register on the 15 th legislative day (House) or session day (Senate) after Congress reconvenes for the next session. In each chamber, resolutions of disapproval may be introduced at any point in the 60 days of continuous session of Congress that follow this date, and the Senate may act on the resolution during the 60 days of session that follow the same date. In light of the CRA's requirement that major rules be delayed for 60 calendar days, the May 2008 Bolten memorandum's requirement that final rules be published in the Federal Register by November 1, 2008, indicates that these rules will have taken effect before the 111 th Congress begins and the next President takes office in January 2009. As a result, the Bolten memorandum may also have the effect of preventing the next presidential administration from doing what was done via the Card memorandum—directing federal agencies to extend the effective dates of any rules that had been published during the Bush Administration but had not taken effect (since the rules would have already taken effect by the time the next President takes office). However, many rules submitted before the Bolten memorandum deadline will remain subject to congressional disapproval in the 111 th Congress because they will not have been submitted before the starting point of the carryover period, and because the CRA permits Congress to enact resolutions of disapproval regarding rules that have already taken effect. Although the exact starting point for the CRA carryover period in the second session of the 110 th Congress can be determined only after sine die adjournment has taken place, the likely date or range of dates may be illuminated by examining congressional activity in prior years. To identify these earlier starting points, CRS examined the calendars of the House and the Senate for all sessions of Congress during the previous 20 years (i.e., from the 100 th Congress, which began in 1987, through the first session of the 110 th Congress in 2007). Counting backwards from the end of each session, we determined the date after which there were either less than 60 days of session in the Senate or less than 60 legislative days in the House. Although some of these sessions of Congress predate the enactment of the CRA, the starting points for those sessions were included to better understand the trends in these dates. Table 1 below presents these data. For each session of Congress, the earlier of the House or Senate starting point dates is shown in the table in bold face . Since the CRA was enacted in March 1996, any rule submitted after the specified date in that session was available for disapproval under the CRA process during the following session of Congress. As the table indicates, the starting points for the CRA carryover periods varied between the two houses of Congress in each session, and across the sessions within each chamber. The data also show the following: In all but two sessions of Congress during this period (i.e., the first and second sessions of the 101 st Congress), the starting point date for the House of Representatives occurred earlier than the starting point date for the Senate. In every session since the CRA was enacted in March 1996, the House starting point has determined the relevant date for CRA carryovers to the next session of Congress. Across all of these sessions of Congress, the earliest starting point for the carryover period was May 12 (second session of the 108 th Congress), and the latest date was September 9 (first session, 100 th Congress). However, it has been unusual for the starting point to be before June or after July. The median relevant starting point (i.e., half occurring before, half after) for all of these sessions of Congress was June 25. The starting points for the CRA carryover periods were almost always earlier during the second sessions of Congress (i.e., during election years) than the starting points in the first sessions. The median starting point during all second sessions was June 9; the median during first sessions was July 19. This difference in median starting points is explained by the fact that both houses often adjourn or recess just prior to and/or after congressional elections. Since the CRA was enacted in March 1996, the starting points for the carryover periods during second sessions of Congress have been even earlier than for the full period, ranging from May 12 to June 23, with the median starting point being June 7. Any rule that was submitted to Congress after the relevant starting point date in any session since the CRA was enacted in March 1996 would not have had 60 days of session in both houses, and Congress' ability to introduce and act on CRA resolutions of disapproval regarding the rule carried over to the next session of Congress. A new initiation period and a new action period for the rule began on the 15 th session (Senate) or legislative (House) day of that new session of Congress. Whether the patterns discussed above will hold true in the second session of the 110 th Congress is currently unclear. The targeted adjournment date in the House of Representatives is September 26, 2008, but no targeted adjournment has been set in the Senate. It is possible that the House and the Senate could have so many days in session late in the year that the starting point for the carryover period (determining which rules would be eligible for new CRA initiation and action periods in the 111 th Congress) would fall later than any of the above dates. However, doing so would require both houses of Congress to be in session for more days at the end of the session than has occurred during the past 20 years. Another way to understand the significance of the starting point dates for CRA carryover periods is to identify some of the rules that may be issued late in the second session of the 110 th Congress (and that therefore may be subject to disapproval during the first session of the 111 th Congress). According to press accounts and other sources, federal agencies are reportedly planning to make a number of controversial proposed rules final by the end of calendar year 2008, including: an Environmental Protection Agency (EPA) revision of the definition of "solid waste" that, if consistent with the October 2003 proposed rule, would exclude certain types of sludge and byproducts (referred to in the proposed rule as "hazardous secondary waste") from regulation under the Resource Conservation and Recovery Act. a Department of Transportation (DOT) rule updating existing standards for roof-crush resistance in passenger vehicles. Several Members of Congress have criticized the August 2005 proposed rule, and after a June 4, 2008, Senate oversight hearing and a bipartisan letter from several Senators, DOT asked Congress to extend the statutory deadline for the issuance of the final rule until October 2008. an EPA "new source review" rule that, if made final, would alter current requirements for when upgrades at older power plants would require the installation of modern anti-pollution equipment. EPA said that the change would balance environmental protection with the "economic need of sources to use existing physical and operating capacity." However, environmental groups contend that the change would weaken existing protections and is counter to a recent decision of the Supreme Court related to this issue. an EPA rule that is expected to change how pollution levels are measured under certain parts of the Clean Air Act, and that some contend will change emissions standards for industrial facilities operating near national parks. a National Park Service rule that, if consistent with the April 2008 proposal, would change the agency's current policy and permit state laws to determine whether concealed firearms could be carried in national parks. a Department of Justice (DOJ) proposed rule that would "clarify and update" the policies governing criminal intelligence systems that receive federal funding, but that some contend would make it easier for state and local police to collect, share, and retain sensitive information about Americans, even when no underlying crime is suspected. a National Highway Traffic Safety Administration rule on how automakers are to meet stricter fuel economy standards for cars and light trucks pursuant to the Energy Independence and Security Act of 2007, which requires the agency to raise fuel economy standards to a fleet wide average of at least 35 miles per gallon by 2020. a Food and Drug Administration (FDA) rule that, if consistent with the proposal, would prohibit pharmaceutical companies and manufacturers of medical devices from changing the labeling of an approved drug, biologic, or medical device unless there is "evidence of a causal association" between the product and a safety concern. Several committee and subcommittee chairmen in the House and Senate have written to FDA expressing concern that this standard, if made final, would "inevitably result in fewer company-initiated warnings." an Employment Standards Administration (ESA) rule that, if made final, would change the implementation of the Family and Medical Leave Act of 1993. ESA and others defended the rule at an April 2008 congressional hearing, while other participants in the hearing (including the chairwoman of the subcommittee) said it would make it more difficult for workers to exercise their rights under the act. The proposed rule is expected to be made final in November 2008. a Department of the Interior (DOI) rule that, in the words of the proposal, requires that surface coal mining operations "minimize the creation of excess spoil and the adverse environmental impacts of fills," but that some observers have said would allow deposits of waste mountaintop material within 100 feet of certain streams. a proposed amendment to the Federal Acquisition Regulation to require certain contractors and subcontractors to use the E-Verify system to confirm that certain of their employees are eligible to work in the United States, but which the U.S. Chamber of Commerce and others said contravenes the intent of Congress and raises numerous practical difficulties. a Housing and Urban Development (HUD) rule that would amend disclosure regulations under the Real Estate Settlement and Procedures Act (RESPA), and that some Members of Congress have requested that HUD withdraw. a Department of Health and Human Services proposed rule that would protect medical providers' right to choose whether they would help perform abortions and other medical procedures, but that some have said could affect the ability of women to obtain certain forms of contraception and other health services. a Department of Labor proposed rule that would change the way that occupational health risk assessments are conducted within the department. Legislation has been introduced in the 110 th Congress ( H.R. 6660 ) that would prohibit the issuance or enforcement of this rule. a DOI proposed rule that would, among other things, give federal agencies greater responsibility in determining when and how their actions may affect species under the Endangered Species Act. Several Members of Congress have expressed concerns about the draft rule, and congressional hearings are expected. The foregoing information suggests the following observations: Federal departments and agencies are likely to issue a number of significant final rules during the last months of the current Bush Administration, as has been done at the conclusion of most recent presidential administrations. Some Members of Congress have already expressed concerns about several of those Bush Administration "midnight" rules, should they be issued. All of the final rules that are submitted to Congress during the second session of the 110 th Congress with less than 60 session days left in the Senate or less than 60 legislative days left in the House will be automatically be carried over to the 111 th Congress. Starting on the 15 th legislative day (House) or session day (Senate) of the new session, each rule will have a new CRA initiation period (60 days of continuous session of Congress) and a new action period in the Senate (60 days of session) for resolutions of disapproval. House and Senate calendars from previous sessions of Congress, particularly sessions that occurred during election years (second sessions), suggest that any final rule submitted to Congress after June 2008 may be carried over to the first session of the 111 th Congress, and may be subject to a resolution of disapproval during that session. However, the starting point for the carryover period could slip to late September or early October if an unprecedented level of congressional activity occurs late the session. Expedited procedures in the Senate and special rules in the House can help ensure that such resolutions are acted upon in each chamber. However, the enactment of any resolution of disapproval will still depend heavily on the action of the new President. If the resolution of disapproval is vetoed, it will require a two-thirds vote in both houses of Congress for the targeted rule to be rejected. The memorandum issued by White House Chief of Staff Bolten directing agencies to issue most final rules by November 1, 2008, would, if fully implemented, ensure that most of the rules—even those considered "major" under the CRA and whose effective dates must be delayed for 60 days—would take effect before the 111 th Congress begins and the next President takes office in January 2009. As noted earlier in this report, the Bolten memorandum may also have the effect of preventing the next presidential administration from doing what was done via the Card memorandum—directing federal agencies to extend the effective dates of any rules that had been published during the Bush Administration but had not taken effect (since the rules would have already taken effect by the time the next President takes office). In addition, some believe that the memorandum may be cited as a reason why certain rules will not be issued before the end of the Bush Administration. However, as also pointed out earlier, the Bolten memorandum will have no impact on the next Congress's ability to overturn agency rules that are submitted within the last 60 legislative or session days in each house of Congress, since the CRA permits Congress to enact resolutions of disapproval regarding rules that have already taken effect. Also, once a rule is disapproved, the CRA prevents the agency from proposing a substantially similar rule without subsequent statutory authorization. Even without the CRA, though, Congress can stop rulemaking in other ways. For example, each year, Congress includes provisions in appropriations legislation prohibiting rulemaking within particular policy areas, preventing particular proposed rules from becoming final, and prohibiting or affecting the implementation or enforcement of rules. However, unlike disapprovals under the CRA, the regulatory requirements that have been put into effect are not rescinded, and the agency is not prohibited from issuing a substantially similar regulation in the future.
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The Congressional Review Act ("CRA," 5 U.S.C. §§801-808) established a special set of expedited or "fast track" legislative procedures, primarily in the Senate, through which Congress may enact joint resolutions disapproving agencies' final rules. Members of Congress have 60 "days of continuous session" to introduce a resolution of disapproval after a rule has been submitted to Congress or published in the Federal Register, and the Senate has 60 "session days" to use CRA expedited procedures. Although the CRA was considered a reassertion of congressional authority over rulemaking agencies, only one rule has been disapproved using its procedures, and that reversal was the result of a specific set of circumstances created by a transition in party control of the presidency. The CRA also indicates that if a rule is submitted to Congress less than 60 session days in the Senate or 60 legislative days in the House of Representatives before Congress adjourns a session sine die, then the rule is carried over to the next session of Congress and treated as if it had been submitted to Congress or published in the Federal Register on the 15th legislative day (House) or session day (Senate). This restart of the CRA process in a new session of Congress occurs even if no joint resolution of disapproval had been introduced regarding the rule during the preceding session of Congress. A review of the House and Senate calendars from the first session of the 100th Congress to the first session of the 110th Congress indicates that the date triggering the carryover provisions of the CRA (i.e., the date after which less than 60 legislative or session days remained in a session) has usually been determined by the House of Representatives, and that the date was almost always earlier in second sessions of Congress (during which congressional elections are held) than in first sessions. The median date after which the "carryover periods" began for all sessions during this period was June 25, and the median for all second sessions was June 9. Since the CRA was enacted in March 1996, the median starting point for these carryover periods during second sessions of Congress has been somewhat earlier—June 7. At the conclusion of most recent presidential administrations, the volume of agency rulemaking has increased noticeably. In May 2008, the White House Chief of Staff generally required federal agencies to finalize all regulations to be issued during the Bush Administration by November 1, 2008. According to press accounts and other sources, federal agencies are planning to issue a number of significant final rules by the end of 2008. If any of these "midnight rules" are submitted within the "carryover period" of the second session of the 110th Congress, then they will be subject to the carryover provisions of the CRA. This report will be updated to reflect changes in factual material or other developments.
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Under the Chicago Convention, agreed in 1944, airlines provide international air services for passengers, cargo, and mail on the basis of bilateral or multilateral air service agreements covering the countries concerned. Traditionally, air service agreements covered topics such as route selection, airline identity, capacity, pricing, provisions for charter and cargo transportation, and a number of ancillary issues. Open skies agreements were conceived as a way to stretch the framework of bilateral air service agreement to the least restrictive form by "giving the airlines of each contracting party unlimited access to operate services to and from any point in each other's territory, creating a virtually untrammeled pricing regime, and eliminating prescribed curbs on airline capacity." In addition, open skies agreements contain provisions governing commercial opportunities, safety, and security. In August 1992, the U.S. Department of Transportation (DOT) announced its "open skies" initiative, which was intended to continue the trend of liberalizing international civil aviation. As defined by DOT, "open skies" consists of the following 11 principles: open entry on all routes between the signatory countries; unrestricted capacity and frequency on all routes; the right to operate between any point in the United States and any point in other signatory countries without restriction, including service to intermediate and beyond points, and the right to transfer passengers to an unlimited number of smaller aircraft at the international gateway; flexibility in setting fares; liberal charter arrangements; liberal cargo arrangements; the ability of carriers to convert earnings into hard currency and return those earnings to their homelands promptly and without restriction; open code-sharing opportunities; the right of a carrier to perform its own ground handling in the foreign country; the ability of carriers to freely enter into commercial transactions related to their flight operations; a commitment to nondiscriminatory operation of and access to computer reservation systems. Since the open skies initiative was unveiled in 1992, the United States has reached 114 open skies agreements governing international air passenger and air freight services. These agreements typically allow any airline based in a signatory jurisdiction to offer service between the jurisdictions, and let the airlines determine their flight routes, frequencies, fares, and aircraft types according to market demand. In general, international air service agreements involve the granting of various levels of the "freedoms of the air." The foundation and framework for modern international civil aviation agreements can be traced back to the Chicago Convention, which affirmed the principle that every nation has absolute and exclusive sovereignty over its airspace. The Chicago Convention produced two ancillary accords, the International Air Services Transit Agreement ("Two Freedoms Agreement") and the International Air Transport Agreement ("Five Freedoms Agreement"). These are the "five freedoms" of air transport that are often referred to in negotiations over international air service agreements. The Two Freedoms Agreement contains provisions limited to overflight and noncommercial landing rights. These provisions are widely accepted around the world. The Five Freedoms Agreement includes the two transit rights in the Two Freedoms Agreement and three additional freedoms called "traffic rights" that permit airlines to develop deeper transnational route networks: The Third Freedom allows an air carrier to deplane traffic that was enplaned in its home country in a foreign country. The Fourth Freedom refers to the right to enplane traffic in the foreign country that is bound for the carrier's home country. The Fifth Freedom is the right to enplane traffic at one foreign point and deplane it at another foreign point as part of a continuous operation also serving the airline's home country. After the United States implemented domestic airline deregulation in the late 1970s, it began to pursue more liberal and market-based international agreements. However, some aspects of international civil aviation remain subject to U.S. laws. Current U.S. law requires that to operate as an air carrier between domestic locations in the United States, a carrier must be a "citizen of the United States." To be considered a citizen for civil aviation purposes, an entity must be owned by an individual U.S. citizen, a partnership of persons who are each U.S. citizens, or a corporation (1) whose president and at least two-thirds of whose directors and other managing officers are U.S. citizens, (2) that is under the actual control of U.S. citizens, and (3) has at least 75% of its voting stock owned or controlled by U.S. citizens. This limits foreign ownership of any U.S. airline to 25%, considerably lower than the 49% limit set by the EU. Another U.S. law contains a general prohibition against cabotage activity, excluding foreign airlines from providing domestic point-to-point air services. Since the Chicago Convention, international civil aviation rights have developed primarily through a series of bilateral agreements treated in the United States as "executive agreements" rather than as treaties, meaning they do not require the advice or consent of Congress. DOT's Office of the Assistant Secretary for Aviation and International Affairs, with assistance from the State Department, is responsible for negotiating bilateral agreements and awarding U.S. airlines the right to offer services provided for in those agreements. There are currently two debates related to open skies agreements. In both cases, several U.S. network airlines and unions representing U.S. airline workers have objected that foreign carriers are making use of rights granted under open skies agreements in ways that were not intended when those agreements were reached. The airlines have called for "fair skies." Some other U.S. air carriers, as well as groups representing airline passengers and cargo shippers, have accused advocates of "fair skies" of seeking to limit international competition. In one case, representatives of three major U.S. airlines—American Airlines, Delta Air Lines, and United Airlines—and airline labor unions allege that three carriers based in the Persian Gulf region have received subsidies and government support that contravene Article 11 of the U.S.-United Arab Emirates (UAE) open skies agreement and identical language in the U.S.-Qatar agreement. The language in question states the following: "Each Party shall allow a fair and equal opportunity for the designated airlines of both Parties to compete.... " The other case, also initiated by U.S. network airlines and labor unions, involves Norwegian Air International (NAI), which seeks to operate transatlantic flights to U.S. destinations. The opponents accuse NAI, a subsidiary of Norway-based Norwegian Air Shuttle, of registering in Ireland so that it could employ a business model that purportedly would violate labor standards provisions in the U.S.-European Union (EU) open skies agreement. On a separate but related note, there has been debate over a U.S. Customs and Border Patrol (CBP) preclearance facility that began operation in January 2014 at Abu Dhabi International Airport in the UAE. The presence of a preclearance facility makes an airport more attractive to U.S.-bound travelers, as they are not delayed by the need to pass through immigration and customs controls upon arrival in the United States. The Abu Dhabi facility was strongly opposed by some U.S. air carriers, labor unions, and Members of Congress because Etihad Airways, owned by the government of Abu Dhabi, is the only airline that operates nonstop flights from Abu Dhabi to the United States. Opponents were concerned that U.S. carriers, which rely on code-sharing partners to serve Abu Dhabi via connections in Europe, would be competitively disadvantaged because their passengers are not eligible for preclearance. Three fast-growing air carriers in the Persian Gulf region are involved in the controversy: Emirates Airline, Etihad Airways, and Qatar Airways. All three airlines are state-owned: Emirates Airline by the government of Dubai, Etihad Airways by the government of Abu Dhabi, and Qatar Airways by the government of Qatar. Dubai and Abu Dhabi are emirates within the UAE. These three airlines are referred to as the Persian Gulf carriers in this report. These relatively young carriers are among the fastest-growing airlines in the world. For example, the youngest among the three, Etihad Airways, was established by royal decree in July 2003. It started operation in November 2003, and has grown extremely rapidly. Nearly 14.3 million passengers flew Etihad in 2014, an increase of 24% over the 2013 level. Emirates Airline was established in 1985; Qatar Airways in 1993. Emirates flew 44.5 million passengers and 2.25 million tons of cargo in its fiscal year 2013-2014, and is now the world's largest international airline by capacity. The three carriers have young fleets and hundreds of wide-body aircraft on order. Collectively, these three carriers serve about 10 U.S. cities. Although the open skies agreements allow U.S. carriers to fly between the United States and Qatar and between the United States and the UAE, no U.S. carriers serve Qatar or Abu Dhabi. Delta and United each operate one daily round trip to Dubai. American Airlines, Delta Air Lines, and United Airlines, joined by the Air Line Pilots Association, International, as well as the Allied Pilots Association and the Association of Professional Flight Attendants, accused the UAE and Qatar of providing more than $40 billion in subsidies to the Persian Gulf carriers over the past decade. They claim that such practices have distorted the global air transport market in favor of the three state-owned carriers. Americans for Fair Skies, a group led by former Air Line Pilots Association (ALPA) President Lee Moak, joined the coalition to oppose the expansion of the Persian Gulf carriers' service to the United States. Among specific allegations, the opponents claim that Emirates Airline received between $1.6 billion and $4 billion in subsidies when its government took over its fuel-hedging losses, and at least $2.3 billion in subsidies since 2004 from subsidized Dubai airport expansions; that Etihad Airways received $6.3 billion in government capital injections plus $4.6 billion in interest-free loans; and that Qatar Airways benefited from airport fee exemptions and rebates and billions of dollars in interest-free, unsecured loans from its state owner that did not require repayment. The U.S. carriers also accuse their Persian Gulf rivals of "skyrocketing capacity" at more than three times the global GDP growth rate, and of targeting international routes to the United States. The Wall Street Journal reported that, collectively, the Persian Gulf carriers have doubled the number of available seats on flights to the United States since 2009. The opponents have promoted a concept they refer to as "fair skies," which would limit foreign carriers' access to the United States. They have asked the Administration to freeze the number of flights Persian Gulf carriers operate to the United States and to renegotiate the open skies accords with Qatar and the UAE, or even annul the agreements if no terms can be reached within a fair-competition framework. All open skies agreements the United States has entered include provisions for consultations to resolve disputes. However, the agreements do not provide for unilateral changes, nor for capacity restrictions. A similar debate was initiated in Europe in late 2014 by Lufthansa Group and Air France-KLM, and by labor groups such as the European Cockpit Association (ECA). They have been pushing for the EU to limit certain traffic rights offered by open skies, and advocate a change to what the ECA and other groups call "fair skies," which would allow governments to limit some traffic rights to carriers perceived to benefit from unfair state subsidies and/or support. The European Commission indicated that it would address German and French concerns over the alleged unfair subsidies to Persian Gulf carriers later in 2015. The German Transport Minister and his French counterpart reportedly have asked the European Commission not to grant additional traffic rights into the EU until the dispute is resolved. The two ministers have reportedly said that the Netherlands, Belgium, Sweden, and Austria support their position. The United Kingdom, home to the British Airways, has not expressed an official view. British Airways is now owned by International Airlines Group (IAG), which is also the parent company of the Spanish airline Iberia and the Spanish low-cost carrier Vueling. In January 2015, Qatar Airways acquired nearly 10% of IAG's shares. At the end of March 2015, British Airways and Iberia left the Brussels-based Association of European Airlines (AEA), an industry lobby group, reportedly over disagreement with Air France-KLM and Lufthansa regarding their demands to limit access to Europe for the Persian Gulf carriers and to investigate the alleged government subsidies to the Persian Gulf carriers. Air Berlin, in which Etihad holds over a 29% stake, reportedly also left AEA soon after the departure of British Airways. All three Persian Gulf carriers have denied the subsidy allegations individually without making a joint response to the U.S. allegations. Qatar Airways CEO Akbar Al Baker contended that Qatar's government acts as a shareholder, saying the situation is similar to instances in the past when European governments owned carriers such as Lufthansa, British Airways, and Air France. He pointed out that U.S. airlines do not fly to 90% of the destinations that Qatar Airways serves. The Persian Gulf carriers have suggested that the U.S. airlines benefited from financial restructuring under Chapter 11 of the U.S. Bankruptcy Code in the aftermath of the 9/11 attacks, indicating that shedding debt obligations under bankruptcy protection might be seen as a subsidy outside the United States. Emirates, Etihad, and Qatar Airways maintain that they are unsubsidized and profitable companies, and that they offer Americans access to cities around the globe that U.S. airlines ignore. They say the U.S. airlines should improve the way they run their businesses, offer better service, and compete. As did the U.S. airlines and labor unions, the Persian Gulf carriers have presented their case to U.S. government officials. In early April 2015, the U.S. Departments of State, Commerce, and Transportation invited comments from interested parties on both the subsidies case and whether the U.S. government should begin consultations with the governments of the UAE and Qatar. Emirates Airline filed a request asking the U.S. government to release all materials that the Partnership for Fair & Open Skies, Delta Air Lines, United Airlines, and American Airlines have submitted to make their case. Emirates said in its filing that it would be "fundamentally unfair for Emirates to be asked to respond to specific allegations when it continues to be denied full access to all of the materials the Coalition claims support those allegations." Some trade groups, tourism interests, and consumer advocates, including Airports Council International-North America, the U.S. Travel Association, the U.S. Business Travel Coalition, and some domestic passenger and cargo carriers, have voiced their support for the competition brought by the open skies agreements. These organizations have alleged that the U.S. air carriers that have complained about the subsidization of the Persian Gulf carriers have themselves benefited from extensive U.S. government subsidies. FedEx Corp., concerned about potential restrictions to its air cargo hub in Dubai, maintains that the open skies deals with the Persian Gulf countries are crucial to its cargo business, and warns that "retrenchment in any way from open skies by the U.S. would jeopardize the economic growth benefits that air cargo provides." U.S. passenger airline JetBlue, which has a code-sharing agreement with Emirates, supports the open skies policy and argues that its own success in serving the Caribbean and Latin America would not have been possible without such agreements. The major aircraft manufacturers, such as Boeing and Airbus, have customers on both sides. They have not explicitly taken sides in the debate. Boeing and Airbus maintain that they generally support the liberalization of international aviation and oppose drastic changes to the Qatar and UAE agreements. The Persian Gulf air carriers are based in locations with relatively moderate population levels and moderate growth potential for local air traffic. However, they appear to be following the operational model of Singapore Airlines, which has been developing its hub to connect travelers between Asia Pacific and Europe or North America. From the Persian Gulf carriers' hubs in Dubai, Abu Dhabi, and Doha, 80% of the world's population lives within an eight-hour flying distance. This has helped the Persian Gulf carriers to benefit from the growth in traffic between U.S. and European points and Asia, especially the Indian subcontinent. These carriers are also changing the landscape of international aviation. First, by connecting passengers via their hubs in the Persian Gulf, they alter global aviation connectivity and put pressure on major traditional international air travel hubs such as Paris and Frankfurt. In a Wall Street Journal article, Lufthansa said that its Frankfurt hub has lost nearly a third of its market share on routes between Europe and Asia since 2005, and that more than 3 million passengers now fly annually from Germany to other points via Persian Gulf hubs. Lufthansa said the market share erosion would affect its North American partners such as United Airlines and Air Canada as it cuts flights and reduces connections for North American passengers who change planes in Germany en route to points in Europe, Africa, and South Asia. Second, by acquiring stakes in or forming partnerships with other airlines, the Persian Gulf carriers are challenging the established global alliances while raising concerns over the role they would play in the existing network alliances. For example, Etihad has been expanding its network and operations through investments in relatively small European airlines, as well as by purchasing equity in India's Jet Airways (24%) and Virgin Australia (22%). It has acquired a 49% stake in the Italian carrier Alitalia, and also holds stakes in other "partner airlines." Alitalia is a member of the Skyteam alliance, whose members include Delta and Air France-KLM. Air Berlin, in which Etihad owns a 29.21% stake, is in the Oneworld alliance, whose members include American Airlines, British Airways, and Qatar Airways. However, aside from the opposition from Europe and the United States, the Persian Gulf carriers face issues that may challenge their future growth. One key issue, according to a 2014 International Air Transport Association (IATA) report, is airspace management. Since approximately 40%-60% of airspace in the Persian Gulf region is controlled by various countries' militaries, the limited available airspace may hamper the airlines' continuing expansion. Another challenge is staff shortage: with the Persian Gulf carriers leading the world in new aircraft orders, the region may face pilot and crew shortages in the next 20 years. On the other hand, the government of Dubai is building a new airport, Al Maktoum International Airport, which it envisions as the largest passenger hub in the world. Al Maktoum, located approximately 40 miles from Dubai International Airport, is used mainly as a cargo airport at present and sees only a handful of passenger flights. Last September, Dubai's ruler, Sheik Mohammed bin Rashid Al Maktoum, approved a $32 billion expansion plan that would enable the airport to handle 120 million passengers per year and to service 100 Airbus 380 jets at the same time. Further expansion plans would take capacity to 220 million passengers per year. The government expects Emirates to relocate its hub to the new airport. The existing Dubai International Airport is expected to remain in operation. An application by Norwegian Air International (NAI) for a foreign air carrier permit under the U.S.-EU open skies agreement has become controversial. NAI is a subsidiary of Norwegian Air Shuttle, the third-largest discount carrier in Europe. Norwegian Air Shuttle and its intercontinental arm, Norwegian Long Haul, hold FAA-issued airline certificates under Norwegian license and provide nonstop services to several U.S. destinations from several European countries, including Norway. These services are authorized under the U.S.-EU agreement, which has applied to Norway, not an EU member state, since 2011. On December 3, 2013, Norwegian Air Shuttle submitted an application for NAI, which is registered in Ireland, to operate transatlantic flights to U.S. destinations. NAI's application has been pending before DOT for more than a year. In general, DOT approves EU carriers' applications within weeks, making the delay unprecedented. At issue is NAI's plan to operate with an Irish air operator certificate, using not only Norwegian, EU, and U.S. citizens as crew members, but also contracting for crew members from other countries. Opponents, including labor groups, some airlines, and many Members of Congress, allege that NAI violates Article 17 bis of the U.S.-EU open skies agreement, which states that "opportunities created by the Agreement are not intended to undermine labour standards.... " They contend that NAI's practices, which include hiring crew in Asia via employment agencies and using an Irish Air Operator's Certificate instead of a Norwegian one, would create precedent for using low-wage crew members from third countries aboard flights to the United States and violate the U.S.-EU open skies agreement. On the other side of the argument, several former U.S. secretaries of transportation, as well as EU officials and the Irish Aviation Authority, say the application is valid under the terms of the U.S.-EU open skies agreement and would encourage competition and bring lower fares. On September 2, 2014, DOT issued an order dismissing NAI's request for a temporary exemption from the rules so that it could begin flights to the United States while DOT considers its application for a foreign air carrier permit. This dismissal was not a ruling on the merits of NAI's permit application. The EU delegations as well as European Commission and Norwegian officials believe that the U.S. authorities are in breach of the U.S.-EU open skies agreement by delaying NAI's traffic rights, and have raised the issues multiple times. Norwegian Air Shuttle is one of the few European discount carriers now flying to the United States. However, other low-fare airlines in Europe are known to be interested in offering transatlantic service, making it possible that the controversy raised by the NAI application will reappear in similar context, but with different air carriers. In the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ), Congress adopted two provisions related to the NAI issue. Section 415(a) of Division K prohibits any expenditure of funds to approve a foreign air carrier permit that would contravene Article 17 bis of the U.S.-EU open skies agreement. The section immediately following, Section 415(b), provides that the language of Section 419(a) does not bar issuance of a foreign air carrier permit that is consistent with the U.S.-EU open skies agreement and U.S. law. Neither section binds DOT to reach any particular conclusion with respect to the NAI application. In the Department of Homeland Security Appropriations Act, 2015 ( P.L. 114-4 ), Congress included a provision regarding the establishment of new CBP air preclearance operations. Section 555 prohibits funds from being used for new air preclearance agreements entering into force after February 1, 2014, unless such operations provide (1) a homeland or national security benefit to the United States; (2) U.S. passenger airlines are not precluded from operating at preclearance locations; and (3) a U.S. passenger air carrier is operating at any airport contemplated for establishment of new air preclearance operations. So far there has been no legislative action regarding the allegations against the Persian Gulf air carriers. Congress has no legal authority to suspend or alter the air service agreements between the United States and Persian Gulf countries. On April 30, 2015, in a letter to Secretary of State John Kerry and Secretary of Transportation Anthony Foxx, a bipartisan group of 262 lawmakers expressed their concerns and urged the agencies to begin consultations with the governments of the UAE and Qatar.
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"Open skies" agreements are a form of international civil air service agreement that facilitates international aviation in a deregulated environment. They eliminate government involvement in airline decisionmaking about international routes, capacity, and prices. Since 1992, the United States has reached 114 open skies agreements governing international air passenger and air freight services. There are two ongoing controversies that are related to open skies agreements. One controversy involves some U.S. network airlines' and labor unions' opposition to the expansion of three fast-growing airlines based in the Persian Gulf region—Emirates Airline, Etihad Airways, and Qatar Airways. The U.S. carriers allege the subsidies and support that these three Persian Gulf carriers purportedly receive from their government owners contravene fair competitive practices requirements of their home countries' open skies agreements with the United States. The U.S. carriers have urged the Administration to freeze the number of flights Gulf carriers operate to the United States and to renegotiate the open skies accords with Qatar and the United Arab Emirates. Similar protests have occurred in Europe, initiated by Lufthansa Group and Air France-KLM, and organized labor. The other controversy concerns Norwegian Air International (NAI), an airline that is registered in Ireland and plans to operate transatlantic flights to U.S. destinations. NAI's application has met strong opposition from labor groups and some airlines that allege that NAI violates a provision of the U.S.-EU open skies agreement that governs labor standards. They contend that NAI's plan would create precedent for using low-wage crew members from third countries aboard flights to the United States. However, several former U.S. secretaries of transportation and Irish and European Union (EU) officials, as well as some U.S. consumer advocates and travel industry groups, maintain that the NAI application is valid under the terms of the open skies agreement and would encourage competition and bring lower fares. This report addresses some of the most frequently asked questions related to these two on-going controversies.
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Justice Stevens has been a key figure in the Supreme Court's recent decisions interpreting the scope of two "companion rights": the due process right to a "beyond a reasonable doubt" determination and the right to trial by jury. The right to a jury trial in criminal prosecutions is explicitly protected in the Sixth Amendment to the U.S. Constitution. The "proof beyond a reasonable doubt" standard is guaranteed by the Due Process Clauses of the Fifth Amendment (federal proceedings) and the Fourteenth Amendment (state proceedings). Together, those constitutional provisions require that a criminal conviction follow a jury determination of "proof beyond a reasonable doubt of every fact necessary to constitute the crime." Those rights have a strong legal and historical foundation. However, a question emerged regarding their application to sentencing determinations, particularly as "sentence enhancements" became a popular legislative tool: to what extent do facts taken into account during sentencing require a "beyond a reasonable doubt" determination by a jury? Justice Stevens has had a critical role in the Supreme Court's resolution of that question, in several respects. First, he asserted that the constitutional question should be addressed, describing the constitutional guarantees at issue as being of "surpassing importance." Second, along with Justice Scalia, in early cases reviewing sentencing enhancements, he indicated his broad interpretation of the jury trial and due process rights. In a concurring opinion, for example, he wrote, "I am convinced that it is unconstitutional for a legislature to remove from the jury the assessment of facts that increase the prescribed range of penalties to which a criminal defendant is exposed." He added that "[i]t is equally clear that such facts must be established by proof beyond a reasonable doubt." Third, having persuaded five of the Court's nine justices of his views, he authored the opinion for the Court in a Apprendi v. New Jersey , the leading case in which the Court announced a broad reading of the constitutional rights at issue. Finally, he wrote for the Court in United States v. Booker , a decision applying the Apprendi holding to the Federal Sentencing Guidelines. Although this line of cases has resulted in closely divided opinions, the justices were not divided along typical lines. Justice Scalia has been the other justice arguing in agreement with Justice Stevens in many of the cases addressing a jury's role in criminal sentencing. In Apprendi , Justices Scalia, Thomas, Souter, and Ginsburg joined Justice Stevens's majority opinion. Justice Stevens's opinion in Apprendi was foreshadowed in several dissenting and concurring opinions in cases decided during the 1980s and 1990s. The first such case was McMillan v. Pennsylvania , decided in 1986. McMillan involved a Pennsylvania statute establishing a mandatory five-year minimum prison sentence in cases in which a judge finds, by a preponderance of the evidence (a lower standard than "beyond a reasonable doubt"), that the defendant visibly possessed a firearm during the commission of the offense. The statute expressly stated that the firearm possession "shall not be an element of the crime." Instead, it stated that it "shall be determined at sentencing," indicating that it was to be removed from typical jury trial and "beyond a reasonable doubt" requirements. The U.S. Supreme Court upheld the statute. Writing for the Court, Chief Justice Rehnquist emphasized that the state legislature expressly designated firearm possession as a "sentencing factor," rather than "an element of the crime." The Court concluded that the state legislature had intended to create a sentencing factor which "operates solely to limit the sentencing court's discretion in selecting a penalty within the range already available to it." Justice Stevens wrote a dissenting opinion, not joined by any other justice, in which he first articulated his view of the constitutional implications of sentencing statutes of this kind. "In my view," he wrote, "a state legislature may not dispense with the requirement of proof beyond a reasonable doubt for conduct that it targets for severe criminal penalties." His disagreement with the Court stemmed in part from his interpretation of prior precedents. He agreed with the statement from a prior case, also quoted by the majority, that "[the] applicability of the reasonable-doubt standard … has always been dependent on how a State defines the offense that is charged." However, he interpreted that holding to ensure that states have discretion regarding what conduct to criminalize, not over which conduct will be treated as a "criminal element" versus a "sentencing factor." "In my opinion," he concluded, "the constitutional significance of the special sanction cannot be avoided by the cavalier observation that it merely 'ups the ante' for the defendant." A 1998 case, Almendarez-Torres v. United States , involved a federal statute that makes it a crime to, among other things, return to the United States (without express consent of the Attorney General) after having been deported. A general provision authorizes criminal penalties of up to two years imprisonment. A second provision authorizes greater penalties in cases in which the alien was removed after a conviction for one of several specified crimes. In Almendarez-Torres , the defendant had been deported subsequent to three convictions for aggravated felonies, for which the statute increased the maximum prison sentence for reentry to 20 years. Prosecutors did not introduce the fact of the aggravated felonies at the indictment or trial phase. Nevertheless, at sentencing, the U.S. district court relied on those aggravated felony convictions to enhance the sentence. A five-justice majority on the Supreme Court framed the question on appeal as "whether [the aggravated felony provision] defines a separate crime or simply authorizes an enhanced penalty." Noting that the provision's concern is recidivism—a factor commonly weighed in sentencing decisions, it held that it is "reasonably clear" that Congress intended to "set forth a sentencing factor" rather than a "separate crime." Thus, it concluded that the statute "simply authorizes a court to increase the sentence," and thus does not require a determination by a jury. Justice Stevens and two other justices joined a dissent written by Justice Scalia. Justice Scalia asserted that the Court's prior decisions made it "genuinely doubtful whether the Constitution permits a judge (rather than a jury) to determine by a mere preponderance of the evidence (rather than beyond a reasonable doubt) a fact that increases the maximum penalty to which a criminal defendant is subject." Justice Stevens wrote an opinion reiterating his view on the constitutional question the following year, in Jones v. United States . The defendant in Jones was convicted for violation of a federal carjacking statute, 18 U.S.C. § 2119. That statute generally caps imprisonment for violations at 15 years, but a subsection increased the maximum prison term in cases in which "serious bodily injury … results." The defendant, Nathaniel Jones, was charged with carjacking, but the specific allegation that the carjacking resulted in serious bodily injury was not raised until the sentencing phase. At that time, the court found that serious bodily injury had occurred and increased Jones's sentence accordingly. No jury determinations were made on that question. The Court resolved the case on statutory grounds. In an opinion by Justice Souter, it held that the "serious bodily injury" prong, as written in the existing statute, constituted a separate criminal offense, and thus needed to be determined by a jury "beyond a reasonable doubt." It indicated that a different reading of the statute might "raise serious constitutional questions," but avoided resolving such issues because the case could be resolved on statutory grounds. In brief concurring opinions in Jones , Justices Stevens made clear that he would have reached the constitutional issues lurking in the case. Furthermore, he expressed the view that "it is unconstitutional to remove from the jury the assessment of facts that increase the prescribed range of penalties to which a criminal defendant is exposed." Justice Stevens expressed that view on behalf of the Court in Apprendi v. New Jersey . In Apprendi , the Court reviewed a New Jersey statute that authorized 10- to 20-year increases in prison sentences if a defendant's actions were found by a judge, by a preponderance of the evidence, to have been committed with a purpose to intimidate the victim because of the victim's race or other specified characteristics. The defendant, Charles Apprendi, was found to have fired a gun into the home of an African American family. The morning of his arrest, he was alleged to have stated that "because [the family is] black in color he does not want them in the neighborhood." He later argued that his statements had been mischaracterized. In the state prosecution, Apprendi pleaded guilty to three weapon possession charges. In the plea agreement, the state reserved the right to request a sentencing enhancement based on the state's "hate crimes" statute. At sentencing, evidence was presented to support and refute Apprendi's alleged racial motivation in firing into the victims' home. Applying a preponderance of the evidence standard as directed by the state statute, the state trial judge concluded that Apprendi had acted with racial prejudice and accordingly enhanced his sentence on that basis. On appeal, Apprendi argued that the Fifth and Fourteenth Amendment Due Process Clauses require that the facts justifying the sentence enhancement (i.e., a motivation of prejudice) to be found by a jury using the "beyond a reasonable doubt" standard. Both a state appellate court and the New Jersey Supreme Court rejected Apprendi's argument. Relying in part on the U.S. Supreme Court's rulings in Almendarez-Torres and McMillan v. Pennsylvania , they held that the "biased purpose" determination was not an element of the underlying offense and thus did not require a jury finding of proof beyond a reasonable doubt. The U.S. Supreme Court reversed. Writing for the Court, Justice Stevens asserted that the constitutional question was "starkly presented" by the facts in the case. He examined the history of the constitutional rights involved, noting that statutory sentence enhancements are a relatively new development in a landscape of constitutional rights with centuries-old foundations. He acknowledged that the history supports judges' ability to exercise discretion in sentencing. However, he argued that such discretion has generally been limited to determinations regarding an appropriate sentence within a given range; it has not historically been extended to authorize additional penalties on the basis of a new factual determination. After reviewing the history and relevant precedents, he articulated the Court's major holding: "Other than the fact of a prior conviction, any fact that increases the penalty for a crime beyond the prescribed statutory maximum must be submitted to a jury, and proved beyond a reasonable doubt." Key cases decided after Apprendi have addressed the decision's application to sentencing guidelines. In a 2004 case, Blakely v. Washington , the defendant challenged a sentence imposed pursuant to Washington State's sentencing guidelines. He was convicted of a crime for which the guidelines designated a maximum sentence of 53 months imprisonment, but was sentenced to 90 months after the sentencing judge found that he had acted with "deliberate cruelty"—a factor for which the guidelines authorized judges to increase a sentence. In an opinion written by Justice Scalia and joined by Justice Stevens and three other justices, the Supreme Court applied Apprendi to strike down the sentencing scheme. It held that the "statutory maximum" for Apprendi purposes is the maximum sentence a judge may impose solely on the basis of the facts reflected in the jury verdict or admitted by the defendant. One year later, Justice Stevens wrote one of two majority opinions for the Court in United States v. Booker , in which the Court addressed the question whether the Blakely holding applied to the Federal Sentencing Guidelines. The case involved a conviction for possession with intent to distribute crack cocaine. At sentencing, the judge found, by a preponderance of the evidence, that the defendant had distributed additional drugs and obstructed justice, and increased the sentence on that basis. Applying Apprendi and Blakely , the Court held that "[a]ny fact (other than a prior conviction) which is necessary to support a sentence exceeding the maximum authorized by the facts established by a plea of guilty or a jury verdict must be admitted by the defendant or proved to a jury beyond a reasonable doubt." Justice Stevens characterized the holding as a reaffirmation of the Apprendi holding. His opinion again emphasized the historical importance of the constitutional rights at issue. A different majority of justices joined an opinion written by Justice Breyer. In that opinion, the Court interpreted the constitutional holding (announced in the opinion by Justice Stevens) as requiring the Court to strike down two provisions of the Federal Sentencing Act, including one which made the guidelines mandatory. That holding was based on the Court's determination of what Congress might have intended in light of the Court's constitutional holding. It concluded that Congress would not have intended the guidelines to be made mandatory in situations where a judge is constitutionally required to receive jury determinations regarding facts relevant to sentencing. Justice Stevens dissented from that opinion. He characterized the Court's invalidation of the Sentencing Act provisions as judicial overstepping, arguing that the constitutional holding in the case "does not authorize the Court's creative remedy" with regard to the Federal Sentencing Act. He asserted that "[b]ecause the Guidelines as written possess the virtue of combining a mandatory determination of sentencing ranges and discretionary decisions within those ranges, they allow ample latitude for judicial factfinding that does not even arguably raise any Sixth Amendment issue." The impact of Justice Stevens's role, and of the Apprendi case in particular, has been to limit the extent to which criminal penalties can be increased based on facts found by a judge rather than a jury. Although it remains permissible for judges to take relevant facts into consideration when rendering criminal sentences, they now may not increase sentences beyond the prescribed statutory maximum unless the facts supporting such an increase are found by a jury beyond a reasonable doubt. As can be seen in the cases applying that holding to sentencing guidelines, Justice Stevens's interpretation of the constitutional trial-by-jury and due process rights has had practical and lasting effects on criminal sentencing.
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Justice Stevens has played a critical role in the Supreme Court's interpretation of a jury's role in criminal sentencing. In 2000, he wrote the majority opinion for the Court in Apprendi v. New Jersey, a landmark case in which the Court held that a judge typically may not increase a sentence beyond the range prescribed by statute unless the increase is based on facts determined by a jury "beyond a reasonable doubt." In 2005, he wrote one of two majority opinions in United States v. Booker, in which the Court applied the Apprendi rule to the Federal Sentencing Guidelines. In those two cases and in several other cases on this issue during the past few decades, Justice Stevens has been a leading voice, articulating a broad interpretation of the jury trial and due process rights at issue.
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Congressional interest in the patent system has been evidenced by the recent passage of patent reform legislation by both houses of the 112 th Congress. Among the topics of legislative debate has been the presumption of validity enjoyed by issued patents. In this respect the June 9, 2011, decision of the United States Supreme Court in Microsoft Corp. v. i4i Limited Partnership et al. is notable. In that decision, the Court retained current legal standards by holding that patents must be proved invalid by "clear and convincing evidence." The Court explicitly rejected the argument that the "preponderance of the evidence" s tandard, which would have made patents more vulnerable to challenge, applied in this situation. This report reviews the Microsoft v. i4i decision and its implications for innovation policy in the United States. The Patent Act of 1952 authorizes the U.S. Patent and Trademark Office (USPTO) to review patent applications and to approve them where "the applicant is entitled to a patent under the law." Congress has established a number of patentability requirements—including novelty and nonobviousness —that USPTO examiners must evaluate in determining whether a patent should issue. To be considered novel, the invention must not be wholly anticipated by the so-called "prior art," or public domain materials such as publications and other patents. The nonobviousness requirement is met if the invention is beyond the ordinary abilities of a person of ordinary skill in the art in the appropriate field. To assess whether a particular invention meets these requirements, examiners will conduct a search of the prior art to look for relevant treatises, journal articles, and other patents. Once a patent issues, its owner gains the right to exclude others from using the claimed invention. This right can be enforced by bring a civil action for infringement in federal court. Congress provided the accused infringer with several defenses. Among them is that the patent is invalid; in other words, the USPTO should not have allowed the patent to issue at all. The patent statute provides that a "patent shall be presumed valid" and that the "burden of establishing invalidity ... rest[s] on the party asserting such invalidity." However, the patent statute does not specify how persuasive the evidence of invalidity must be in order for the judge, jury, or other finder of fact to rule in favor of the accused infringer. Under case law developed by the courts, the accused infringer must overcome the presumption of validity by persuading the factfinder of the patent's invalidity by "clear and convincing evidence." The standard of clear and convincing evidence is satisfied if the factfinder believes that a particular proposition is substantially more likely to be true than not. Stated differently, the trier of fact must have a firm belief in the factuality of that proposition. Most civil litigation proceeds under the more readily satisfied "preponderance of the evidence" standard. Under the preponderance of the evidence standard, the factfinder must only be persuaded that the something is more likely so than not so. Patent holder i4i filed an infringement suit against Microsoft in 2007. According to i4i, Microsoft Word infringed its patent to an improved method of editing computer documents. Microsoft denied infringement and counterclaimed for a declaration of invalidity and unenforceability. With regard to its invalidity defense, Microsoft contended that i4i's sales of software known as "S4" rendered the asserted patent invalid for lack of novelty. At trial, Microsoft objected to i4i's proposed instruction that Microsoft was required to prove invalidity by clear and convincing evidence because the USPTO had not been aware of the S4 software when it approved i4i's patent application. Microsoft requested that the following instruction be read to the jury: Microsoft's burden of proving invalidity and unenforceability is by clear and convincing evidence. However, Microsoft's burden of proof with regard to its defense of invalidity based on prior art that the examiner did not review during the prosecution of the patent-in-suit is by preponderance of the evidence. The District Court rejected this proposal and instead instructed the jury that "Microsoft has the burden of proving invalidity by clear and convincing evidence." The jury found that Microsoft failed to prove invalidity and that Microsoft had willfully infringed the i4i patent. This holding was affirmed on appeal. Microsoft then petitioned the Supreme Court for review of the case. According to Microsoft, the proper standard for proving invalidity should be the preponderance of the evidence. Alternatively, Microsoft asserted that the preponderance of the evidence standard should apply when an invalidity defense rests on evidence that was not considered by the USPTO during examination of the asserted patent. The Supreme Court affirmed the holdings of the lower courts. Each of the eight Justices who considered the case agreed that accused infringers must prove invalidity by clear and convincing evidence. Chief Justice Roberts was recused from the case. Writing for the Court, Justice Sotomayor observed that section 282 of the Patent Act of 1952 establishes a presumption that a patent is valid and imposes the burden of proving invalidity on a patent's challenger, but "includes no express articulation of the standard of proof." However, judicial opinions issued prior to 1952 established that patents enjoyed "a presumption of validity, a presumption not to be overthrown except by clear and cogent evidence." Justice Sotomayor therefore understood that by the time Congress enacted the 1952 Patent Act, "the presumption of patent validity had long been a fixture of the common law." The Court was therefore unable to "conclude that Congress intended to 'drop' the heightened standard of proof from the presumption simply because § 282 fails to reiterate it expressly." The Court next addressed Microsoft's argument that a preponderance of the evidence standard should apply where the evidence was not before the USPTO during the examination process. Justice Sotomayor responded that "pre-1952 cases never adopted or endorsed the kind of fluctuating standard of proof that Microsoft envisions." Justice Sotomayor further took note of the "impracticalities" of a dual standard of proof, observing that because an examiner has no duty to cite every reference considered, whether an examiner has considered a particular reference will often be "a question without a clear answer." Justice Breyer joined the Court's opinion but also wrote a separate, concurring opinion that was joined by Justices Scalia and Alito. He "emphasiz[ed] that in this area of law as in others the evidentiary standard of proof applies to questions of fact and not to questions of law." He added that "[w]here the ultimate question of patent validity turns on the correct answer to legal questions—what these subsidiary legal standards mean or how they apply to the facts as given—today's strict standard of proof has no application." Justice Thomas also concurred in the Court's conclusion. He also believed that § 282 did not alter the judicially developed "heightened standard of proof ... which has never been overruled by this Court or modified by Congress." The distinction between "clear and convincing evidence" and a "preponderance of the evidence" may seem to be a subtle one. That interested observers from a variety of innovative industries filed numerous amicus curiae (friend of the court) briefs with the Supreme Court suggests the significance of the presumption of validity, however. Many observers believe that the heightened "clear and convincing evidence" does not account for the nature of the patent acquisition process, promotes costly litigation, and enourages "patent assertion entities." Others argued that switching to a "preponderance of the evidence" standard would discount the nature of the patent litigation process, discourage investment in R&D, and ultimately discourage innovation. This report briefly reviews some of these positions. The Federal Trade Commission (FTC) and other observers have supported a shift to the more easily satisfied "preponderance of the evidence" standard for a number of reasons. First, many observers believe that modern patent examination involves "little actual assessment of whether a patent should issue." Patent examination is conducted on an ex parte basis—that is to say, there is no adversary to present arguments to the examiner that the application should not be approved. Applicants must report the relevant prior art of which they are aware to the USPTO, but need not conduct a "due diligence" search of the literature prior to filing. The examiner is reportedly allotted approximately 18 hours to review the application. Under these circumstances, some believe that the USPTO issues many patents that would have been rejected had the agency possessed a better understanding of the prior art. In their view, the higher "clear and convincing evidence" standard is inappropriate in view of these compact acquisition proceedings. Second, some commentators believe that the current standard promotes charges of patent infringement. The Honorable William Alsup, District Judge for the Northern District of California, wrote that the "clear and convincing evidence" standard provides a huge advantage for the patent holder—and it is often an unfair advantage, given the ease with which applicants and their agents can sneak undeserving claims through the PTO. Because of the burnish of this presumption, patentees can use a weak, arguably invalid patent, to force an accused infringer through years of litigation. This is more than just a nuisance. Legal defense costs run, at the low end, about three million dollars per case, and range well over ten million dollars in some actions. In the United States, the number of patent infringement suits filed annually nearly doubled between 1994 and 2004. According to the Phoenix Center for Advanced Legal and Economic Public Policy Studies, patent litigation costs the economy 4.5 billion dollars annually. Finally, some believe the "clear and convincing evidence" standard promotes so-called "patent assertion entities," sometimes termed "patent trolls." The FTC has defined "patent assertion entities" as "firms whose business model primarily focuses on purchasing and asserting patents" as compared to using patent in support of manufacturing or the provision of services. Some observers believe that the "clear and convincing evidence" standard encourages aggressive licensing and litigation tactics by patent assertion entities because an accused infringer "faces an uphill battle in defending itself." In their view, the increased vulnerability of asserted patents would discourage "patent trolling." On the other hand, others support the conclusion of the Supreme Court in Microsoft v. i4i that patents must be proven invalid by "clear and convincing evidence." First, some believe that the "clear and convincing evidence" standard reflects realties of the litigation process. Patent cases are tried before federal courts of general jurisdiction and often involve juries consisting of lay persons. Many commentators believe that the "clear and convincing evidence" standard appropriately causes these decision makers to defer to a specialized agency, the USPTO, in patent matters. Some observers also believe that inventors put themselves in a vulnerable position when they patent their inventions. Whether courts ultimately uphold their patents or not, their inventions have already been disclosed to the public. As attorney Albert Walker explained in his early treatise on patent law: It is easy for a few bad or mistaken men to testify, that in some remote or unfrequented place, they used or knew a thing substantially like the thing covered by the patent, and did so before the thing was invented by the patentee. In such a case it may happen that the plaintiff can produce nothing but negative testimony in reply: testimony of persons who were conversant with the place in question, at the time in question, and did not see or know the thing alleged to have been there at that time. If mere preponderance of evidence were to control the issue, the affirmative testimony of a few persons, that they did see or know or use a particular thing at a particular time and place, would outweigh the negative testimony of many persons, that they did not see or know or use any such thing. Under this view, the presumption of validity should be a robust one so as to encourage inventors to seek patent protection. Finally, some observers believe that strong, enforceable patents are necessary to support investment in high-technology innovation. The development of cutting-edge inventions, such as new medicines, electronics, and biotechnologies, often involves considerable expense and risk. An innovative firm may be less likely to engage in such endeavors if its entire patent portfolio would become more vulnerable to challenge by competitors. These observers believe that the "clear and convincing evidence" standard promotes innovation while still allowing room for accused infringers to contest the validity of improvidently granted patents. In the Microsoft v. i4i opinion, the Supreme Court concluded: Congress specified the applicable standard of proof in 1952 when it codified the common-law presumption of patent validity. Since then, it has allowed the Federal Circuit's correct interpretation of § 282 to stand. Any recalibration of the standard of proof remains in its hands. This passage plainly provides the Court's deference to Congress on this issue. If the current "clear and convincing evidence" is deemed appropriate, then no change need be made. Alternatively, straightforward amendments to § 282 could change the standard to the "preponderance of the evidence" standard. The presumption of validity also arises in other contexts. For example, patent reform legislation in the 112 th Congress stipulates that in both post-grant and inter partes review proceedings before the USPTO, "the petitioner shall have the burden of proving a proposition of unpatentability by a preponderance of the evidence." The decreased evidentiary showing required before the USPTO may reflect increased legislative confidence in the patent expertise of that agency as compared to the federal courts. Although the Microsoft v. i4i opinion addressed a seemingly technical point of patent law, the implications of a shift from a "clear and convincing evidence" standard to a "preponderance of the evidence" standard were potentially significant for the nation's environment for innovation and investment. The Supreme Court's ruling leaves any possible change to patent law's presumption of validity squarely within the purview of Congress.
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The June 9, 2011, decision of the United States Supreme Court in Microsoft Corp. v. i4i Limited Partnership et al. rained current legal standards by holding that patents must be proved invalid by "clear and convincing evidence." The Court explicitly rejected the argument that the "preponderance of the evidence" standard, which would have made patents more vulnerable to challenge, applied in this situation. The decision arguably holds a number of potential implications for U.S. innovation policy, including incentives to innovate, invest, and assert patents, and leaves the question of the appropriate presumption of validity for patents squarely before Congress.
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In 1970, the K visa category was created for foreign national fiancé(e)s of U.S. citizens. The first visa within the category, the K-1 visa, is a nonimmigrant visa that grants temporary admission to the United States for fiancé(e)s in order for them to marry their U.S. citizen petitioners. Since the visa's creation, Congress has passed additional legislation that has added protections for fiancé(e)s and their children. There were 35,925 K-1 visas issued by the U.S. Department of State (DOS) in FY2014. The K-1 visa has drawn increased attention due to a mass shooting in San Bernardino, CA, on December 2, 2015. One of the suspected shooters, Tashneen Malik, reportedly came to the United States on a K-1 visa to marry the other suspected shooter, Syed Rizwan Farook. The investigation of the couple, after the fact, reportedly brought to light suspicions to the couple's support of violent jihadists. Due to these events, Congress and the public have raised questions about the K-1 visa and its security screening. For instance, how well are individuals screened for fraud and security risks, and are there any gaps in the screening process? After the shooting, President Barack Obama asked the U.S. Department of Homeland Security (DHS) to review the U.S. visa program. Some members of Congress have also called for the inclusion of visa applicants' social media accounts as an added screening measure. This report will review the K-1 visa, providing information on the background of the program. Next, the report will cover the requirements of the visa and its application procedures, including the filing of a petition, the application for a visa, and the national security screening. The following section will describe K-1 visa holders' admission to the United States and their adjustment of status to lawful permanent residency. The last section will provide statistics on the issuance of the K-1 visa and the source countries of visa holders. P.L. 91-225 established the K nonimmigrant visa category in 1970 for fiancés, fiancées, and the derivative children of the fiancé(e). The law amended the Immigration and Nationality Act (INA) in an effort to address the difficulties faced by U.S. citizens who wished to bring their fiancé(e)s to the United States to be married. There are four subcategories within the K visa category. P.L. 91-225 created the first two categories (K-1 visa and K-2 visa), and in 2000 the Legal Immigration Family Equity Act (LIFE Act; Title XI of P.L. 106-553 ) created the last two categories (K-3 visa and K-4 visa). The K-1 visa is for noncitizens seeking to enter the United States to marry a U.S. citizen, and the K-2 visa is for their children. The K-3 visa is for noncitizens who married a U.S. citizen abroad and want to enter the United States while they wait for their immigration petition, or for an immigrant visa to become available, and the K-4 visa is for their children. Subsequent legislation was enacted in order to provide protections to the fiancé(e) (also referred to as the beneficiary). The International Marriage Broker Regulation Act of 2005 (IMBRA; Title VIII, Subtitle D, of P.L. 109-162 ) requires the disclosure of the use of an international marriage broker and the petitioner's criminal convictions for certain crimes, notably sexual crimes. Additionally, IMBRA provides requirements with regard to international marriage brokers and requires the Department of State to provide beneficiaries with a pamphlet containing facts about the K-1 visa, domestic violence, and their rights. The Adam Walsh Child Protection and Safety Act of 2006 ( P.L. 109-248 ) further prohibits U.S. citizens from petitioning for a K-1 visa if they have been convicted of certain offenses against a minor (unless the Secretary of DHS can determine, under his/her sole discretion, that the petitioner poses no risk to the beneficiary). In order for a foreign national to be issued a K-1 visa, the petitioner who is filing on the fiancé(e)'s behalf must be a U.S. citizen and must provide the following evidence: The parties have met in person within two years of the petition's filing, though the Secretary of DHS may waive this requirement. The parties have a bona fide intention to marry. The parties are legally able and willing to conclude a valid marriage in the United States within 90 days of the fiancé(e)'s arrival. In addition to the determination that a foreign national is qualified for a K-1 visa, a decision must be made as to whether the foreign national is admissible or excludable under the INA. A U.S. citizen petitioner must file Form I-129F, Petition for Alien Fiancé(e), with DHS's U.S. Citizenship and Immigration Services (USCIS), along with supporting documents. Additional requirements, established in IMBRA, mandate that the petitioners provide criminal records related to certain crimes and that they notify USCIS if they used an international marriage broker to meet the beneficiary. IMBRA also requires the petitioners to obtain a waiver if they have filed two or more K-1 petitions in the past or have had a K-1 petition approved in the two years before their current petition. Furthermore, if the petitioners are subject to the Adam Walsh Child Protection and Safety Act, they must demonstrate they pose no risk to the beneficiary. After USCIS approves a petition, it is sent to the U.S. Embassy or Consulate in the home country of the foreign national to determine eligibility for a K-1 visa for admission to the United States. The petitioner and beneficiary (including eligible children) must provide a completed Form DS-160, Online Nonimmigrant Visa Application, valid passports, divorce or death certificates for any previous spouses, police certificates from their present countries of residence and other countries they lived in for at least six months, medical examinations, evidence of financial support, photographs, evidence of relationship, and fees. Once all necessary documents are provided and security clearances are completed, the consular office schedules an interview to determine eligibility. Although the K-1 visa is a nonimmigrant visa, due to the beneficiary's intention of remaining in the United States, the consular office treats it as an immigrant visa and seeks to determine whether the individual would be admissible as an immigrant. Additionally, DOS has issued instructions with regard to consideration of these applications. The K visa applicant is required to submit his or her photograph and fingerprints, as well as full name (and any other name used or by which he or she has been known), age, gender, and the date and place of birth, as are all foreign nationals seeking a visa. The visa applicant's personal data are added to the Consular Consolidated Database (CCD), a biometric/biographic database that screens all visa applicants, including those seeking a K visa. CCD links with other databases to flag problems that may have an impact on the issuance of the visa, which include DHS's Automated Biometric Identification System (IDENT) and the Federal Bureau of Investigation (FBI) Integrated Automated Fingerprint Identification System (IAFIS). In addition to performing biometric checks of the fingerprints for all visa applicants, DOS uses facial recognition technology to screen visa applicants against a "watchlist" of photos of known and suspected terrorists obtained from the Terrorist Screening Center (TSC), as well as the entire gallery of visa applicant photos contained in the CCD. To screen K visa applicants, as well as all other visa applicants, consular officers use the Consular Lookout and Support System (CLASS) database, which has name-searching algorithms to ensure matches between names of visa applicants and any derogatory information contained in CLASS. DOS reports that about 70% of the records in CLASS come from other agencies, including DHS, the FBI, and the Drug Enforcement Administration (DEA). DOS also employs an automated CLASS search algorithm that runs the names of all visa applicants against the CCD to check for any prior visa applications, refusals, or issuances. Consular officers have long relied on the Security Advisory Opinion (SAO) system, which requires a consular officer abroad to refer selected visa cases for greater review by intelligence and law enforcement agencies. If consular officials receive information about a K visa applicant that causes concern, they send a dedicated and secure communication to the National Counterterrorism Center (NCTC). In a similar set of SAO procedures, consular officers send suspect names, identified by law enforcement and intelligence information, to the FBI for a name check. There is also the "Terrorist Exclusion List" (TEL), which lists organizations designated as terrorist-supporting and includes the names of individuals associated with these organizations. In June 2013, DOS began "Kingfisher Expansion" (KFE) in partnership with the NCTC for conducting interagency counterterrorism screening of all visa applicants. The consular official submits the K visa applicants' electronic visa applications as a "vetting package" to the NCTC. In turn NCTC uses an automated process to compare the vetting package with its holdings, most notably the Terrorist Identities Datamart Environment (TIDE) on known and suspected terrorists and terrorist groups. A "hit" in KFE triggers a Washington-based interagency review of the visa application. KFE also conducts post-issuance reviews of valid visas to check for new information on emerging threats. The deadly attack in San Bernardino raised questions as to whether immigration officials should be pre-emptively trawling the social media accounts of visa applicants, after early rumors that Tashneen Malik (using a pseudonym) had posted declarations of loyalty to the Islamic State on Facebook that day. A former DHS official who currently serves as a consultant to ABC News asserted that DHS had a policy of not reviewing the social media accounts of visa applicants during his tenure at DHS. According to media accounts, the FBI was also criticized for not uncovering evidence of pro-jihadist messages that Malik reportedly had e-mailed in 2012. Multiple media sources have reported that FBI Director James Comey has subsequently stated that there was "no evidence of a posting on social media" by either of the suspects in the San Bernardino shootings. DHS initiated three pilot programs earlier in 2015 to specifically incorporate appropriate social media review into its vetting of applicants for certain immigration benefits. If the beneficiary is issued a K-1 visa, it is normally valid for six months. DHS Customs and Border Protection (CBP) officers inspect all arrivals to the United States at ports of entry and again screen the K visa holder against the various DHS databases and "watch lists." Once in the United States, the K-1 nonimmigrant is required to marry the U.S. citizen petitioner within 90 days. K-1 visa holders are permitted to work in the United States during this time if they file for employment authorization. The foreign national is eligible for lawful permanent residence as an immediate relative if the marriage takes place within 90 days and the fiancé(e) is otherwise admissible. This status is conditional for two years. If the marriage does not occur within 90 days, the K visa expires and the foreign national must depart from the United States. From FY2000 to FY2014, DOS issued a total of 430,900 K-1 visas, with an additional 65,833 K-2 visas issued to the children of K-1 visa beneficiaries. Since FY2000, K-1 visa issuances have fluctuated, though they have experienced an overall rise. FY2014 was the peak year thus far in the 21 s century for fiancé(e) visas, with DOS issuing 35,925 K-1 visas, an increase of 36% from FY2013. The lowest number of K-1 visa issuances in the 21 st century, at 21,471 visas, was in FY2000. In terms of source countries for all K visa holders, the Philippines led with 8,525 K visas in FY2014. In comparison, Chinese nationals were issued the second largest number of K visas at 2,177 visas; and Mexican nationals were issued the third largest portion of K visas at 2,101 visas. In FY2014, Asia was the top receiving region of K visas with 18,864, or 46% of all K visas issued. Additionally, North America and Central America was the second largest source region with 19% of K visas, while Europe was the third largest source region with 18% of K visas. Figure 2 presents the regional breakdown of K visas that DOS issued in FY2014, and Figure 3 shows the top 12 source countries.
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The K nonimmigrant visa category was created in 1970 through P.L. 91-225, which amended the Immigration and Nationality Act (INA). Within the K visa category, the K-1 visa is a visa for fiancé(e)s of U.S. citizens and the K-2 visa is a visa for the fiancé(e)'s children. Congress later enacted legislation to provide protections for fiancé(e)s, specifically creating requirements around the use of international marriage brokers, the disclosure of the U.S. petitioner's criminal background, the provision of information to fiancé(e)s on their rights, and additional protections for minors. A mass shooting on December 2, 2015, in San Bernardino, CA, where one of the suspected shooters entered the United States on a K-1 visa, has drawn increased attention to the visa category. This tragedy has spurred questions surrounding the K-1 visa national security screening process and any possible gaps. Some Members of Congress have suggested including a review of K-1 applicants' social media accounts into the screening process. In order to qualify for a K-1 visa, a U.S. citizen must file on behalf of his/her fiancé(e) and provide evidence that (1) the parties have met in person within two years of the petition's filing, (2) the parties have a bona fide intention to marry, and (3) the parties are legally able and willing to be married in the United States within 90 days of the fiancé(e)'s arrival. The petitioner must first file a petition with the Department of Homeland Security's (DHS's) U.S. Citizenship and Immigration Services (USCIS). Once the petition is approved, it is sent to a U.S. Embassy or Consulate in the home country of the foreign national, where it is determined if the fiancé(e) is eligible for admission to the United States. Although the K-1 visa is a nonimmigrant visa, the fiancé(e) intends to remain in the United States and is therefore also subject to the admission requirements of immigrant visas. K visa applicants' national security screening entails the use of biographical, biometric, and photographic data. The data are entered into consular-based databases, such as the Consular Consolidated Database (CCD) and Consular Lookout and Support System (CLASS), which flag problems that may have an impact on the issuance of a visa or matches to any derogatory information. Consular offices send suspect individuals' applications for greater review to other agencies, such as the Federal Bureau of Investigation (FBI) and the National Counterterrorism Center (NCTC). In 2013, NCTC began conducting interagency counterterrorism screening of all visa applicants and in 2015, DHS began pilot programs to incorporate social media screening into its vetting of applicants for certain immigration benefits. Once visa applicants have been approved and their security clearances are completed, they can travel to the United States, where they must marry their U.S. citizen petitioners within 90 days of their arrival. Once married, the fiancé(e) adjusts to a conditional residency and after two years can become a lawful permanent resident. In FY2014, the U.S. Department of State issued 35,925 K-1 visas. Asia received the largest portion of K visas at 46%, with the Philippines being the country with the highest number of K visas at 8,525 visas.
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A perceived lack of coordination in the federal government's warning notification processand inconsistent messages regarding threats to the homeland have led to an erosion of confidencein the information conveyed to the Nation. Congress is now considering legislation( H.R. 1817 , The Department of Homeland Security Authorization Act for FY2006) toreform the Homeland Security Advisor System to assure greater confidence in the threat informationbeing conveyed to the Nation. A universally understandable, consistent, and reliable national threatnotification system is deemed necessary in today's world of increasing and time-sensitive threats tothe Nation. Many believe that the notification of a threat to the United States should be conveyedby a single entity and the message should be consistent with other communications federalgovernment officials may offer. In times of crisis or national emergency, the federal government'sunity of message and a coordinated delivery of the threat notification are widely seen as crucial tothe effectiveness of the system designed to convey the message. "The System's color-coded warningshave become the primary means by which the federal Government communicates directly to thepublic its bottom-line judgment on the risk of terrorist attack at any given time." (1) However, the circumstancesand explanations surrounding the warnings and changes in the Homeland Security AdvisorySystem's (HSAS) color code to date have called into question the utility and credibility of the system.In particular: At times it appears the color-code has been raised based on speculation thata terrorist attack may occur rather than receipt of new threat information; At other times, warnings of heightened threats have been issued withoutchanging the HSAS; and On numerous occasions agencies have provided different, and sometimescontradictory, information about threats to the homeland. On March 11, 2002, the President signed Homeland Security Presidential Directive-3 (HSPD-3) and created the HSAS (See Figure 1). This Directive gave responsibility to the AttorneyGeneral to administer and make public announcements regarding threats to the Nation. (2) Subsequent of the HomelandSecurity Act of 2002, enacted November 25, 2002, provided that the Under Secretary of theInfrastructure Analysis and Infrastructure Protection (IAIP) Directorate, subject to the direction andcontrol of the Secretary (of Homeland Security), shall administer the Homeland Security AdvisorySystem (HSAS), including (1) exercising primary responsibility for public advisories related tothreats to homeland security (2) in coordination with other agencies of the Federal Government,providing specific warning information to State and local government agencies and authorities, theprivate sector, other entities, and the public. (3) Figure 1. HSAS Though the Homeland Security Act of 2002 is fairly clear regarding the transition ofresponsibility of administering a national threat notification system from the Attorney General to theSecretary of Homeland Security, there reportedly have been "a few occasions in the past couple ofyears that Secretary Ridge was frustrated when Attorney General Ashcroft announced terrorist threatinformation, despite the fact that the Homeland Security Act of 2002, transferred the responsibilityof management of the HSAS from DOJ to DHS. Also at times, DHS has disagreed with the alarmingtone of Ashcroft's announcements." (4) This paper will discuss examples of uncoordinated national threatannouncements between DHS, DOJ, and other federal government entities. It is possible that recentchanges of Departmental and Agency leadership may assist in resolving future occurrences of uncoordinated and premature threat announcements. However, the issue remains that previous threatannouncements and arguably a lack of discernible processes in determining from whom threatinformation is to be conveyed, has seriously eroded the HSAS's credibility generating congressionalreview and discussion of ways to approach future national threat warning efforts. September 11 - September 24, 2002 First time the threat-level is raised from Yellow-Elevated (Significant Risk ofTerrorist Attack) to Orange-High (High Risk of Terrorist Attack) Pursuant to the responsibility given to the Attorney General and delineated in HSPD-3, Attorney General Ashcroft announced on September 11, 2002, that "the U.S. intelligence communityhas received information, based on the debriefing of a senior Al Qaeda operative, of possible terroristattacks timed to coincide with the anniversary of the September 11 attacks on the United States."However, one-week prior to the official notice put forth by the Attorney General, Office ofHomeland Security Chief Tom Ridge reportedly stated that "U.S. officials do not have intelligenceindicating terrorists are plotting another attack on the September 11th anniversary. We do notanticipate raising the threat level for that day." (5) Though it is common in the world of intelligence to receiveinformation that contradicts previous analysis, possibly explaining moving from an elevated (yellow)to a high threat (orange) environment in one-week's time, the concern is that prior to the first use ofthe HSAS, two senior members of the Administration spoke publicly to the status of the threatenvironment. In this case the Director of the Office of Homeland Security seemed to have preemptedthe Attorney General's responsibility to publicly announce information regarding the threatenvironment and the status of the HSAS. The following two items review instances where threat information of a significant nature wasdiscussed by senior Administration officials in an open forum. These instances did not result in achange of the HSAS. On October 17, 2002, Director of Central Intelligence (DCI) Tenet stated before a jointsession of the House and Senate Intelligence Committees, "You must make the assumption that AlQaeda is in an execution phase and intends to strike us both here and overseas. That's unambiguousas far as I am concerned." (6) On November 15, 2002, the FBI stated, "Sources suggest Al Qaeda may favor spectacularattacks that meet several criteria: high symbolic value, mass casualties, severe damage to the U.S.economy and maximum psychological trauma." (7) Despite the tone of the warning, White House spokesman ScottMcClellan said the national alert status would remain unchanged. Although the previous two examples did not represent official public announcements, theeffect was the same in that both of these events were widely publicized. Both statements may havebeen analytically correct, however a potentially troublesome precedent was being set by seniorofficials offering diverging interpretations of the nation's threat environment in a public forum. February 7 - February 27, 2003 Second time the threat-level raised to Orange Prior to the raising of the alert level, the Homeland Security Act of 2002 had been enacted(November 11, 2002). The act provided that the Under Secretary of IAIP subject to the direction andcontrol of the Secretary (of Homeland Security), shall administer the Homeland Security AdvisorySystem (HSAS). On February 7, 2003, Secretary of Homeland Security Ridge announced thatintelligence reports suggested that Al Qaeda was planning attacks on apartment buildings, hotels,and other soft targets. (8) In the week leading up to the issuance of this threat warning and during the twenty-dayduration of this rise in the alert level, numerous Administration officials provided varyingdescriptions as to the level of specificity and immediacy of the threat. Homeland Security SecretaryRidge said a terrorist attack was unlikely one-week after Attorney General Ashcroft stated that therewas an increased likelihood of an attack on the United States. During this same time-period DCITenet testified before Congress that the information that led to this threat alert was as specific as ithas ever been. (9) SecretaryRidge also stated during this alert level change that the intelligence about a possible attack moreoften than not is vague, whereas Attorney General Ashcroft stated that specific intelligence wascorroborated by multiple intelligence sources. (10) On February 24, 2003, in the waning days of this increased alert level, Attorney GeneralAshcroft stated that the threat of terrorist attack remained high and there were no plans to downgradethe Nation's alert level. Less than three days later, Secretary Ridge announced that the HSAS wasbeing lowered to Yellow- Elevated. March 17 - April 11, 2003 Third time threat-level raised to Orange On March 17, 2003, Secretary of Homeland Security Ridge stated that Intelligence reportsindicated Al Qaeda would probably attempt to launch terrorist attacks against U.S. interests to defendMuslims and the Iraqi people. On the eve of the war in Iraq, Secretary Ridge informed the public thatthe terrorist threat level was being raised, not because of any new threatening intelligence, butbecause the war seemed likely to provoke a terrorist response in the U.S. (11) Prior to the war in Iraq, numerous Administration officials including some at the CIA andFBI, and lawmakers believed that should the United States commence military operations in Iraq,terrorist attacks in the United States would be an inevitable cost of toppling Saddam Hussein. (12) In lowering the threat level on April 11, 2003, DHS released a statement that after anassessment of the threats by the intelligence community, the Department of Homeland Security hadmade the decision to lower the threat advisory level. Defense Secretary Rumsfeld later noted that"the Nation must remain vigilant and alert to the possibility Al Qaeda or those sympathetic to theircause; as well as former Iraqi regime state agents, may attempt to conduct attacks against the UnitedStates." (13) This change of alert level status was accompanied by a continuing pattern of independentofficial announcements regarding possible threats to the Nation, including statements by theSecretary of Defense countering the reasoning used to lower the alert level: threats remain of anattack from al Qaeda or Iraqi sympathizers. (14) May 20 - May 30, 2003 Fourth time threat-level raised to Orange On May 20, 2003, the Department of Homeland Security announced that the United Statesintelligence community believed Al Qaeda had entered an operational period worldwide, includingplans to attack the United States On the morning of May 20, 2003 DHS Secretary Ridge appeared before the HouseCommittee on Homeland Security and stated that "America had the terror networks off-balance andthat we are much safer (as a Nation)". Later that day in a press conference held to announce raisingthe threat alert level, Secretary Ridge reportedly stated "in response to intelligence reports concerninganti-U.S. terrorist group intentions and the recent attacks in Saudi Arabia and Morocco (15) we are raising the HSASto Orange". "While there is not credible, specific information with respect to targets or method ofattack, the use of tactics similar to those seen in recent terrorist attacks overseas include small armsequipped assault teams, large vehicle-borne improvised explosive devices, and suicidebombers." (16) Simultaneous with this announcement, DHS Under Secretary for Border and Transportation SecurityAsa Hutchinson announced at a press conference on Capitol Hill that the alert level had been raisedbecause "there is increased specificity in what we hear, but not necessarily in terms of thetarget." (17) On the following day FBI Director Mueller stated that there was no specific informationregarding potential targets or the timing of an attack. DOD Secretary Rumsfeld reportedly stated thatsame day that some Al Qaeda leaders in Iran were plotting attacks. (18) In this instance, a number of senior members of the Administration discussed the informationconsidered in the raising of the alert level, and one of the Secretary of Homeland Security's principaldeputies offered conflicting information regarding the specificity of that information. December 21, 2003 - January 9, 2004 Fifth time threat-level raised to Orange On December 21, 2003, Secretary of Homeland Security Ridge stated that the United Statesintelligence community had received a substantial increase in threat-related intelligence reports andthat credible sources suggested the possibility of attacks against the homeland around the holidayseason and beyond. "The information we have indicates that extremists abroad are anticipatingnear-term attacks that they believe will either rival or exceed the attacks that occurred in New Yorkand the Pentagon and the fields of Pennsylvania nearly two years ago." (19) On numerous occasions since the inception of the HSAS a variety of senior governmentofficials have been quoted saying that it may never be known if raising the alert level stopped aterrorist act from occurring. However, two days after the alert level was raised for the fifth timesince its creation, the Secretary of Defense stated that "there's no question that there are any numberof terrorist acts that were stopped prior to their actually occurring." (20) Also, six days after thisHSAS threat level was lowered, the FBI Director stated that he did not foresee a time when thecountry could drop its guard and that "we probably will at some point in time have anotherattack." (21) There were two public discussions in 2004 of threat information of a significant nature thatproduced some anxiety among U.S. citizens and frustration on the part of the Congress. Neither ofthe following instances resulted in a change of the HSAS. On March 24, 2004, the FBI issued a threat advisory indicating that the Texas oil industrymay have been targeted by terrorists. While DHS is statutorily responsible for public advisoriesrelating to the announcement of homeland security threats, specifically as they pertain to alertinginfrastructure owners and operators of threat related information, the advisory came solely from theFBI. As House Committee for Homeland Security Chairman Christopher Cox stated two-weeksafter this occurrence, "Clearly this is a very troubling development. Was it simply a one-time glitchor has there been a breakdown in communications between some of our key federal agencies?"Chairman Cox added, "Congress and the American people need to know, given the dangerous,uncertain times we live in today, cooperation among all authorities is more important than ever. Wesimply can't afford to be sending confusing messages to a nervous public." (22) May 26, 2004 , On May 26, 2004, Secretary Ridge appeared on five television news showsstating that although the prospect of a terrorist attack is significant, Americans should "go aboutliving their lives and enjoying living in this country." At 3 p.m. that same day Attorney GeneralAshcroft and Federal Bureau of Investigation Director Mueller held a press conference and gave awarning to the American public. The Attorney General announced that based on "credibleintelligence from multiple sources, Al Qaeda intends to attack the United States in the next fewmonths. This disturbing intelligence indicates Al Qaeda's specific intention to hit the United Stateshard." Ashcroft said the intelligence -- along with recent public statements attributed to Al Qaeda-- "suggest that it is almost ready to attack the United States." He further stated that after the March11 train bombings in Madrid, Spain, an Al Qaeda spokesman said the network had completed "90percent of preparations" to attack the United States. (23) During this press conference a reporter asked if there was credible intelligence suggestingthe United States is going to be attacked between now and the election, why the threat level had notbeen raised. Attorney General Ashcroft responded that "the Homeland Security Council, led bySecretary Ridge, would make such a decision, and for me to try to speak for them at this time wouldbe inappropriate." (24) After Mr. Ashcroft's announcement, Mr. Ridge seemed surprised by the Attorney General's warning.Asked why the National Color-code alert had not been raised, Mr. Ridge replied "there is nothingspecific enough (to raise the alert level)." This seemingly uncoordinated effort was followed by a response from RepresentativeChristopher Cox, Chairman of the House Select Committee on Homeland Security. "Disseminationby our government of sensitive terrorism warnings must be closely coordinated across ourintelligence and law enforcement communities," Cox said. "In the Homeland Security Act, DHS wasassigned the central coordinating role in this process. The absence of Secretary Ridge fromyesterday's news conference held by the attorney general and the FBI director, and the conflictingpublic messages their separate public appearances delivered to the nation, suggests that the broadand close interagency consultation we expect, and which the law requires, did not take place in thiscase." (25) These last two examples are cited by many observers as suggesting a general lack ofcoordination and unity in message of warnings to the nation of threats, and also reflecting a lack ofoverall collaboration between DHS and other federal intelligence community and law enforcementorganizations. Homeland Security employees have complained that their CIA and FBI colleaguesshow them little respect. Intelligence agents reportedly counter saying that DHS has been known togo public with terror alerts based on information that other agencies found to be sketchy. (26) This latter contention doesnot seem to be supported by the pattern of Administration officials, other than the DHS Secretary,openly discussing threats to the Nation. August 1 - November 10, 2004 Sixth time threat-level raised to Orange On August 1st, 2004, Secretary of Homeland Security Ridge stated that the HSAS was beingraised to Orange based on threat intelligence that indicated Al Qaeda was planning attacks againstfinancial institutions in New York, Washington, D.C., and New Jersey prior to September 11, 2001.In announcing this threat level change, the DHS Secretary Ridge stated that the United States hadnew and unusually specific information about where al Qaeda would like to attack. The following day, Monday, August 2, 2004 White House Homeland Security Advisor FranTownsend similarly stated that the increase in threat level was based on information showing thatAl Qaeda had been surveilling financial targets in 2000 and 2001. However, she also added that themost recent intelligence included mention of threats to the U.S. Capital and Members of Congress. This prompted Washington, D.C. Capitol Police Chief to remark that the briefings he had receivedon the recent intelligence did not speak to specific, credible, direct threats against Congress as aninstitution, or its Members. (27) Secretary Ridge did not mention the Capital or Congress in hisstatement announcing the increase in the threat level. However, one month later, Secretary Ridgereportedly admitted that though the Administration viewed the threat as "credible," the informationwas "sketchy and incomplete." (28) On October 12, 2004, in view of the uncertainty of the intelligence that was presented andthe subsequent announcements regarding the threat environment, Senator Mark Dayton temporarilyclosed his Washington, D.C. Office, " based upon that information, I have decided to close my officeuntil after the upcoming election. I do so out of extreme, but necessary, precaution to protect thelives and safety of my Senate staff and my Minnesota constituents, who might otherwise visit myoffice in the next few weeks. I feel compelled to do so, because I will not be here in Washington toshare in what I consider to be an unacceptably greater risk to their safety." (29) During this threat level change, a senior member of the White House proffered additionalinformation as to the reason the threat level was raised in Washington, D.C. The additionalinformation led to further confusion, producing follow-on statements and actions by the WashingtonD.C. Police Chief and a Member of Congress that further called into question the credibility of theoriginally announced information that led to the raising of the HSAS. Given the history of these seemingly uncoordinated threat notifications, local governmentsand the public have complained about being confused by the varying details supporting the decisionto raise the alert level. Many have lost confidence in the system. In February 2003, the Governor of Hawaii decided to keep Hawaii at the blue (guarded) levelwhen the federal government raised its level to orange (high risk). Monetary cost of increasedsecurity and the public's psyche were figured into the decision as well as the potential loss of life. Ed Teixeira, vice director of the civil defense division of the Hawaii's Department of Defensereportedly commented that, "just because [Secretary of Homeland Security Tom] Ridge and[Attorney General John] Ashcroft go on TV and say we are on orange, it doesn't mean states andcounties have to be at orange." (30) Though a lack of information regarding place and timing of anattack was noted as the reason to not follow the federal government's recommendation regardingraising the alert level, it is equally telling that the Hawaii State Homeland Security advisor pointedto the Secretary of Homeland Security and the the Attorney General as the individuals Hawaii Stateofficials listen to regarding threat warnings. Business leaders argued for better threat information from law enforcement, as well as bettercoordination among agencies providing threat information. Specifically, they said that they did notreceive sufficient specific threat information, and frequently received threat information frommultiple government agencies. (31) Some federal agencies, as well as state and local officialsreported hearing about notification of national threat level changes from other entities, such as theFBI and media sources, before being notified by DHS. (32) There have been examples and findings that speak to the issue of coordinated warnings andunity of message. A significant finding of the USS Cole Commission acknowledged thatcontradictory threat levels played a role in the level of protection of the ship on the day of theattack. (33) Similarly, theCommission on the Intelligence Capabilities of the United States regarding Weapons of MassDestruction reported on the confusion associated with threat warning products destined for thePresident and senior decision makers. (34) "The American public, state and local law enforcement,governors and mayors, and private sector officials with responsibility for critical infrastructure alldeserve crystal clarity when it comes to terrorism threat advisories." (Representative ChristopherCox (R-Calif.), Chairman of the House Select Committee on Homeland Security) A number of options exist that include clarifying DHS's primacy in alerting the Nation ofimpending threats, eliminating the Homeland Security Advisory System, or transferring the nationalthreat notification responsibility to the National Counter Terrorism Center. One issue is whether the intent of Section 201d7 (35) of the Homeland Security Act of 2002 was to give DHS explicitauthority and responsibility to be the sole federal entity charged with conveying homeland securitythreat information to the American people. In delivering to Congress the proposed legislation tocreate the Department of Homeland Security, President Bush recommended that "one departmentcoordinate communication with State and local governments, private industry, and the Americanpeople about threats and preparedness." (36) Section102(c)(3) of the Homeland Security Act also states thatthe Secretary of Homeland Security has the authority and responsibility for "distributing or, asappropriate, coordinating the distribution of warnings and information to State and local governmentpersonnel, agencies, and authorities and to the public." Congress could reemphasize DHS' primacyin alerting the Nation of impending threats. This might put other Agency officials on notice as towhom is authorized to be the public face of national threat notifications. Another option would beto allow other Departments to disseminate threat information regarding the security of the homelandwhen such information is deemed credible and extremely time-sensitive (exigent circumstances). Given the short history of the HSAS, uncoordinated warning efforts, lack of uniformity inthe type of information conveyed, and an increasingly wary populace as to the credibility of themessage, Congress could choose to eliminate the system. The natural question that follows is whatwould the replacement system be and would it be an improvement on the current system. One could argue that, given the uniqueness of each threat situation requiring acommunication to the public, threat notifications may not allow for a system per se. According tothis line of reasoning, each "warning-notice" should be handled as its own entity. Threat information,geographic location, target location, timing of perceived attack, defensive measures, and the likeshould be addressed individually and not formulated to fit into a neat category of threat-levels. Thismight be problematic for a number of reasons. First, many federal and state programs are tied to thecurrent color-code with numerous actions and funding decisions tied to a raising or lowering of thealert. Secondly, though cumbersome and non-specific, the current HSAS allows for an assessment,by federal and state governments, the private sector, and the public as to a general threat level thatcomes with certain expectations regarding the federal response. Lastly, if a warning-notice typesystem were introduced, the inevitable question would arise regarding how one compares today'sthreat warning to past color-coded warnings and other warning-notices. As stated in the Intelligence Reform and Terrorism Prevention Act of 2004, a mission of theNational Counter Terrorism Center is to serve as the primary organization for analyzing andintegrating all intelligence possessed or acquired by the United States Government pertaining toterrorism and counter terrorism (except intelligence pertaining exclusively to domestic terrorists anddomestic counter terrorism) and to serve as the central and shared knowledge bank on known andsuspected terrorists and international terror groups, as well as their goals, strategies, capabilities, andnetworks of contacts and support. (37) Since the relevant Departments concerned with terrorism are represented at the NCTC andlegislatively NCTC is the focal point of all federal analytical and strategic operational planningterrorism efforts, this entity may be well positioned to review all applicable information regardingthe terrorist threat and also coordinate the warning message to be conveyed to the public. One optionwould be to designate the NCTC the federal government's communicator of threat information tothe Nation. Precedence exists for this option as Secretary Ridge and the Director of the NCTC(formerly the Terrorist Threat Integration Center) held a joint press conference discussing the threatenvironment and suggested protective measures. (38) Formalizing the NCTC as the national threat messenger wouldallow Congress to hold one organization (NCTC) responsible for terrorism analysis and the warningsthat are derived therein. DHS could continue to provide specific advice regarding protectivemeasures to the private sector, state and local governments, and the public. However, the advice andcollaborative efforts would be based on threat information compiled and communicated by theNCTC. Congress could include language to allow for other Departments to disseminate threatinformation under exigent circumstances. Whether the threat notification process continues in the current form of the HSAS, iseliminated and replaced by situation specific warning-notices, or is transferred to the NCTC or someother entity, the issue remains one of coordination and unity of message, rather than in what formthe threat information should be conveyed. Undoubtedly, numerous government agencies willcontinue to comment on various aspects of a given threat condition. However, critics argue thatfuture national threat announcements should occur in a coordinated manner that allows for anunambiguous message. Due to a lack of coordination and unity in message it appears that the generalpublic and affected localities are becoming desensitized or disinterested in the information containedin national threat warning notification messages. The lack of confidence brought on by confusionin the current notification process could be a severe liability in an actual emergency.
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A perceived lack of coordination in the federal government's warning notification processand inconsistent messages regarding threats to the homeland have led to an erosion of confidencein the information conveyed to the Nation. Congress is now considering legislation( H.R. 1817 , The Department of Homeland Security Authorization Act for FY2006) toreform the Homeland Security Advisor System to allow for greater confidence in the threatinformation conveyed to the Nation. Since September 11, 2001, numerous federal government organizations have notified thepublic of threats to the Nation. At times, warnings have been issued in a government-widecoordinated manner; other times this has not been the case. In each situation that has led toincreasing the threat level, a number of organizations have made public pronouncements regardingthe nature of the threat prior to, during, or after the raising of the alert-level. The informationconveyed to the public often has been inconsistent regarding the threat or the timing of a suspectedattack. This lack of coordination and unity in message has led to a dilution in the American public'sbelief in the pronouncements and a questioning of the utility of the Homeland Security AdvisorySystem (HSAS). The focus of this paper is the federal government's coordination efforts in publiclyalerting the Nation of threats to the homeland. The report reviews past warnings and changes in thealert level, organizations that have made public statements regarding threats to the Nation, andexamples of how this lack of unity might lead to confusion and misinterpretations of the threat level.Options for Congress are provided regarding delineation of roles and responsibilities and whichgovernment entity should be held accountable for warning the Nation of threats to the homeland . This paper may be updated based on future National threat notifications or changes in thenotification system. For a discussion and options regarding the Homeland Security AdvisorySystem's (HSAS) level of detail with respect to disseminated warnings, Department of HomelandSecurity's suggested protective measures, coordination of the HSAS with other current federalwarning systems, or the costs associated with threat levels changes see CRS Report RL32023 , Homeland Security Advisory System: Possible Issues for Congressional Oversight .
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There is no statutory definition of homeland security that reflects the breadth of the enterprise as currently understood. Although there is a federal Department of Homeland Security, it is neither solely dedicated to homeland security missions, nor is it the only part of the federal government with significant responsibilities in this arena. The Department of Homeland Security (DHS) was established by the Homeland Security Act of 2002 ( P.L. 107-296 ), which was signed into law on November 25, 2002. The new department was assembled from components pulled from 22 different government agencies and began official operations on March 1, 2003. Since then, DHS has undergone a series of restructurings and reorganizations intended to improve its effectiveness and efficiency. Although DHS does include many of the homeland security functions of the federal government, several of these functions or parts of these functions remain at their original executive branch agencies and departments, including the Departments of Justice, State, Defense, and Transportation. Not all of the missions of DHS are officially "homeland security" missions. Some components have historical missions that do not directly relate to conventional homeland security definitions, such as the Coast Guard's environmental and boater safety missions, and Congress has in the past debated whether FEMA and its disaster relief and recovery missions belong in the department. Some criminal justice elements could arguably be included in a broad definition of homeland security. Issues such as the role of the military in law enforcement, monitoring and policing transfers of money, human trafficking, explosives and weapons laws, and aspects of foreign policy, trade, and economics have implications for homeland security policy. Rather than trying to resolve the question of what should or should not be considered a part of homeland security, this report is a survey of issues that have come up in the context of homeland security policy debates. After initial discussion of the definitions of homeland security, the homeland security budget, and the role of homeland security actors in the intelligence community, the report groups the issues into five general themes: Counterterrorism and Security Management; Border Security and Trade; Disaster Preparedness, Response, and Recovery; Cybersecurity; and DHS Management Issues As each topic under these themes is introduced, the author of the section is listed, along with their contact information. In many cases, a specific CRS report is highlighted as a source of more detailed information. This report is neither exhaustive nor exclusive in its scope, but representative of the broad array of issues likely to be taken up in one way or another by the 115 th Congress in the coming months. The report includes many issues that were touched upon in the 114 th Congress through legislation or hearings, and remain unresolved. Some specific issues or issue areas are explored from a variety of perspectives in other CRS work (e.g., issues with law enforcement, domestic policy, or national security aspects), and the reader is encouraged to reach out to CRS directly or explore the CRS website to take full advantage of the products available to them on these matters. While this report may be updated, it should be viewed as an introduction, not a legislative tracker. Therefore, some issues currently under debate are not included as a focal item in this report, as the state of the debate is highly dynamic (e.g., the Administration's proposed construction of a wall on the U.S.-Mexico border), and other CRS analytical products provide more current analysis than can practically be provided in a report of this breadth. [author name scrubbed], Specialist in Homeland Security Policy and Appropriations ( [email address scrubbed] , [phone number scrubbed]) For more information, see CRS Report R44621, Department of Homeland Security Appropriations: FY2017 , coordinated by [author name scrubbed], and CRS Report R44052, DHS Budget v. DHS Appropriations: Fact Sheet , by [author name scrubbed]. From FY2003 through FY2015, according to data from the Office of Management and Budget (OMB), the entire U.S. government spent almost $807 billion (in nominal dollars) on "homeland security"—defined in law as "those activities that detect, deter, protect against, and respond to terrorist attacks occurring within the United States and its territories." Such spending peaked in FY2009 at $73.8 billion. The OMB indicated that its initial estimate of the total budget for homeland security activities for FY2016 was $71.7 billion. By comparison, the budget for the Department of Homeland Security has grown from $31.2 billion in FY2003, when it did not have its own appropriations bill, to $63.5 billion in FY2015, the last year for which we have complete budget data as of the date of publication. Roughly $36.7 billion of that amount, or 57.8%, was considered "homeland security" spending by OMB's accounting under the above definition. Some argue that the definition in law is too focused on explicit and directly attributable counterterrorism activities compared to broader theories that have been part of the national discussion, which consider immigration and border control or disaster response as a part of homeland security. For FY2017, the Obama Administration requested $47.3 billion in discretionary budget authority for DHS, including over $6.7 billion to pay for the costs of major disasters under the Stafford Act. Additional Overseas Contingency Operations (OCO) funding was requested by the Administration for the Coast Guard as a transfer from the U.S. Navy. Neither the Senate bill nor the House bill that were reported out of their respective appropriations committees in response to that request received floor consideration. On September 29, 2016, President Obama signed P.L. 114-223 into law, which contained a continuing resolution that funded the government at the same rate of operations as FY2016, minus 0.496% through December 9, 2016. A second continuing resolution was signed into law on December 10, 2016 ( P.L. 114-254 ), funding the government at the same rate of operations as FY2016, minus 0.1901%, through April 28, 2017. A third continuing resolution extended funding at that rate through May 5, 2017. On March 16, 2017, the Trump Administration submitted an amendment to the FY2017 budget request. The amendment proposed $3 billion more in funding for DHS, including funding for construction of a border wall and increases in staffing for U.S. Customs and Border Protection and Immigration and Customs Enforcement that had been called for by President Trump in Executive Orders signed January 25, 2017. On May 5, 2017, President Trump signed into law P.L. 115-31 , Division F of which was the Department of Homeland Security Appropriations Act, 2017. The act included $49.3 billion in discretionary budget authority for DHS for FY2017, $1.1 billion of which was included as supplemental appropriations in response to the March request and emerging developments. The act included a finalized reorganization of most of the structure of DHS appropriations intended to improve transparency. However, the appropriations for the U.S. Coast Guard continue to be presented in their old structure due to complications with their financial management system. The current budget environment will likely present challenges to homeland security programs, DHS components, and the department as a whole, going forward. The funding demands of ongoing capital investment efforts, such as the proposed border wall and ongoing recapitalization efforts, and staffing needs for cybersecurity, border security, and immigration enforcement, will compete with one another for limited funding across the government and within DHS. The potential impact of the changing budget environment is discussed at various points throughout this report. [author name scrubbed], Research Fellow, Intelligence and National Security Policy ( [email address scrubbed] , [phone number scrubbed]) Heidi Peters, Research Librarian ( [email address scrubbed] , [phone number scrubbed]) While many think of homeland security only in terms of DHS, it is a primary mission of the entire Intelligence Community (IC). In the years since 9/11, the "wall" between foreign and domestic intelligence has fallen and many efforts have been initiated to better integrate the capabilities residing in intelligence and law enforcement organizations. "National intelligence" has come to mean "all intelligence," not just foreign intelligence. The many barriers between foreign and domestic intelligence that existed prior to 9/11 were intended to prevent government spying on U.S. persons and focused the IC on foreign intelligence. The tragedy of the 9/11 attacks overcame earlier concerns and led Congress and the executive branch to enact legislation, policies, and regulations designed to enhance information sharing across the U.S. government. The Homeland Security Act of 2002 ( P.L. 107-296 ) gave the DHS responsibility for fusing law enforcement and intelligence information relating to terrorist threats to the homeland. Provisions in the Intelligence Reform and Terrorist Prevention Act (IRTPA) of 2004 ( P.L. 108-458 ) established the National Counterterrorism Center (NCTC) as the coordinator at the federal level for terrorism information and assessment and created the position of Director of National Intelligence (DNI) to provide strategic management across the IC. New legal authorities accompanied these organizational changes. At the state and local level, initiatives to improve collaboration across the federal system, such as the FBI-led Joint Terrorism Task Forces (JTTFs), have expanded—the number of JTTFs across the country grew from 34 to over 100 between 2001 and 2017—and new ones, such as DHS's National Network of Fusion Centers (NNFC), have been put in place. The "community" of U.S. government entities that perform some kind of intelligence-related activity has gradually evolved into 17 organizations/agencies that span six separate government departments and two independent agencies. Two intelligence elements of DHS and one element of the FBI are most closely associated with homeland security. DHS's missions include "preventing terrorism and enhancing security; securing and managing our borders; enforcing and administering our immigration laws; strengthening cyberspace and critical infrastructure; and strengthening national preparedness and resilience to disasters." DHS's Office of Intelligence and Analysis (OIA) provides intelligence support across the full range of DHS missions. OIA combines the unique information collected by DHS components as part of their operational activities (e.g., at airports, seaports, and the border) with foreign intelligence from the IC; law enforcement information from federal, state, local, and tribal sources; private sector data about critical infrastructure and key resources; and information from domestic open sources to develop homeland security intelligence. OIA analytical products focus on a wide range of homeland security threats to include foreign and domestic terrorism, border security, human trafficking, and public health. OIA's customers range from the U.S. President to border patrol agents, Coast Guard personnel, airport screeners, and local first responders. Much of the information sharing is done through the NNFC—with OIA providing personnel, systems and training. The U.S. Coast Guard (USCG), made part of DHS in 2002, has intelligence elements that deal with information relating to maritime security and homeland defense. The USCG's responsibilities include protecting citizens from the sea (maritime safety), protecting America from threats delivered by the sea (maritime security), and protecting the sea itself (maritime stewardship). Its diverse mission sets and broad legal authorities allow it to fill a unique niche within the IC. The FBI functions as both an intelligence and law enforcement agency. Immediately after the attacks of September 11, 2001, investigators highlighted a number of obstacles to information sharing among the nation's intelligence and law enforcement communities, and called for related reforms. In the decade following 9/11, a number of laws and executive orders included provisions designed to improve the FBI's counterterrorism efforts. For example, the IRTPA of 2004 ( P.L. 108-458 ) directed the FBI Director "to develop and maintain a specialized and integrated national intelligence workforce consisting of agents, analysts, linguists, and surveillance specialists who are recruited, trained, and rewarded in a manner which ensures the existence within the FBI of an institutional culture with substantial expertise in, and commitment to, the intelligence mission of the Bureau." The FBI Intelligence Branch "oversees intelligence policy and guidance." It includes the Directorate of Intelligence, "the FBI's dedicated national intelligence workforce." The directorate has "clear authority and responsibility for all Bureau intelligence functions" and includes intelligence elements and personnel that reside at FBI Headquarters and in each FBI field division. Such elements play a role in much of the investigative work that the FBI pursues. For example, intelligence is central to FBI efforts to thwart national security threats. Such activity is broadly managed by the FBI National Security Branch which includes: The Counterintelligence Division. It focuses on preventing theft of sensitive information and advanced technologies. The Counterterrorism Division. It oversees counterterrorism investigations and the JTTFs located in FBI field divisions. The High-Value Detainee Interrogation Group. It is a multiagency body administered by the FBI and "brings together intelligence professionals from the U.S. Intelligence Community to conduct interrogations that strengthen national security and that are consistent with the rule of law." The Weapons of Mass Destruction Division. It helps coordinate intelligence-related efforts designed to prevent the use of chemical, biological, radiological, and nuclear weapons. The Terrorist Screening Center. It maintains the U.S. government's consolidated watch list of known or suspected terrorists. Law enforcement information is expected to be shared with other intelligence agencies for use in all-source products. In 2016 testimony to the Senate Committee on Homeland Security and Governmental Affairs, then-FBI Director James Comey commented on the importance of sharing intelligence within the broader context of the FBI's "intelligence transformation:" Integrating intelligence and operations is part of the broader intelligence transformation the FBI has undertaken in the last decade. We are making progress, but have more work to do. We have taken two steps to improve this integration. First, we have established an Intelligence Branch within the FBI headed by an executive assistant director (EAD). The EAD looks across the entire enterprise and drives integration. Second, we now have special agents and new intelligence analysts at the FBI Academy engaged in practical training exercises and taking core courses together. As a result, they are better prepared to work well together in the field. Our goal every day is to get better at using, collecting and sharing intelligence to better understand and defeat our adversaries. Domestic surveillance issues will likely be a concern for the 115 th Congress principally because certain provisions of the Foreign Intelligence Surveillance Act (FISA) of 1978 ( P.L. 95-511 ), primarily those associated with Title VII, will sunset on December 31, 2017. FISA provides a statutory framework regulating when government agencies may gather foreign intelligence through electronic surveillance or physical searches, capture the numbers dialed on a telephone line (pen registers) and identify the originating number of a call on a particular phone line (with trap and trace devices), or access specified business records and other tangible things. Authorization for such activities is typically obtained via a court order from the Foreign Intelligence Surveillance Court (FISC), a specialized court created to act as a neutral judicial decision maker in the context of FISA. The 9/11 attacks prompted a new look at FISA's surveillance and search provisions. Major revisions are associated with several pieces of legislation: Intelligence Authorization Act (IAA) for Fiscal Year (FY) 1999 ( P.L. 105-272 ); USA PATRIOT Act of 2001 ( P.L. 107-56 ), IRTPA of 2004 ( P.L. 108-458 ), Protect America Act of 2007 ( P.L. 110-55 ), and the FISA Amendments Act of 2008 ( P.L. 110-261 ). The USA FREEDOM Act of 2015 ( P.L. 114-23 ), enacted during the 114 th Congress, reauthorized three amendments to FISA known as the "roving" wiretap provision, the "Section 215" provision, and the "lone wolf" provisions. Distinctions between the three amendments include Multipoint, or "roving" wiretaps allow wiretaps to follow an individual even when he or she changes the means of communication (i.e., wiretaps which may follow a target even when he or she changes phones). If it had been allowed to expire, FISA provisions would require a separate FISA Court authorization to tap each device a target uses. "Section 215" broadened the types of records and "other tangible things" that can be made accessible to the government under FISA. If it had been allowed to expire, FISA provisions would have read as they did prior to passage of the USA PATRIOT Act, and accessible business records would have been limited to "common carrier, public accommodation facility, physical storage facility, or vehicle rental facility." The "lone wolf" provision allows the government to monitor individuals acting alone and potentially engaged in international terrorism, providing that they are not citizens or permanent residents of the United States. If it had been allowed to expire, there would have been no provision for individuals acting alone. Title VII was added to the original FISA legislation pursuant to the FISA Amendments Act of 2008 ( P.L. 110-261 ) with a sunset clause that repealed Title VII on December 31, 2012. The FISA Amendments Reauthorization Act of 2012 ( P.L. 112-238 ) authorized a five-year extension—such that Title VII will be automatically repealed on December 31, 2017, unless the 115 th Congress passes legislation to extend it. Section 702 permits the Attorney General and the DNI to jointly authorize targeting of persons reasonably believed to be located outside the United States in order to acquire foreign intelligence information. However, it is limited in scope. For example, it is limited to targeting non-U.S . persons, the targeting procedures must be reasonably designed to prevent the intentional acquisition of any communication where the sender and all intended recipients are known at the time of the acquisition to be located in the United States, and procedures must be consistent with Constitutional protections afforded by the 4 th Amendment. Once authorized, such acquisitions may last for periods of up to one year. If it is allowed to expire, orders in effect on December 31, 2017, would be allowed to continue through their expiration date. However, no new orders under Section 702 could be issued after the sunset date. The "wall" between domestic and foreign intelligence has come down metaphorically, but barriers to information sharing and collaboration remain between the IC and law enforcement entities, between IC entities in the various levels of government—federal, state, local, tribal, territorial—and between the public and private sector. There are a number of efforts underway to overcome those barriers. For example, the White House-led Information Sharing and Access Interagency Policy Committee (ISA IPC) focuses on government-wide standards and architecture, security and access, associated privacy protections, and best practices. DHS has developed a Critical Infrastructure Information Sharing and Collaboration Program (CISCP) that shares threat, incident and vulnerability information between government and industry across critical infrastructure sectors such as the chemical, energy, dams, and financial services sectors in order to meet its public-private cybersecurity data sharing and analytical collaboration mission. The FBI partners with businesses, academic institutions, state and local law enforcement agencies, and other participants through a program called InfraGard. The Department of State promotes security cooperation through its Overseas Security Advisory Council partnering with business and private sector interests worldwide. Congress may choose to explore how these information-sharing organizations, and others, are measuring progress in efforts such as CISCP. Based on those metrics, it may attempt to assess the United States' current situation in terms of information sharing and collaboration on homeland security-related issues such as cybersecurity, border security, transportation security, disaster response, drug interdiction, critical infrastructure protection, and homegrown violent extremism. As Congress reviews cases of collaboration between multiple agencies, it may examine if it is clear which agency has the lead, and whether any single organization is accountable if a collaborative arrangement fails. [author name scrubbed], Specialist in Science and Technology Policy ([email address scrubbed], [phone number scrubbed]) The Directorate of Science and Technology (S&T) has primary responsibility for establishing, administering, and coordinating DHS R&D activities. The Domestic Nuclear Detection Office (DNDO) is responsible for research and development (R&D) relating to nuclear and radiological threats. Several other DHS components, such as the Coast Guard, also fund R&D and R&D-related activities related to their missions. The Common Appropriations Structure that DHS introduced in its FY2017 budget includes an account titled Research and Development in seven different DHS components. The Under Secretary for S&T has statutory responsibility for coordination of homeland security R&D both within DHS and across the federal government. The Director of DNDO also has an interagency coordination role with respect to nuclear detection R&D. Both internal and external coordination have been long-standing congressional concerns. Regarding internal coordination, the Government Accountability Office (GAO) concluded in 2012 that because so many components of the department are involved, it is difficult for DHS to oversee R&D department-wide. In January 2014, the joint explanatory statement for the Consolidated Appropriations Act, 2014 ( P.L. 113-76 ) directed DHS to implement and report on new policies for R&D prioritization. It also directed DHS to review and implement policies and guidance for defining and overseeing R&D department-wide. In July 2014, GAO reported that DHS had updated its guidance to include a definition of R&D and was conducting R&D portfolio reviews across the department, but that it had not yet developed policy guidance for DHS-wide R&D oversight, coordination, and tracking. A challenge for external coordination is that the majority of homeland security related R&D is conducted by other agencies, most notably the Department of Defense and the Department of Health and Human Services. The Homeland Security Act of 2002 directs the Under Secretary for S&T, "in consultation with other appropriate executive agencies," to develop a government-wide national policy and strategic plan for homeland security R&D, but no such plan has ever been issued. Instead, in certain areas, the National Science and Technology Council (a White House coordinating entity) has issued R&D strategies in certain topical areas, such as biosurveillance, and the S&T Directorate has developed R&D plans with individual agencies in response to certain specific threats. Provisions regarding R&D coordination have often appeared in congressional report language accompanying homeland security appropriations bills. In the 115 th Congress, they may also be included in DHS reauthorization legislation. John Rollins, Specialist in Terrorism and National Security ( [email address scrubbed] , [phone number scrubbed]) For more information, see CRS Report R41004, Terrorism and Transnational Crime: Foreign Policy Issues for Congress . Terrorism remains a transnational threat that entails risks to U.S. global interests emanating from and manifesting in both the international and domestic environment. Central to U.S. efforts to address transnational terrorism are actions taken to detect, deter, and defeat Al Qaeda and the Islamic State. While recognizing that numerous other terrorist groups may wish to harm U.S. global security interests, the current Administration appears to be primarily focused on addressing threats from Al Qaeda and the Islamic State, their affiliated organizations, and adherents to their violence-based philosophy. Understanding how Al Qaeda and the Islamic State continue to evolve into global entities with a diverse set of actors and capabilities is central to formulating sound strategic policy and overseeing its effective implementation. The past few years have witnessed a continuation in terrorist actions by entities claiming some affiliation with or philosophical connection to Al Qaeda. Many of the past year's global terrorist attacks were conducted by individuals or small terrorist cells that received support ranging from resources and training to having minimal connections, if any, with the terrorist groups to which they claim allegiance. Some argue that recent U.S. counterterrorism successes may be reducing the level of terrorist threats to the nation emanating from core Al Qaeda. U.S. officials suggested that the killing of Osama bin Laden in May 2011 coupled with continuous post-9/11 global military and intelligence counterterrorism actions have significantly degraded Al Qaeda's ability to successfully launch a catastrophic terrorist attack against U.S. global interests. Others suggest that Al Qaeda has changed from an organization to a philosophical movement, making it more difficult to detect and defeat. Still, Al Qaeda, the organization and its affiliates, persist and have drawn the attention of the Trump Administration. The Islamic State (IS, also known as the Islamic State of Iraq and the Levant, ISIL, or ISIS) is a transnational Sunni Islamist insurgent and terrorist group that has expanded its control over parts of Iraq and Syria since 2013. There is debate over the degree to which the overseas members of the Islamic State organization might represent a direct terrorist threat to U.S. facilities and personnel in the region or to the U.S. homeland or whether the more significant concern relates to how unaffiliated individuals not under the control of IS leadership might become inspired to undertake attacks. The forerunners of the Islamic State were part of the insurgency against coalition forces in Iraq. In the years since the 2011 U.S. withdrawal from Iraq, the organization has expanded and contracted its presence in Iraq and broadened its reach and activities in Syria. The Islamic State has thrived in the disaffected Sunni tribal areas of eastern provinces of Syria affected by the civil war. Since 2014, IS forces have killed Syrian and Iraqi adversaries, including some civilians, often from ethnic or religious minorities, and killed hostages, including U.S. citizens. Islamic State attempts to make further gains in Iraq and Syria continue. The group's tactics have drawn international ire, and raised U.S. attention to Iraq's political problems and to the war in Syria. The terrorist threat to U.S. global interests will likely remain an important issue for the Administration and the 115 th Congress. Over the past few years numerous individuals were arrested in the homeland and abroad for conducting attacks and planning terrorism-related activities directed at U.S. national security interests. Many of the attacks—successful and unsuccessful—were of a transnational dimension and included a lone attacker who appears to have become radicalized over the Internet, terrorist organizations wishing to use airliners as platforms for destruction, and individuals attempting to detonate large quantities of explosives or undertaking mass shootings in symbolic areas frequented by large groups of people. The 114 th Congress undertook efforts, largely through hearings, to better understand the nature of terrorism in various geographic regions and assess the effectiveness of U.S. and partnering nations' counterterrorism efforts. Programs and policies that Congress has reviewed include public diplomacy efforts; imposition of sanctions; terrorism financing rules; the nexus between international crime, narcotics, and terrorism; and the relationship between domestic and international terrorism activities. The 115 th Congress may assess the Trump Administration's counterterrorism-related strategies, policies, and programs to ascertain if additional guidance or legislation is required. Any such assessments will likely include considerations of how best to balance perceived risks to U.S. global security interests with other non-security related policy priorities. [author name scrubbed], Specialist in Organized Crime and Terrorism ( [email address scrubbed] , [phone number scrubbed]) For more information, see CRS Report R44521, The Islamic State's Acolytes and the Challenges They Pose to U.S. Law Enforcement , by [author name scrubbed] Congress continues to focus attention on the threat posed by people who have pursued terrorist activity in the homeland. It may be of value for Congress to undertake its policy discussions with a broad understanding of the contours of such terrorist plotting, as well as the general types of actions the government takes to mitigate this threat. Since 2014, the Islamic State (IS) has become the focal point for the bulk of homegrown violent jihadist terrorist plots. According to CRS analysis of publicly available information, IS supporters have accounted for 80 of the approximately 91 homegrown violent jihadist plots between 2014 and February 2017. This includes instances in which people in the United States wanted to travel to Syria to fight with extremist groups in the nation's civil war as well as plots to strike domestic targets. These plots can be broken into three rough categories based on the courses of action that plotters pursued as they attempted to support the terrorist group. The first two categories focus on foreign fighters, the last on people who will not or have not traveled to train or fight overseas, but are willing to do harm in the United States: The Departed — American foreign fighters who plan to leave or have left the United States to fight for the Islamic State. This group includes suspects scheming to travel but who are caught before they arrive in IS territory. The Returned — American foreign fighters who trained with or fought in the ranks of the Islamic State and return to the United States, where they can potentially plan and execute attacks at home. The Inspired — Americans lured—in part—by IS propaganda to participate in terrorist plots within the United States. The desire to become a foreign fighter (captured in either the departed or the returned category) played a role in 47 of the 80 IS-related plots. Almost all of the 47 had people either departing the United States for Syria or considering such a trip. Three of the 47 cases involved investigations of people who had returned from the conflict zone. In 37 cases since the start of 2014, people inspired by the terrorist group's propaganda considered striking targets in the United States. IS has tried to inspire attacks via its propaganda. For example, in May 2016, the group issued an audio recording, particularly encouraging American and European sympathizers to commit attacks in their home countries during the holy month of Ramadan (early June to early July). The January 2016 issue of Dābiq , the Islamic State's English language magazine, praised the married couple reportedly involved in the San Bernardino shooting in December 2015. Aside from the three categories based on the courses of action that IS supporters follow, at least two other sorts of IS foreign fighters pose some threat to U.S. interests. The Lost — unidentified Americans who fight in the ranks of the Islamic State. Such individuals may come home after fighting abroad and remain unknown to U.S. law enforcement. Some American IS fighters will never book a trip back to the United States. (The post 9/11 record of U.S. counterterrorism investigations suggests this prospect. None of the Americans who have fought for al-Shabaab, a terrorist group based in Somalia, are known to have come home to plot attacks.) Finally, some American IS supporters will perish abroad. The Others — foreign IS adherents who radicalize in and originate from places outside of the United States or non-American foreign fighters active in the ranks of the Islamic State. These persons could try to enter the United States from abroad. Preemption and monitoring of possible IS terrorist activity by U.S. law enforcement can be broadly described in terms of interdiction, investigation, and countering violent extremism in the United States. In this sphere, interdiction activities involve—among other things—stopping a suspected terrorist from entering the United States. For example, within the Department of Homeland Security (DHS), components such as Customs and Border Protection (CBP) draw on information from the federal government's consolidated terrorist watchlist as they engage in intelligence-driven screening to mitigate the risk posed by travelers destined for the United States. The federal government has also coordinated with other nations regarding identifying and interdicting foreign fighters. One of the known efforts targeting foreign fighters pursued by DHS involves enhancements to the Electronic System for Travel Authorization (ESTA) used by CBP to vet prospective travelers from visa waiver countries "to determine if they pose a law enforcement or security risk before they board aircraft destined for the United States." In early 2017, the Trump Administration pursued additional broader measures it believed would thwart terrorist travel. In March 2017, the administration revised its January 27, 2017, Executive Order 13769, "Protecting the Nation from Foreign Terrorist Entry into the United States." Effective on March 16, 2017, the revision imposed a 90-day ban on the entry into the United States of certain aliens from Iran, Libya, Somalia, Sudan, Syria, and Yemen. The executive order also suspended the United States Refugee Admissions Program for 120 days and lowered the number of refugees accepted annually from 110,000 to 50,000. Discussion of counterterrorism investigation activities largely focuses on Joint Terrorism Task Forces (JTTFs) led by the Federal Bureau of Investigation (FBI) and supported by local, state, and federal agencies—including DHS. The task forces fill the chief role in coordinating federal counterterrorism cases across the United States, bringing together federal, state, and local participants in the process. JTTFs have been involved in stopping individuals trying to leave the United States to fight with the Islamic State as well as investigating people who have returned from the conflict zone. Beyond U.S. borders, the FBI has legal attachés around the world that coordinate with foreign law enforcement partners to fight terrorist activity. Additionally, the Department of Justice (DOJ) has worked to expand its presence in countries that serve as transit points for foreign fighters. The Obama Administration created a program focused on "proactive actions to counter efforts by extremists to recruit, radicalize, and mobilize followers to violence." The program—dubbed countering violent extremism (CVE)—reputedly covered potentially violent extremists acting from a variety of ideological perspectives (such as homegrown jihadists and white supremacists). It did not involve intelligence gathering or investigative work tied to criminal prosecutions. CVE emphasized tackling the conditions and factors driving recruitment and radicalization by violent extremists—people who promoted political goals by supporting or committing ideologically motivated violence. At DHS, the program largely involved community engagement and partnership efforts. It appears that much of CVE addressed people who were not breaking the law but may have been on the path toward breaking the law by becoming violent extremists (e.g., terrorists). It is unclear what the Trump Administration plans to do with this program, but media outlets have reported the Administration is interested in focusing it exclusively on homegrown violent jihadists. [author name scrubbed], Specialist in Science and Technology Policy ( [email address scrubbed] , [phone number scrubbed]) Following the 2001 anthrax attacks, the federal government created several programs to support the research, development, and procurement of new medical countermeasures against chemical, biological, radiological, and nuclear (CBRN) threats. Despite these efforts, many of the CBRN threats that the government deems likely to pose the highest risk lack available countermeasures. The 115 th Congress may consider the effectiveness of the federal efforts and whether current programs should be continued, modified, or ended, and whether new programs should be established. The research, development, and procurement of new CBRN medical countermeasures for civilian use involves a complex multi-agency process, largely within the Department of Health and Human Services. The Department of Homeland Security provides risk analysis to inform countermeasure prioritization. Recent Congresses have provided HHS new authorities and modified existing authorities to improve the performance, efficiency, and transparency of the multiagency process. However, some key issues remain unresolved, including those related to appropriations, interagency coordination, and countermeasure prioritization. In addition to determining the appropriate amount of funding, Congress may decide whether to return to funding a key procurement program, Project BioShield, through a multiyear advance appropriation. Policymakers may consider whether the legislative changes to planning and transparency requirements have sufficiently enhanced coordination of the multiagency countermeasure development enterprise and congressional oversight. Additionally, Congress may consider whether the current prioritization process appropriately balances effort between threats that have some available FDA-approved countermeasures, such as anthrax and smallpox, and threats which lack any such countermeasure, such as Ebola. [author name scrubbed], Specialist in Science and Technology Policy ( [email address scrubbed] , [phone number scrubbed]) Congress authorized DHS to regulate security at chemical facilities through P.L. 113-254 , the Protecting and Securing Chemical Facilities from Terrorist Attacks Act of 2014. This act repealed the prior statutory authority that had been granted in the Homeland Security Appropriations Act, 2007 ( P.L. 109-295 , §550). The new authority expires in December 2018. As the termination date approaches, the 115 th Congress will likely consider whether the authority should be reauthorized, modified, or allowed to expire. Congress will likely consider whether the DHS Chemical Facility Anti-Terrorism Standards program (CFATS) and associated regulations appropriately balance homeland security and stakeholder needs. Congress may also consider how well DHS has implemented the program and whether the implementation is aligned with current congressional intent. In considering whether to reauthorize CFATS, Congress may reconsider previously raised issues. The Obama Administration and some stakeholders determined that existing regulatory exemptions, such as for community water systems and wastewater treatment facilities, pose potential risks. Environmental and "right-to-know" groups additionally advocate that Congress include requirements for facilities to adopt or identify "inherently safer technologies" and widely disseminate security-related information to first responders and employees. The regulated industry generally opposes granting DHS the ability to require implementation of inherently safer technologies or other specific security measures. Industry stakeholders question the maturity and applicability of the inherently safer technology concept as a security measure and cite the need to tailor security approaches for each facility. The Obama Administration also identified the broad dissemination of chemical security-related information as a potential security concern. However, following the 2013 explosion of the West Fertilizer Company in West, TX, DHS discovered that information about that facility's chemical inventory had not been effectively shared between federal agencies. This led to reconsideration of existing information-sharing policies and Executive Order 13650, "Improving Chemical Facility Safety and Security." Additionally, if Congress decides to reauthorize the program, then it may consider whether to make CFATS permanent or to include another expiration provision. Paul Parfomak, Specialist in Energy Policy, Resources, Science and Industry Division ( [email address scrubbed] , [phone number scrubbed]) For more information, see CRS Report R43604, Physical Security of the U.S. Power Grid: High-Voltage Transformer Substations The electric utility industry operates as an integrated system of generation, transmission, and distribution facilities to deliver electric power to consumers. In the United States, this system has over 9,000 electric generating units connected to over 200,000 miles of high-voltage transmission lines rated at 230 kilovolts (kV) or greater strung between large towers. This network is interspersed with hundreds of large electric power transformers whose function is to adjust electric voltage as needed to move power across the network. High voltage (HV) transformer units make up less than 3% of transformers in U.S. power substations, but they carry 60%-70% of the nation's electricity. Because they serve as vital transmission network nodes and carry bulk volumes of electricity, HV transformers are critical elements of the nation's electric power grid. The various parts of the electric power system are all vulnerable to failure due to natural or manmade events. However, HV transformers are considered by many experts to be among the most vulnerable to intentional damage from malicious acts. Security analysts have long asserted that a coordinated and simultaneous attack on multiple HV transformers could have severe implications for reliable electric service over a large geographic area, crippling its electricity network and causing widespread, extended blackouts. Such an event could have severe electric reliability consequences, demonstrated in recent grid security exercise, as well as serious economic and social consequences. A handful of recent physical attacks on individual transformer substation—most notably a 2013 attack on an HV transformer substation in Metcalf, CA—did not cause widespread blackouts, but did highlight the physical vulnerability of HV transformer substations and drew the attention of both the media and federal officials to the utility industry's substation security efforts. Over the last decade or so the electric utility industry and government agencies have engaged in a number of initiatives to secure HV transformers from physical attack and to improve recovery in the event of a successful attack. These initiatives include coordination and information sharing, spare equipment programs, and grid security exercises, among other measures. Grid security guidelines or standards have been developed to address the physical security of the grid since at least 2002, including standards promulgated by the North American Electric Reliability Corporation (NERC) as voluntary best practices. In November 2014, following the Metcalf attack, the Federal Energy Regulatory Commission (FERC) approved a new mandatory Physical Security Reliability Standard (CIP-014-1) proposed by NERC "to address physical security risks and vulnerabilities related to the reliable operation" of the power grid by performing risk assessments to identify their critical facilities, evaluate potential threats and vulnerabilities, and implement security plans to protect against attacks. As of December 2016, NERC had received initial risk assessments and security plans from transmission owners and operators subject to the standard and was in discussions with FERC officials about how best to audit them. While NERC's physical security standard was viewed by many as an important step in improving grid security, some policymakers have advocated additional measures to facilitate grid recovery in an emergency. For example, a 2015 report by the (DOE) also recommended a DOE-led effort to develop a critical HV transformer reserve as a source of emergency spares in the event of natural disaster or physical attack. The 114 th Congress included provisions in the Fixing America's Surface Transportation (FAST) Act ( P.L. 114-94 ), which became law on December 4, 2015, to facilitate recovery during electric grid emergencies due to physical damage and other causes. The act provides the Secretary of Energy additional authority to order emergency measures to protect or restore the reliability of critical electric infrastructure during a grid security emergency (§1104). The act also requires the Secretary of Energy to submit to Congress a plan for a Strategic Transformer Reserve (§1105). The reserve would store in strategic locations spare large power transformers to temporarily replace critical large power transformers damaged by intentional attack or destructive natural events. This section would authorize the Secretary to establish the reserve six months after submitting the plan to Congress. As of January 2017, DOE intended to submit its plan "in the near future." In addition the DOE's efforts, six industry-led transformer-sharing programs are operating or being developed in the United States. There is widespread agreement among state and federal government officials, utilities, and manufacturers that HV transformers in the United States are vulnerable to terrorist attack, and that such an attack potentially could have catastrophic consequences. Congress has long been concerned about grid security in general, but recent security exercises, together with the Metcalf attack, have focused congressional interest on the physical security of HV transformers, among other specific aspects of the grid. As the electric utility industry and federal agencies continue their efforts to improve the physical security of the grid, the 115 th Congress may consider several key issues as part of its oversight of the sector: industry's implementation of the new physical security standards, DOE's plan for a strategic transformer reserve and related grid security activities, independent private sector efforts to improve HV transformer design and recovery, and the quality of federal information about threats to the grid. [author name scrubbed], Specialist in American National Government, Government and Finance Division ( [email address scrubbed] , [phone number scrubbed]) Continuity of government operations refers to programs and initiatives to ensure that governing entities are able to recover from a wide range of potential operational interruptions. Government continuity planning may be viewed as a process that incorporates preparedness capacities, including agency response plans, employee training, recovery plans, and the resumption of normal operations. These activities are established in part to ensure the maintenance of civil authority, provision of support for those affected by an incident, infrastructure repair, and other actions in support of recovery. Arguably, any emergency response presumes the existence of an ongoing, functional government to fund, support, and oversee recovery efforts. Interruptions for which contingency plans might be activated include localized acts of nature, accidents, technological emergencies, and military or terrorist attack-related incidents. Current authority for executive branch continuity programs is provided in the 2007 National Security Presidential Directive (NSPD) on National Continuity Policy, NSPD-51. To support the provision of essential government activities, NSPD-51 sets out a policy "to maintain a comprehensive and effective continuity capability composed of continuity of operations and continuity of government programs in order to ensure the preservation of our form of government under the Constitution and the continuing performance of national essential functions (NEF) under all conditions." Executive Order (E.O.) 12656, Assignment of Emergency Preparedness Responsibilities, was issued in 1988, and assigns national security emergency preparedness responsibilities to federal executive departments and agencies. E.O. 12656 requires the head of each federal department and agency to "ensure the continuity of essential functions in any national security emergency by providing for: succession to office and emergency delegation of authority in accordance with applicable law; safekeeping of essential resources, facilities, and records; and establishment of emergency operating capabilities." Subsequent sections require each department to carry out specific contingency planning activities in its areas of policy responsibility. Although contingency planning authorities are chiefly based on presidential directives, Congress could consider whether current authorities accurately reflect current government organization and goals, the costs of these programs, potential conflicts that might result from departments and agencies complying with different authorities, and the extent to which government contingency planning ensures that the federal executive branch will be able to carry out its responsibilities under challenging circumstances. [author name scrubbed], Analyst in Homeland Security Policy ( [email address scrubbed] , [phone number scrubbed]) For more information, see CRS Report R44197, U.S. Secret Service: Selected Issues and Executive and Congressional Responses . Since 1865, the U.S. Secret Service (USSS) has investigated counterfeiting, and since 1901, at the request of congressional leadership, has provided full-time presidential protection. Congress has increased its oversight of the USSS due to concern about terrorism threats, several security breaches, and misconduct of USSS personnel. A series of incidents has tarnished the image of the USSS and may have potentially affected its operations. For example, on September 19, 2014, a person gained unauthorized entrance into the White House after climbing the fence. On September 30, 2014, following a House Oversight and Government Reform Committee hearing on the USSS, which addressed this breach and previous incidents it became public that on September 16, 2014, a private security contractor at a federal facility, while armed, was allowed to share an elevator with the President during a site visit, in violation of USSS security protocols. On March 4, 2015, it was reported that two senior USSS special agents, including one who was responsible for all aspects of White House security, disrupted the scene of an investigation of a suspicious package during an elevated security condition at the White House complex. It was further alleged that these two agents were under the influence of alcohol. Both Congress and the USSS responded to the incidents. The USSS conducted a review of its training of personnel and its technology, perimeter security, and operations. Congress conducted a number of oversight hearings on the incidents and USSS policy. At the end of the 114 th Congress, one such hearing was conducted by the House Oversight and Government Reform Committee. The purpose of this hearing was to examine allegations that USSS agents were not receiving compensation for overtime, and review DHS IG reports addressing USSS's protection of sensitive material. Among the criticisms raised at the hearing were assertions that the USSS' investigative mission places an additional burden on USSS agents and distracts from the Service's protection mission, the USSS suffers technology failures that cast doubts on the Service's ability to protect the nation's financial infrastructure, USSS agents are promoted to senior management positions despite alleged misconduct, and USSS senior leadership continues to withhold information pertaining to alleged misconduct from the committee. Congress is likely to continue to pursue these USSS issues in the 115 th Congress. [author name scrubbed], Analyst in Homeland Security Policy ( [email address scrubbed] , [phone number scrubbed]) For more information, see CRS Report R43570, Federal Building and Facility Security: Frequently Asked Questions . The security of federal government buildings and facilities affects not only the daily operations of the federal government but also the health, well-being, and safety of federal employees and the public. Federal building and facility security is decentralized and disparate in approach, as numerous federal entities are involved, and some buildings or facilities are occupied by multiple federal agencies. The federal government is tasked with securing over 446,000 buildings and facilities daily. The September 2001 terrorist attacks, the September 2013 Washington Navy Yard shootings, and the April 2014 Fort Hood shootings focused the federal government's attention on building security activities. This resulted in an increase in the security operations at federal facilities and more intense scrutiny of how the federal government secures and protects federal facilities, employees, and the visiting public. In general, federal facility security includes operations and policies that focus on reducing the exposure of the facility, employees, and the visiting public to criminal and terrorist threats. Each federal facility has unique attributes that reflect its individual security needs and the missions of the federal tenants. According to the Department of Justice's Office of Justice Programs (OJP), there are approximately 20 federal law enforcement entities that provide facility security. Due to the large number and different types of federal facilities, there is no single security standard that applies to every facility. There is, however, an interagency committee responsible for providing a number of standards that address federal facility security. The Interagency Security Committee's (ISC) mission is to "safeguard U.S. nonmilitary facilities from all hazards by developing state-of-the-art security standards in collaboration with public and private homeland security partners." Federal facility security is as diffuse as the number of law enforcement agencies securing them. Individual facilities secured by the same law enforcement agency may be secured in different manners based on specific security needs and threats. This makes it challenging to collect official and comprehensive data on threats to or incidents occurring at federal facilities. [author name scrubbed], Analyst in Homeland Security Policy ( [email address scrubbed] , [phone number scrubbed]) For more information, see CRS Report R44669, Department of Homeland Security Preparedness Grants: A Summary and Issues . Congress has enacted legislation and appropriated grant funding to states and localities for homeland security purposes since 1996. One of the first programs to provide this type of funding was the Nunn-Lugar-Domenici Program which was established by Congress in the 1996 Department of Defense Reauthorization Act and provided assistance to over 150 cities for biological, chemical, and nuclear security. Providing homeland security assistance to states and localities was arguably spurred by the 1993 bombing of the World Trade Center in New York City and the 1995 bombing of the Alfred P. Murrah federal building in Oklahoma City. Following the September 11, 2001, terrorist attacks, Congress increased focus on state and local homeland security assistance by, among other things, establishing the Department of Homeland Security (DHS) and authorizing DHS to administer federal homeland security grant programs. With the increase of international and domestic terrorist threats and attacks against the United States following the end of the Cold War, and the termination of the old federal civil defense programs, a number of policy questions arose regarding homeland security assistance programs. The majority of these questions have not been completely addressed, even though Congress has debated and enacted legislation that provides homeland security assistance to states and localities since 1996. Congressional debate continues on policy questions related to homeland security assistance for states and localities. Some may contend there is a need for the Congress to conduct further oversight hearings and legislate on policy issues related to DHS assistance to states and localities. These potential issues include (1) the purpose and number of assistance programs; (2) the use of grant funding; and (3) the funding level for the grant programs. Generally, each grant program has a range of eligible activities. When Congress authorizes a federal grant program, the eligible activities may be broad or specific depending on the statutory language in the grant authorization. When grant funds are distributed through a competitive process, the administering federal agency officials exercise discretion in the selection of grant projects to be awarded funding within the range of eligible activities set forth by Congress. Some may argue the purpose and number of DHS grant programs have not been sufficiently addressed. Specifically, should DHS provide more all-hazards assistance versus terrorism-focused assistance? Does the number of individual grant programs result in coordination challenges and deficient preparedness at the state and local level? Would program consolidation improve domestic security? Finally, does the purpose and number of assistance programs affect the administration of the grants? Another issue Congress may address is how effectively DHS's assistance to states and localities is being spent. One way to review the use of program funding is to evaluate state and local jurisdictions' use of DHS's assistance. When DHS announces annual state and locality homeland security grant allocations, grant recipients submit implementation plans that identify how these allocations are to be obligated. However, the question remains whether or not the grant funding has been used in an effective way to enhance the nation's homeland security. Annual federal support, through the appropriations process, for these homeland security grant programs is another issue Congress may want to examine considering the limited financial resources available to the federal government. Specifically, is there a need for the continuation of federal support for these programs, or should Congress reduce or eliminate funding? In the past 13 years, Congress has appropriated approximately $33 billion for state and local homeland security assistance. Since the establishment of DHS in 2003, Congress appropriated a high total of funding of $3.5 billion in FY2004, and the lowest appropriated amount was $1.4 billion in FY2013. Kristin M. Finklea, Specialist in Domestic Security ( [email address scrubbed] , [phone number scrubbed]) The United States is the world's largest marketplace for illegal drugs and sustains a multi-billion dollar market in illegal drugs. An estimated 27.1 million Americans (10.1% of the 12 and older population) were current users of illicit drugs in 2015. The most recent National Drug Threat Assessment Summary indicates that Mexican drug trafficking organizations continue to dominate the U.S. drug market. The Drug Enforcement Administration (DEA) outlined this threat: Mexican [transnational criminal organizations (TCOs)] remain the greatest criminal drug threat to the United States; no other groups are currently positioned to challenge them.... By controlling lucrative smuggling corridors across the [Southwest border], Mexican TCOs are able to introduce multi-ton quantities of illicit drugs into the United States on a yearly basis. The poly-drug portfolio maintained by these Mexican TCOs consists primarily of heroin, methamphetamine, cocaine, marijuana, and, to a lesser extent, fentanyl. Mexican criminal networks either (1) transport or (2) produce and transport drugs north across the United States-Mexico border. After being smuggled across the border by criminal networks, the drugs are distributed and sold within the United States. The illicit proceeds may then be laundered or smuggled south across the border. While drugs are the primary goods trafficked by the criminal networks, those networks also generate income from other illegal activities, such as the smuggling of humans and weapons, counterfeiting and piracy, kidnapping for ransom, and extortion. One of the current domestic drug threats fueled, in part, by Mexican traffickers is heroin. Not only has there been an increase in heroin use in the United States over the past several years, but there has been a simultaneous increase in its availability. This availability is driven by a number of factors, including increased production and trafficking of heroin by Mexican criminal networks. Some Mexican farmers have reported abandoning marijuana cultivation in favor of growing opium poppies; the switch may be partly due to the decline in wholesale prices of marijuana in Mexico—which some claim is linked to increased marijuana legalization in the United States—and an increase in U.S. heroin demand. Increases in Mexican heroin production and its availability in the United States have been coupled with increased heroin seizures at the Southwest border. Reportedly, these seizures increased by over 350% between 2008 and 2015. The 115 th Congress may consider a number of options in attempting to reduce drug trafficking from Mexico to the United States. For instance, Congress may question whether the Trump Administration will continue or alter priorities set forth by the Obama Administration's National Southwest Border Counternarcotics Strategy, the overarching strategic goal of which was to "[s]ubstantially reduce the flow of illicit drugs, drug proceeds, and associated instruments of violence across the Southwest border." Policymakers may also be interested in examining various federal drug control agencies' roles in reducing Southwest border trafficking. This could involve oversight of the DEA and its initiatives such as the Organized Crime Drug Enforcement Task Force (OCDETF) program, as well as the Office of National Drug Control Policy and its National Drug Control Strategy and Budget, among others. Kristin M. Finklea, Specialist in Domestic Security ( [email address scrubbed] , [phone number scrubbed]) The flow of money outside legal channels not only presents challenges to law enforcement, but it also has a significant nexus with homeland security policy. Proceeds from illegal enterprises are sometimes used to fund broader destabilizing activities, such as smuggling, illegal border crossings, or more violent activities, such as terrorist operations—including those controlled by the FARC (Revolutionary Armed Forces of Colombia) in Colombia. While this is an issue with a global scope, this section focuses specifically on the policies affected by movement of illicit funds across the Southwest border. As noted in the DEA's National Drug Threat Assessment Summary ¸ "the annual volume of illicit proceeds generated in the United States is approximately $300 billion" and of that amount, "drug sales generate an estimated 21 percent, or $64 billion." Money from the traffickers' illegal sale of drugs in the United States is moved across the border into Mexico, and these funds fuel the drug traffickers' criminal activities. This money is often not deposited directly into the U.S. financial system; instead, it is illegally laundered through mechanisms such as bulk cash smuggling of U.S. currency into Mexico and "repatriation of the funds into the United States via couriers or armored vehicles." Additionally, money may be moved through trade-based money laundering or placed in financial institutions, cash-intensive front businesses, prepaid or stored value cards, or money services businesses. The 115 th Congress may examine interagency coordination to reduce the flow of illicit money (and other goods) across the Southwest border. Various departments and agencies—including the DEA, Federal Bureau of Investigation, U.S. Immigration and Customs Enforcement, U.S. Customs and Border Protection, and the Financial Crimes Enforcement Network (FinCEN)—share responsibility for combating drug-related activity and the flow of illicit proceeds both along the Southwest border and throughout the United States. Many of these agencies are also represented in Mexico, increasing U.S.-Mexican bilateral cooperation. Further, while some efforts explicitly target money laundering and bulk cash smuggling, other investigations might also uncover evidence of illicit proceeds. For instance, operations targeting southbound firearms smuggling may intercept individuals smuggling not only weapons, but cash proceeds from illicit drug sales as well. Kristin M. Finklea, Specialist in Domestic Security ( [email address scrubbed] , [phone number scrubbed]) Mexican traffickers rely on cross-border tunnels to smuggle illicit drugs—primarily marijuana—from Mexico into the United States. At least 224 tunnels have been discovered along the Southwest border since the 1990s, and some of the more recently discovered tunnels are highly sophisticated. Early tunnels were rudimentary "gopher hole" tunnels dug on the Mexican side of the border, traveling just below the surface, and popping out on the U.S. side as close as 100 feet from the border. Slightly more advanced tunnels relied on existing infrastructure, which may be shared by neighboring border cities such as Nogales, AZ, in the United States and Nogales, Sonora, in Mexico. These interconnecting tunnels may tap into storm drains or sewage systems, allowing smugglers to move drugs further and more easily than in tunnels they dug themselves. The most sophisticated tunnels can have rail, ventilation, and electrical systems. In April 2016 authorities uncovered the longest drug smuggling tunnel yet. At over 800 yards, it was equipped with railing, lighting, ventilation, and an elevator. Authorities seized over two thousand pounds of cocaine and over eleven tons of marijuana. U.S. law enforcement uses various tactics to detect these cross-border tunnels. They may use sonic equipment to detect the sounds of digging and tunnel construction and seismic technology to detect blasts that may be linked to tunnel excavation. Another tool for tunnel detection is ground penetrating radar. However, factors including soil conditions, tunnel diameter, and tunnel depth can limit the effectiveness of this technology. Despite these tools, U.S. officials have acknowledged that law enforcement currently does not have technology that is reliably able to detect sophisticated tunnels, and authorities have reportedly never found a tunnel with these technologies. Rather, tunnels are more effectively discovered as a result of human intelligence and tips. U.S. officials have noted the value of U.S.-Mexican law enforcement cooperation in detecting, investigating, and prosecuting the criminals who create and use the cross-border tunnels. As a result, the 115 th Congress may not only consider how to best help U.S. law enforcement develop technologies that can keep pace with tunneling organizations, but also examine whether existing bi-national law enforcement partnerships are effective and whether they may be improved to enhance investigations of transnational criminals. Policymakers may also question how prominently the issue of combating cross-border smuggling tunnels may play within the larger border security framework. Lisa Sacco, Analyst in Illicit Drugs and Crime Policy ( [email address scrubbed] , [phone number scrubbed]) For more information, see CRS Report R43014, U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security , and CRS Report R43014, U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security . U.S. Customs and Border Protection (CBP), within DHS, is America's primary trade enforcement agency, and CBP seeks to balance the benefits of efficient trade flows against the demand for cargo security and the enforcement of U.S. trade laws. Thus, the overarching policy question with respect to incoming cargo is how to minimize the risk that weapons of mass destruction, illegal drugs, and other contraband will enter through a U.S. port of entry (POE), while limiting the costs and delays associated with such enforcement. CBP's current trade strategy emphasizes "risk management" and a "multi-layered" approach to enforcement. With respect to cargo security, risk management means that CBP segments importers into higher and lower risk pools and focuses security procedures on higher-risk flows, while expediting lower-risk flows. CBP's "multi-layered approach" means that enforcement occurs at multiple points in the import process, beginning before goods are loaded in foreign ports and continuing after the goods have been admitted into the United States. In recent years, congressional attention to cargo security has focused on one of CBP's primary tools for risk management, the Customs-Trade Partnership Against Terrorism (C-TPAT) trusted trader program, and on the statutory requirement that 100% of incoming maritime cargo containers be scanned abroad prior to being loaded on U.S.-bound ships. Congress also faces perennial questions about spending levels for POE infrastructure and personnel. Lisa Sacco, Analyst in Illicit Drugs and Crime Policy ( [email address scrubbed] , [phone number scrubbed]) The Customs-Trade Partnership Against Terrorism (C-TPAT) is a voluntary public-private and international partnership that permits certain import-related businesses to register with CBP and perform security tasks prescribed by the agency. In return C-TPAT members are recognized as low-risk actors and are eligible for expedited import processing and other benefits. CBP established C-TPAT in November 2001 following the September 11, 2001 (9/11) terrorist attacks, and the program was authorized as part of the Security and Accountability for Every Port Act of 2006 (SAFE Port Act, P.L. 109-347 ). Proponents of C-TPAT favor increased participation in the program as a way to facilitate legal trade flows. Some businesses, however, have criticized the program for providing inadequate membership benefits, especially in light of the time and financial investments required to become certified as C-TPAT members. Yet there may be no easy way to substantially expand C-TPAT benefits. In the case of land ports, the primary trusted trader benefit is access to dedicated lanes where wait times may be shorter and more predictable. However, adding lanes at land ports is difficult because many of them are located in urban areas with limited space for expansion and with limited ingress and egress infrastructure. In the case of maritime imports, the primary trusted trader benefit is a reduced likelihood of secondary inspection. Only about 6% of all maritime containers are selected for such an inspection, so C-TPAT membership may offer little practical advantage in this regard. In February 2017, the Government Accountability Office (GAO) issued a report outlining challenges in CBP management of the C-TPAT program. GAO recommended that CBP develop: "(1) standardized guidance for field offices regarding the tracking of information on security validations, and (2) a plan with milestones and completion dates to fix the Dashboard so the C-TPAT program can produce accurate data on C-TPAT member benefits." [author name scrubbed], Specialist in Transportation Policy ( [email address scrubbed] , [phone number scrubbed]), and Lisa Sacco, Analyst in Illicit Drugs and Crime Policy ( [email address scrubbed] , [phone number scrubbed]) Section 1701 of the Implementing Recommendations of the 9/11 Commission Act of 2007 ( P.L. 110-53 ) requires that all imported marine containers be scanned by nonintrusive imaging equipment and radiation detection equipment at a foreign loading port by July 1, 2012, unless DHS can demonstrate it is not feasible, in which case the deadline can be extended by two years on a port-by-port basis. DHS has sought a blanket extension for all ports, citing numerous challenges to implementing the 100% scanning requirement at overseas ports. In a report to Congress on the program, CBP identified three main obstacles to implementing 100% scanning at all foreign ports. First, 100% scanning requires significant host state and private sector cooperation, but some foreign governments and business groups do not support 100% scanning. Second, 100% scanning would be logistically difficult. Initial pilots were deployed in relatively low-volume ports with natural chokepoints, but many cargo containers pass through large volume ports with more varied port architectures. Third, 100% scanning would be costly. In February 2012, the Congressional Budget Office (CBO) estimated that 100% scanning at foreign ports would cost an average of $8 million per shipping lane to implement, or a total of about $16.8 billion for all 2,100 shipping lanes. Port operators and foreign partners also absorb additional costs associated with fuel and utilities, staffing, and related expenses. In a letter requesting renewal of the two-year extension, then-DHS Secretary Jeh Johnson stated, I have personally reviewed our current port security and DHS's short term and long term ability to comply with 100% scanning requirement. Following this review, I must report, in all candor, that DHS's ability to fully comply with this unfunded mandate of 100% scanning, even in the long term, is highly improbable, hugely expensive, and in our judgment, not the best use of taxpayer resources to meet this country's port security and homeland security needs. In an October 2015 hearing, DHS officials reiterated their opposition to a 100% scanning strategy in favor of a risk-based and layered security strategy. Major U.S. trading partners also oppose 100% scanning. The European Commission has determined that 100% scanning is the wrong approach, favoring a multilayered risk management approach to inspecting cargo. CBP has tested the feasibility of scanning all U.S.-bound containers at several overseas ports and identified numerous operational, technical, logistical, financial, and diplomatic obstacles, including opposition from host government officials. In a July 2016 hearing, DHS officials restated their opposition to pursuing a 100% scanning strategy. One-hundred-percent scanning conflicts with DHS's general approach to risk management, which seeks to focus scarce inspection resources on the highest-risk containers. By scanning a smaller number of containers, DHS may be able to devote additional resources to each individual scan. This alternative approach is considered important because reviewing the scans is labor-intensive, and scanning fewer containers may allow DHS to subject individual scans to greater scrutiny, and to maintain a lower threshold for opening containers with questionable scanning images. If illicit cargo is estimated to be limited to less than 1% of incoming containers, as CBP believes to be the case, an alternative enforcement strategy may be to focus on a smaller set of only the likeliest containers. This approach would emphasize risk-based scanning along with investment in CBP intelligence to improve targeting, and/or increase CBP personnel, which would allow ports to conduct a larger number of targeted special enforcement operations. [author name scrubbed], Specialist in Transportation Policy ( [email address scrubbed] , [phone number scrubbed]) In January 2007, TSA and the Coast Guard issued a final rule implementing the Transportation Worker Identification Credential (TWIC) at U.S. ports. Longshoremen, port truck drivers, railroad workers, merchant mariners, and other workers at a port must apply for a TWIC card to obtain unescorted access to secure areas of port facilities or vessels. The card was authorized under the Maritime Transportation Security Act of 2002 (MTSA; §102 of P.L. 107-295 ). As of October 2015, the population of TWIC holders was approximately 2.1 million. The card must be renewed every five years. TSA conducts a security threat assessment of each worker before issuing a card. The security threat assessment uses the same procedures and standards established by TSA for truck drivers carrying hazardous materials, including examination of the applicant's criminal history, immigration status, and possible links to terrorist activity to determine whether a worker poses a security threat. A worker pays a fee of about $130 that is intended to cover the cost of administering the cards. The card uses biometric technology for positive identification. Terminal operators were to deploy card readers at the gates to their facilities, so that a worker's fingerprint template would be scanned each time he or she enters the port area and matched to the data on the card. Finding a card reader that worked reliably in a harsh marine environment has proven difficult. On August 23, 2016, the Coast Guard issued a final rule requiring that only the highest-risk maritime facilities install card readers, generally facilities handling dangerous cargoes in bulk or large passenger vessels (> 1,000 passengers). This limited the facilities required to have card readers to about 525 facilities (about 16% of the roughly 3,200 maritime facilities regulated under MTSA). Other facilities, including those handling containerized cargo, would continue to use the TWIC as a "flash pass," but the biometric data on the card would not be used to positively identify the worker. Potential problems with this approach were highlighted by the February 2016 announcement that federal investigators uncovered a "document mill" producing fraudulent TWIC cards in Los Angeles. The final rule becomes effective on August 23, 2018. Currently, the Coast Guard performs spot checks with hand-held biometric readers while conducting port security inspections. GAO and Inspector General audits have been highly critical of how the TWIC has been implemented. A 2013 GAO audit found that the results of a pilot test of card readers should not be relied upon for developing regulations on card reader requirements because they were incomplete, inaccurate, and unreliable. This audit was discussed at a hearing by the House Subcommittee on Government Operations on May 9, 2013, and by the House Subcommittee on Border and Maritime Security on June 18, 2013. Another 2013 GAO audit examined TSA's Adjudication Center (which performs security threat assessments on TWIC applicants and other transportation workers), and recommended steps the agency could take to better measure the center's performance. A 2011 GAO audit found internal control weaknesses in the enrollment, background checking, and use of the TWIC card at ports, which were said to undermine the effectiveness of the credential in screening out unqualified individuals from obtaining access to port facilities. Similarly, a 2016 Inspector General audit found that TSA appears to be more concerned with customer service in administering the cards (e.g., issuing them in a timely manner) than a careful scrutiny of applicants. For instance, it found that applicants believed to be providing fraudulent identification documents were nevertheless issued a TWIC. The 114 th Congress enacted the Essential Transportation Worker Identification Credential Assessment Act ( P.L. 114-278 ) which requires TSA to improve its vetting process, including fraud detection, and requires DHS to commission an outside organization to conduct a comprehensive assessment of the benefits and costs of the TWIC card. For more information, see CRS Report R43356, Border Security: Immigration Inspections at Ports of Entry . At ports of entry (POEs), Customs and Border Protection's (CBP's) Office of Field Operations (OFO) is responsible for conducting immigration, customs, and agricultural inspections of travelers seeking admission to the United States. The vast majority of people entering through U.S. ports are U.S. citizens, U.S. legal permanent residents (LPRs), and legitimate visitors. Thus, CBP office rs' goals are complex in that they are tasked with identify ing and intercept ing dangerous or unwanted (high-risk) people or materials , while also facilitating access for legitimate (low-risk) travelers. The Drug Enforcement Administration has cited the security risks present at POEs, noting that while transnational criminal organizations use a variety of methods to bring drugs across the border, "the most common method ... involves transporting drugs in vehicles through U.S. ports of entry (POEs)." Transnational criminal organizations also transport drugs using commercial trains and busses, which too transit through the POEs. Travelers seeking admission at POEs are required to present a travel document, typically a passport or its equivalent and (for non-U.S. citizens) either a visa authorizing permanent or temporary admission to the United States or proof of eligibility for admission through the Visa Waiver Program (VWP). Foreign nationals are subject to security-related and other background checks prior to being issued a visa or to receiving travel authorization for the VWP. CBP officers at U.S. POEs verify the authenticity of travelers' documents and that each document belongs to the person seeking admission (i.e., confirm the traveler's identity). Identity confirmation relies in part on biometric checks against the Department of Homeland Security's (DHS) Automated Biometric Identification System (IDENT) database (see " Entry-Exit System " section, below). Database interoperability allows CBP officers to check travelers' records against other biographic and biometric databases managed by the Departments of Justice, State, and Defense. The concentration of inspection activity at the border—for travelers and imports—means that sufficient resources must be present in order to minimize congestion and ensure efficient operations. CBP faces pressure to provide for the rapid processing of individuals crossing the border and must balance this demand with its goal of interdicting threats. Moreover, investment in POEs arguably has not kept pace with rapid growth in international travel and trade, and there may be inadequate infrastructure to manage flows at some ports of entry (also see " Port of Entry (POE) Infrastructure and Personnel " section, below). In an effort to streamline admissions without compromising security, CBP has implemented several trusted traveler programs. Trusted traveler programs require applicants to clear criminal and national security background checks prior to enrollment, to participate in an in-person interview, and to submit fingerprints and other biometric data. In return, trusted travelers are eligible for expedited processing at POEs. CBP currently operates three main trusted traveler programs: Global Entry, which allows expedited screening of passengers arriving at 45 U.S. airports and 14 preclearance airports; NEXUS, which is a joint U.S.-Canadian program for land, sea, and air crossings between the United States and Canada, including through dedicated vehicle lanes at 18 land ports; and the Secure Electronic Network for Travelers Rapid Inspection (SENTRI), which allows expedited screening at land POEs on the U.S.-Mexican border, including through dedicated vehicle lanes at 10 land ports. In light of the substantial flow of cargo and travelers at ports of entry, one perennial issue for Congress is how to allocate resources to Office of Field Operations (OFO) for POE personnel and infrastructure. Some in Congress have argued that inadequate personnel levels and infrastructure have contributed to costly delays and unpredictable wait times at ports of entry, particularly at land ports on the U.S.-Mexico border. CBP's front-line enforcement personnel at POEs include CBP officers and agriculture specialists. In general, since 2004, Congress has invested more heavily in enforcement personnel between POEs (i.e., U.S. Border Patrol agents) than in law enforcement personnel at POEs (i.e., CBP officers). However, the Homeland Security Appropriations Act, 2014 ( P.L. 113-76 ) appropriated $256 million to increase the number of CBP officers at POEs by no fewer than 2,000 by the end of FY2015. CBP has yet to fully fill these positions due to challenges with its ability to recruit, hire, and retain personnel. Some recruitment issues include competition for personnel with other law enforcement agencies, the remote and undesirable locations of some positions, and a long and rigorous hiring process. However, CBP reports that it has taken some steps to improve its recruitment, hiring, and retention processes. Congress created pilot programs that allow CBP to accept donations from stakeholders and/or to enter into reimbursable services agreement with them as a way to address the issues surrounding the balance of trade and travel facilitation with security protections. The Donations Acceptance Program (DAP) allows CBP and the U.S. General Services Administration (GSA) to accept donations from private and public sector entities in the form of real property, personal property, and nonpersonal services. Donations may be used for activities associated with the construction, alteration, operations, or maintenance of new or existing POEs. The Reimbursable Services Program (RSP) enables CBP and private or public sector entities to partner in order to fund improvements in border facilities and port services, including hiring additional CBP officers and underwriting overtime hours. These programs provide CBP with alternative sources of funding outside of the traditional congressional appropriations process. Section 110 of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA, P.L. 104-208 , Div. C) required the Secretary of the DHS (formerly the Attorney General), to develop an automated entry and exit control system that would collect records of arrivals and departures and allow DHS to use these data to identify nonimmigrants who remain in the United States beyond the periods of their visas. Congress amended the system's requirements and deadlines on several occasions since then, including requiring the entry-exit system to contain biometric technology and to be fully interoperable with the Departments of Justice and State's databases. The entry-exit system, however, remains incompletely implemented. The completion of the exit component of the system has been a persistent subject of congressional concern. No exit data are collected from persons leaving through southern border land POEs; and data collection at other POEs is limited to biographic data, is not always collected from a machine-readable document, and relies on information sharing with Canada and with air and sea carriers. CBP reportedly believes that for the purpose of exit tracking, biographic information sharing is cost effective. At the same time, CBP has also argued that strengthened biographic data collection is a necessary precursor to effective biometric data collection, and it views a biometric system as a desirable long-term goal for the entry-exit system. Furthermore, CBP has implemented various pilot programs at select POEs designed to test new technologies to verify travelers' identities. For more information, see CRS Report R42138, Border Security: Immigration Enforcement Between Ports of Entry . Between POEs, CBP's U.S. Border Patrol is responsible for enforcing U.S. immigration law and other federal laws along the border and for preventing all unlawful entries into the United States, including entries of terrorists, unauthorized migrants, instruments of terrorism, narcotics, and other contraband. The Border Patrol, in the course of discharging its duties, patrols 7,494 miles of U.S. international borders with Mexico and Canada and the coastal waters around Florida and Puerto Rico. With support from Congress, CBP—and its predecessor agency the Immigration and Naturalization Service (INS)—has invested in border security personnel, fencing and infrastructure, and surveillance technology since the 1980s, with CBP's current budget totaling $13.3 billion in FY2016. However, some Members of Congress have raised questions about whether CBP's investments at the border have been effective. More recently, the Trump Administration has shown interest in increasing resources on the Southwest border. For instance, President Trump signed Executive Order 13767 on January 25, 2017, calling for the immediate planning, designing, and construction of a "physical wall" along the Southwest border and the hiring of an additional 5,000 Border Patrol agents. Congress also has raised questions about how to measure border security. The CBP has used several different border security metrics that focused on border enforcement outputs, such as the number of migrants apprehended, the migrant interdiction rate, and the recidivism rate (previously removed migrants that re-attempt to cross the border without authorization). These metrics all have limitations. For instance, it is difficult to separate the effects of border security efforts from other factors, such as the economic, political, and social realities present in migrants' home countries and the United States. Most recently, CBP has used statistical modeling to estimate a new border security metric, the level of successful unauthorized entry of migrants into the United States. This metrics seeks to describe the flow of migrants into the United States but may not directly speak to border security effectiveness. Congress may also question the relative priority attached to the southern and northern borders. While the Southwest border has experienced more unauthorized immigration, some security experts have warned that the northern border may represent a more important point of vulnerability when it comes to terrorism and related threats to homeland security—especially in light of the more limited enforcement resources deployed there. [author name scrubbed], Specialist in Aviation Policy ( [email address scrubbed] , [phone number scrubbed]) For more information, see CRS Report RL33512, Transportation Security: Issues for the 115th Congress , by [author name scrubbed], [author name scrubbed], and [author name scrubbed] Following the 9/11 terrorist attacks, Congress took swift action to create the Transportation Security Administration (TSA), federalizing all airline passenger and baggage screening functions and deploying significantly increased numbers of armed air marshals on commercial passenger flights. Despite the extensive focus on aviation security for more than a decade, a number of challenges remain, including effectively screening passengers, baggage, and cargo for explosives threats; developing effective risk-based methods for screening passengers and others with access to aircraft and sensitive areas; exploiting available intelligence information and watchlists to identify individuals who pose potential threats to civil aviation; effectively responding to security threats at airports and screening checkpoints; developing effective strategies for addressing aircraft vulnerabilities to shoulder-fired missiles and similar weapons; and addressing the potential security implications of unmanned aircraft operations in domestic airspace. The Aviation and Transportation Security Act (ATSA; P.L. 107-71 ) mandated 100% screening of all checked baggage placed on domestic passenger flights and on international passenger flights to and from the United States. In addition, the Implementing the 9/11 Commission Recommendations Act of 2007 ( P.L. 110-53 ) mandated the physical screening of all cargo placed on passenger flights. Unlike passenger and checked baggage screening, TSA does not routinely perform physical inspections of air cargo. Rather, TSA satisfies this mandate through the Certified Cargo Screening Program. Under the program, manufacturers, warehouses, distributors, freight forwarders, and shippers carry out screening inspections using TSA-approved technologies and procedures both at airports and at off-airport facilities in concert with certified supply-chain security measures and chain of custody standards. Internationally, TSA works with other governments, international trade organizations, and industry to assure that all U.S.-bound and domestic cargo carried aboard passenger aircraft meets the requirements of the mandate. Additionally, TSA works closely with Customs and Border Protection (CBP) to carry out risk-based targeting of cargo shipments, including use of the CBP Advance Targeting System-Cargo (ATS-C), which assigns risk-based scores to inbound air cargo shipments to identify shipments of elevated risk. Originally designed to combat drug smuggling, ATS-C has evolved over the years, particularly in response to the October 2010 cargo aircraft bomb plot that originated in Yemen, to assess shipments for explosives threats or other terrorism-related activities. In response to a 2009 incident aboard a Northwest Airlines flight, the Obama Administration accelerated deployment of Advanced Imaging Technology (AIT) whole body imaging screening devices and other technologies at passenger screening checkpoints. This deployment also responded to the 9/11 Commission recommendation to improve the detection of explosives on passengers. Explosives screening technologies at passenger screening checkpoints primarily consist of whole body imaging systems known as Advanced Imaging Technology (AIT); advanced technology X-ray imagers for carry-on items; and explosives trace detection (ETD) systems used to test swab samples collected from individuals or carry-on items for explosives residue. In its FY2017 budget request, TSA indicated that it intends to procure AIT and ETD systems in small numbers, while it intends to acquire more than 300 advanced technology X-ray imagers for carry-on items, upgraded with multi-view capabilities or automated explosives detection capabilities. The use of AIT has raised a number of policy questions. Privacy advocates have objected to the intrusiveness of AIT, particularly when used for primary screening. To allay privacy concerns, TSA eliminated the use of human analysis of AIT images and does not store imagery. In place of human image analysts, TSA has deployed automated targeting recognition (ATR) software that generates generic avatar images indicating locations of possible threat items. Another concern raised about AIT centered on the potential medical risks posed by backscatter X-ray systems, but those systems are no longer in use for airport screening, and current millimeter wave systems emit nonionizing millimeter waves are not considered harmful. The effectiveness of AIT and ATR has been brought into question. In 2015, the DHS Office of Inspector General completed covert testing of passenger screening checkpoint technologies and processes to evaluate the effectiveness of AIT and ATR. In congressional testimony, DHS Inspector General John Roth revealed that the covert testing consistently found failures in technology and procedures coupled with human error that allowed prohibited items to pass into secure areas. Even prior to the revelations of weaknesses in passenger checkpoint screening technologies and procedures, the use of AIT was controversial. Past legislative proposals specifically sought to prohibit the use of whole body imaging for primary screening (see, for example, H.R. 2200 , 111 th Congress). Nonetheless, primary screening using AIT is now commonplace at larger airports. Checkpoints at many smaller airports have not been furnished with AIT equipment or other advanced checkpoint detection technologies. In addition to continued deployment and utilization of AIT, the FAA Extension, Safety, and Security Act of 2016 ( P.L. 114-190 ) directed TSA to task the Aviation Security Advisory Committee, composed of industry experts on airport and airline security matters, to develop recommendations for more efficient and effective passenger screening. It also directed TSA to initiate a pilot program at three to six large airports to examine passenger checkpoint reconfigurations that increase efficiencies and reduce vulnerabilities, and a separate pilot program at three airports to develop and test next-generation screening system prototypes designed to expedite passenger handling. For checked baggage screening, TSA utilizes explosives detection system (EDS) and ETD technology. TSA deploys either high-speed (greater than 900 bags per hour), medium-speed (400 to 900 bags per hour), or reduced-size (100 to 400 bags per hour) EDS systems, depending on airport needs and configurations. The use of explosives detection technology was mandated by the Aviation and Transportation Security Act (ATSA; P.L. 107-71 ) more than a decade ago. Consequently, present TSA checked-baggage explosives detection technology acquisition is primarily focused on replacing systems that have reached the end of their service lives. TSA is also funding the development of new algorithms to more reliably detect homemade explosives threats in checked baggage and reduce false positives. TSA pays for or reimburses airports for modifying baggage-handling facilities and installing new inspection systems to accommodate explosives detection technologies. The TSA's National Explosives Detection Canine Team Program trains and deploys canines and handlers at transportation facilities to detect explosives. The program includes approximately 320 TSA teams and 675 state and local law enforcement teams trained by TSA under partnership agreements. More than 180 of the TSA teams are dedicated to passenger screening at about 40 airports. Following airport bombings in Brussels, Belgium, and Istanbul, Turkey, in 2016, there has been interest in increasing deployments of canine teams in nonsterile areas of airport terminals. P.L. 114-190 included language authorizing TSA to provide training to foreign governments in airport security measures including the use of canine teams. The act also directed TSA to utilize canine teams along with other resources and technologies to minimize passenger wait times and maximize security effectiveness of checkpoint operations. TSA has initiated a number of initiatives to focus its resources based on intelligence-driven assessments of security risk. These include the PreCheck trusted traveler program; modified screening procedures for children 12 and under; and a program for expedited screening of known flight crew and cabin crew members. Programs have also been developed for modified screening of elderly passengers similar to those procedures put in place for children. PreCheck is TSA's latest version of a trusted traveler program that has been modeled after CBP programs such as Global Entry, SENTRI, and NEXUS. Under the PreCheck program, participants vetted through a background check process are processed through expedited screening lanes where they can keep shoes on and keep liquids and laptops inside carry-on bags. As of December 2016, PreCheck expedited screening lanes were available at more than 180 airports. The cost of background checks under the PreCheck program is recovered through application fees of $85 per passenger for a five-year membership. TSA's goal is to process 50% of passengers through PreCheck expedited screening lanes, thus reducing the need for standard security screening lanes, but it has struggled to increase program membership. About 10 million individuals have enrolled in either PreCheck or other DHS trusted traveler programs, like Global Entry, that allow access to expedited screening lanes. TSA would like to boost this number to 25 million. P.L. 114-190 included language requiring TSA to increase the involvement of private-sector entities in marketing PreCheck and enrolling applicants. The law also mandates that PreCheck lanes be open and available during peak and high-volume travel times. One concern raised over the PreCheck program, however, is the lack of biometric authentication to verify participants at screening checkpoints. A predecessor test program, the Registered Traveler program, which used private vendors to issue and scan participants' biometric credentials, was scrapped by TSA in 2009 because it failed to show a demonstrable security benefit. In 2016, biometric identity authentication was reintroduced at 13 airports under a private trusted traveler program known as Clear. Participants in Clear, which is separate from PreCheck and not operated or funded by TSA, use an express lane to verify identity using a fingerprint or iris scan rather than interacting with a TSA document checker. Questions remain regarding whether PreCheck is fully effective in directing security resources to unknown or elevated-risk travelers. Nonetheless, it has improved screening efficiency, resulting in cost savings for TSA. TSA estimates annual savings in screener workforce costs totaling $110 million as a result of PreCheck and other risk-based initiatives. TSA has also developed a passenger behavior detection program to identify potential threats based on observed behavioral characteristics. TSA initiated early tests of its Screening Passengers by Observational Techniques (SPOT) program in 2003. By FY2012, the program deployed almost 3,000 behavioral detection officers at 176 airports, at an annual cost of about $200 million. Questions remain regarding the effectiveness of the behavioral detection program, and privacy advocates have cautioned that it could devolve into racial or ethnic profiling. While some Members of Congress have sought to shutter the program, Congress has not moved to do so. For example, H.Amdt. 127 (113 th Congress), an amendment to the FY2014 DHS appropriations measure that sought to eliminate funding for the program, failed to pass a floor vote. Congress also has not taken specific action to revamp the program, despite the concerns raised by GAO and the DHS Office of Inspector General. Airlines were formerly responsible for checking passenger names against terrorist watchlists maintained by the government. Following at least two instances in 2009 and 2010 in which such checks failed to identify individuals who may pose a threat to aviation, TSA modified security directives to require airlines to check passenger names against the no-fly list within two hours of being electronically notified of an urgent update, instead of allowing 24 hours to recheck the list. The event also accelerated the transfer of watchlist checks from the airlines to TSA under the Secure Flight program. In November 2010, DHS announced that 100% of passengers flying to or from U.S. airports are being vetted using the Secure Flight system. Secure Flight vets passenger name records against a subset of the Terrorist Screening Database (TSDB). On international flights, Secure Flight operates in coordination with the use of watchlists by CBP's National Targeting Center-Passenger, which relies on the Advance Passenger Information System (APIS) and other tools to vet both inbound and outbound passenger manifests. In addition to these systems, TSA conducts risk-based analysis of passenger data carried out by the airlines through use of the Computer-Assisted Passenger Prescreening System (CAPPS). In January 2015, TSA gave notification that it would start incorporating the results of CAPPS assessments, but not the underlying data used to make such assessments, into Secure Flight, along with each passenger's full name, date of birth, and PreCheck traveler number (if applicable). These data are used within the Secure Flight system to perform risk-based analyses to determine whether passengers receive expedited, standard, or enhanced screening at airport checkpoints. Central issues surrounding the use of terrorist watchlists in the aviation domain that may be considered during the 115 th Congress include the speed with which watchlists are updated as new intelligence information becomes available; the extent to which all information available to the federal government is exploited to assess possible threats among passengers and airline and airport workers; the ability to detect identity fraud or other attempts to circumvent terrorist watchlist checks; the adequacy of established protocols for providing redress to individuals improperly identified as potential threats; and the adequacy of coordination with international partners. In addition, there has been a growing interest in finding better ways to utilize watchlists to prevent terrorist travel, particularly travel of radicalized individuals seeking to join forces with foreign terrorist organizations such as the Islamic State (IS). Language in P.L. 114-190 directed TSA to assess whether recurrent fingerprint-based criminal background checks could be carried out in a cost-effective manner to augment terrorist watchlist checks for PreCheck program participants. Additionally, the act directed TSA to expand criminal background checks for certain airport workers. Airport perimeter security, access controls, and credentialing of airport workers are generally responsibilities of airport operators. There is no common access credential for airport workers. Rather, each airport issues its own security credentials to airport workers. These credentials are often referred to as Security Identification Display Area (SIDA) badges, and they convey the level of access that an airport worker is granted. TSA requires access control points to be secured by measures such as posted security guards or electronically controlled locks. Additionally, airports must implement programs to train airport employees to look for proper identification and challenge anyone not displaying proper identification. Airports may also deploy surveillance technologies, access control measures, and security patrols to protect airport property from intrusion, including buildings and terminal areas. Such measures are paid for by the airport, but must be approved by TSA as part of an airport's overall security program. State and local law enforcement agencies with jurisdiction at the airport are generally responsible for patrols of airport property, including passenger terminals. They also may patrol adjacent properties to deter and detect other threats to aviation, such as shoulder-fired missiles (see " Mitigating the Threat of Shoulder-Fired Missiles to Civilian Aircraft "). TSA requires security background checks of airport workers with unescorted access privileges to secure areas at all commercial passenger airports and air cargo facilities. Background checks consist of a fingerprint-based criminal history records check and security threat assessment, which include checking employee names against terrorist database information. Certain criminal offenses committed within the past 10 years, including aviation-specific crimes, transportation-related crimes, and other felony offences, are disqualifying. P.L. 114-190 directed TSA to update the eligibility criteria and disqualifying criminal offenses for SIDA access credentials based on other transportation vetting requirements and knowledge of insider threats to security. The law proposes that TSA expand the criminal history look-back period from the current 10 years to 15 years, and that individuals be disqualified if they have been released from prison within five years of their application. The statute directs TSA to establish a formal waiver process for individuals denied credentials. It also calls for full implementation of recurrent vetting of airport workers with SIDA access credentials using the Federal Bureau of Investigation's Rap Back services to identify disqualifying criminal offences. Language in P.L. 114-190 also directs TSA to conduct enhanced physical inspections of airport workers at SIDA access points and in SIDA areas. The inspections are to be random and unpredictable as well as data-driven and operationally dynamic. The law also directs TSA and the Department of Homeland Security Office of Inspector General to increase covert testing of access controls. Incident response at airports is primarily the responsibility of the airport operator and state or local law enforcement agencies, with TSA acting as a regulator in approving response plans as part of an airport's comprehensive security program. On November 1, 2013, a lone gunman targeting TSA employees fired several shots at a screening checkpoint at Los Angeles International Airport (LAX), killing one TSA screener and injuring two other screeners and one airline passenger. In a detailed post-incident action report, TSA identified several proposed actions to improve checkpoint security, including enhanced active shooter incident training for screeners; better coordination and dissemination of information regarding incidents; expansion and routine testing of alert notification capabilities; and expanded law enforcement presence at checkpoints during peak times. TSA did not support proposals to arm certain TSA employees or provide screeners with bulletproof vests, and did not recommend mandatory law enforcement presence at checkpoints. The Gerardo Hernandez Airport Security Act of 2015 ( P.L. 114-50 ), named in honor of the TSA screener killed in the LAX incident and enacted in September 2015, requires airports to adopt plans for responding to security incidents. Additionally, the act requires TSA to create a mechanism for sharing information among airports regarding best practices for airport security incident planning, management, and training. It also requires TSA to identify ways to expand the availability of funding for checkpoint screening law enforcement support through cost savings from improved efficiencies. Law enforcement response to incidents at passenger screening checkpoints allows for flexibility in the deployment of law enforcement support. While some airports station law enforcement officers at dedicated posts at or near passenger screening checkpoints, other airports allow officers to patrol other areas of the airport so long as a minimum response time to incidents at passenger screening checkpoints is maintained. TSA provides funding for law enforcement support at screening checkpoints through agreements that partially reimburse for law enforcement hours. The Brussels and Istanbul airport bombings in 2016 increased concern over response to security incidents in nonsterile areas of airports prior to passenger screening checkpoints. Language in P.L. 114-190 establishes requirements for DHS to develop training exercises to enhance law enforcement and first responder preparedness for active shooter and mass casualty events at airports, mass transit systems, and other public locations. TSA regulates foreign air carriers that operate flights to the United States to enforce requirements regarding the acceptance and screening of passengers, baggage, and cargo carried on those aircraft. As part of this regulation, TSA inspects foreign airports from which commercial flights proceed directly to the United States. Fifteen foreign last point of departure airports (eight in Canada, two in the Bahamas, one in Bermuda, one in Aruba, two in Ireland, and one in Abu Dhabi) have Customs and Border Protection preclearance facilities where passengers are admitted to the United States prior to departure. Passengers on international flights from these preclearance airports deplane directly into the airport sterile area upon arrival at the U.S. airport of entry; they may then board connecting flights or leave the airport directly, rather than being routed to customs and immigration processing facilities. Assessing screening measures at preclearance airports is a particular priority for TSA. TSA is also working to increase checked baggage preclearance processing so checked baggage does not have to be rescreened by TSA at the airport of entry, which has been the practice. Language in P.L. 114-190 requires TSA to conduct security risk assessments at all last point of departure airports, and authorizes the donation of security screening equipment to such airports to mitigate security vulnerabilities that put U.S. citizens at risk. The threat to civilian aircraft posed by shoulder-fired missiles or other standoff weapons capable of downing an airliner remains a vexing concern for aviation security specialists and policymakers. The terrorist threat posed by small man-portable shoulder-fired missiles was brought into the spotlight soon after the 9/11 terrorist attacks by the November 2002 attempted downing of a chartered Israeli airliner in Mombasa, Kenya, the first such event outside of a conflict zone. Since then, Department of State and military initiatives seeking bilateral cooperation and voluntary reductions of man-portable air defense systems (MANPADS) stockpiles had reduced worldwide inventories by nearly 33,000 missiles. Despite this progress, such weapons may still be in the hands of terrorist organizations. Conflicts in Libya and Syria have renewed concerns that large military stockpiles of these weapons may be proliferated to radical insurgent groups like Ansar al-Sharia in Libya, Al Qaeda in the Islamic Maghreb (AQIM), and the Islamic State (IS). The most visible DHS initiative to address the threat was the multiyear Counter-MANPADS program carried out by the DHS Science and Technology Directorate. The program concluded in 2009 with extensive operational and live-fire testing along with Federal Aviation Administration (FAA) certification of two systems capable of protecting airliners against heat-seeking missiles. The systems have not been deployed on commercial airliners in the United States, however, due largely to high acquisition and life-cycle costs. MANPADS are mainly seen as a security threat to civil aviation overseas, but a MANPADS attack in the United States could have a considerable impact on the airline industry. While major U.S. airports have conducted vulnerability studies, efforts to reduce vulnerabilities of flight paths to potential MANPADS attacks face significant challenges because of limited resources and large geographic areas where aircraft are vulnerable to attack. Any terrorist attempts to exploit those vulnerabilities could quickly escalate the threat of shoulder-fired missiles to a major national security priority. The operation of civilian unmanned aerial systems (UASs) in domestic airspace raises potential security risks, including the possibility that terrorists could use a drone to carry out an attack against a ground target. It is also possible that drones themselves could be targeted by terrorists or cybercriminals seeking to tap into sensor data transmissions or to cause mayhem by hacking or jamming command and control signals. Terrorists could potentially use drones to carry out small-scale attacks using explosives, or as platforms for chemical, biological, or radiological attacks. In September 2011, the FBI disrupted a homegrown terrorist plot to attack the Pentagon and the Capitol with large model aircraft packed with high explosives. The incident heightened concern about potential terrorist attacks using unmanned aircraft. Widely publicized drone incidents, including an unauthorized flight at a political rally in Dresden, Germany, in September 2013 that came in close proximity to German Chancellor Angela Merkel; a January 2015 crash of a small hobby drone on the White House lawn in Washington, DC; and a series of unidentified drone flights over landmarks and sensitive locations in Paris, France, in 2015, have raised additional concerns about security threats posed by small unmanned aircraft. Recently, the use of drones, including weaponized drones, by IS has renewed fears that unmanned aircraft may be utilized in a terrorist attack. Domestically, there have been numerous reports of drones flying in close proximity to airports and manned aircraft, in restricted airspace, and over stadiums and outdoor events. The payload capacities of small unmanned aircraft would limit the damage a terrorist attack using conventional explosives could inflict, but drone attacks using chemical, biological, or radiological weapons could be more serious. FAA regulations require TSA to carry out threat assessments of commercial UAS operators, as it does for civilian pilots. However, this requirement does not apply to recreational users, although they must register with FAA. Moreover, while FAA has issued general guidance to law enforcement regarding unlawful UAS operations, it is not clear that law enforcement agencies have sufficient training or technical capacity to respond to this emerging threat. Technology may help manage security threats posed by unmanned aircraft. Integrating tracking mechanisms as well as incorporating "geo-fencing" capabilities, designed to prevent flights over sensitive locations or in excess of certain altitude limits, into unmanned aircraft systems may help curtail unauthorized flights. While unmanned aircraft may pose security risks, they are also a potential asset for homeland security operations, particularly for CBP border surveillance. CBP currently employs a fleet of nine modified Predator UASs. Operating within specially designated airspace, these unarmed UASs patrol the northern and southern land borders and the Gulf of Mexico to detect potential border violations and monitor suspected drug trafficking, with UAS operators cuing manned responses when appropriate. State and local governments have expressed interest in operating UASs for missions as diverse as traffic patrol, surveillance, and event security. A small but growing number of state and local agencies have acquired drones, some through federal grant programs, and have been issued special authorizations by FAA to fly them. However, many federal, state, and local agencies involved in law enforcement and homeland security appear to be awaiting more specific guidance from FAA regarding the routine operation of public-use unmanned aircraft in domestic airspace. The introduction of drones into domestic surveillance operations presents a host of novel legal issues related to an individual's fundamental privacy interest protected under the Fourth Amendment. Several measures introduced in Congress would require government agents to obtain warrants before using drones for domestic surveillance, but would create exceptions for patrols of the national borders used to prevent or deter illegal entry and for investigations of credible terrorist threats. Language in P.L. 114-190 directs FAA to establish a pilot program to detect and mitigate unmanned aircraft operations in the vicinity of airports and other critical infrastructure. Additionally, the act directs FAA to develop an air traffic management system for small UASs that, in addition to addressing safety concerns, could include measures to detect and deter security threats posed by UASs. FAA separately addresses cybersecurity of government-owned air traffic control systems and certified aircraft systems. However, GAO has cautioned that FAA's current approach to cybersecurity does not adequately address the interdependencies between aircraft and air traffic systems, and consequently may hinder efforts to develop a comprehensive and coordinated strategy. While it identified no easy fix, GAO recommended that FAA develop a comprehensive cybersecurity threat model, better clarify cybersecurity roles and responsibilities, improve management security controls and contractor oversight, and fully incorporate National Institute of Standards and Technology information security guidance throughout the system life cycle. Language in P.L. 114-190 mandates development of a comprehensive strategic framework for reducing cybersecurity risks to the national airspace system, civilian aviation, and FAA information systems. The framework is to address cybersecurity risks associated with airspace modernization, aircraft automation, and in-flight entertainment systems. The act also directs FAA to assess the cost and schedule for developing and maintaining an agency-wide cybersecurity threat model as recommended by GAO, and produce a standards plan to implement security guidance for FAA data and information systems. [author name scrubbed], Analyst in Transportation Policy ( [email address scrubbed] , [phone number scrubbed]) Bombings of and shootings on passenger trains in Europe and Asia have illustrated the vulnerability of passenger rail systems to terrorist attacks. Passenger rail systems—primarily subway systems—in the United States carry about five times as many passengers each day as do airlines, over many thousands of miles of track, serving stations that are designed primarily for easy access. The increased security efforts around air travel have led to concerns that terrorists may turn their attention to "softer" targets, such as transit or passenger rail. A key challenge Congress faces is balancing the desire for increased rail passenger security with the efficient functioning of transit systems, with the potential costs and damages of an attack, and with other federal priorities. The volume of ridership and number of access points make it impractical to subject all rail passengers to the type of screening all airline passengers undergo. Consequently, transit security measures tend to emphasize managing the consequences of an attack. Nevertheless, steps have been taken to try to reduce the risks, as well as the consequences, of an attack. These include vulnerability assessments; emergency planning; emergency response training and drilling of transit personnel (ideally in coordination with police, fire, and emergency medical personnel); increasing the number of transit security personnel; installing video surveillance equipment in vehicles and stations; and conducting random inspections of bags, platforms, and trains. The challenges of securing rail passengers are dwarfed by the challenge of securing bus passengers. There are some 76,000 buses carrying 19 million passengers each weekday in the United States. Some transit systems have installed video cameras on their buses, but the number and operating characteristics of transit buses make them all but impossible to secure. In contrast with the aviation sector, where TSA provides security directly, security in surface transportation is provided primarily by the transit and rail operators and local law enforcement agencies. TSA's role is one of oversight, coordination, intelligence sharing, training, and assistance, though it does provide some operational support through its Visible Intermodal Prevention and Response (VIPR) teams, which conduct operations with local law enforcement officials, including periodic patrols of transit and passenger rail systems to create "unpredictable visual deterrents." The Implementing Recommendations of the 9/11 Commission Act of 2007 ( P.L. 110-53 ), passed by Congress on July 27, 2007, included provisions on passenger rail and transit security and authorized $3.5 billion for FY2008-FY2011 for grants for public transportation security. The act required public transportation agencies and railroads considered to be high-risk targets by DHS to have security plans approved by DHS (§1405 and §1512). Other provisions required DHS to conduct a name-based security background check and an immigration status check on all public transportation and railroad frontline employees (§1414 and §1522), and gave DHS the authority to regulate rail and transit employee security training standards (§1408 and §1517). In 2010 TSA completed a national threat assessment for transit and passenger rail, and in 2011 completed an updated transportation systems sector-specific plan, which established goals and objectives for a secure transportation system. The three primary objectives for reducing risk in transit are increase system resilience by protecting high-risk/high-consequence assets (e.g., critical tunnels, stations, and bridges); expand visible deterrence activities (e.g., canine teams, passenger screening teams, and antiterrorism teams); and engage the public and transit operators in the counterterrorism mission. TSA surface transportation security inspectors conduct assessments of transit systems (and other surface modes) through the agency's Baseline Assessment for Security Enhancement (BASE) program. The agency has also developed a security training and security exercise program for transit (I-STEP). The House Committee on Homeland Security's Subcommittee on Transportation Security held a hearing in May 2012 to examine the surface transportation security inspector program. The number of inspectors had increased from 175 full-time equivalents in FY2008 to 404 in FY2011. Issues considered at the hearing included the lack of surface transportation expertise among the inspectors, many of whom were promoted from screening passengers at airports; the administrative challenge of having the surface inspectors managed by federal security directors who are located at airports and who themselves typically have no surface transportation experience; and the security value of the tasks performed by surface inspectors. The number of surface inspectors decreased to 260 (full-time equivalent positions) in FY2016, in part reflecting a reduction in the number of VIPR surface inspectors and in part reflecting efficiencies achieved through focusing efforts on the basis of risk. GAO reported in 2014 that lack of guidance to TSA's surface inspectors resulted in inconsistent reporting of rail security incidents and that TSA had not consistently enforced the requirement that rail agencies report security incidents, resulting in poor data on the number and types of incidents. GAO also found that TSA did not have a systematic process for collecting and addressing feedback from surface transportation stakeholders regarding the effectiveness of its information-sharing effort. In a 2015 hearing, GAO testified that TSA has put processes in place to address these issues. DHS provides grants for security improvements for public transit, passenger rail, and occasionally other surface transportation modes under the Transit Security Grant Program. The vast majority of the funding goes to public transit providers. CRS estimates that, on an inflation-adjusted basis, funding for this program has declined 84% since 2009, when Congress allocated $150 million in the American Recovery and Reinvestment Act, in addition to routine appropriations. In a February 2012 report, GAO found potential for duplication among four DHS state and local security grant programs with similar goals, one of which was the public transportation security grant program. The Obama Administration proposed consolidating several of these programs in the annual budget requests for FY2013 through FY2016. This proposal was not supported by Congress at the time. In P.L. 114-50 , Congress directed TSA to ensure that all passenger transportation providers it considers as having high-risk facilities have in place plans to respond to active shooters, acts of terrorism, or other security-related incidents that target passengers. [author name scrubbed], Analyst in American National Government ([email address scrubbed], [phone number scrubbed]) For further information, see CRS Report R43537, FEMA's Disaster Relief Fund: Overview and Selected Issues , by [author name scrubbed] and CRS Report R42352, An Examination of Federal Disaster Relief Under the Budget Control Act , by [author name scrubbed], [author name scrubbed], and [author name scrubbed] The majority of disaster assistance provided by the Federal Emergency Management Agency (FEMA) to states and localities after a declared emergency or major disaster is funded with monies from the Disaster Relief Fund (DRF). In general, Congress annually appropriates budget authority to the DRF to ensure that funding is available for recovery projects from previous incidents (some of these projects take several years to complete) and to create a reserve to pay for emergencies and major disasters that might occur that fiscal year. Any remaining balance in the DRF at the end of the fiscal year is carried over to the next fiscal year. Because of the unpredictable nature of disasters and competing demands in the discretionary budget, normal annual appropriations have often not always adequately funded the DRF. From FY2004 to FY2013 Congress provided additional budget authority for the DRF through supplemental appropriations fourteen times. This reliance on emergency supplemental appropriations has been of particular congressional concern. In addition, the number of disasters being declared over the last two decades has risen, as have their costs. The upward trend in federal disaster costs have periodically reopened discussions of how to control, reduce, or offset federal spending on major disasters. Prior to the passage of the Budget Control Act in 2011 (BCA, P.L. 112-25 ), supplemental appropriations for disasters were often designated as an emergency expenditure, which under congressional budgetary procedures can exceed discretionary spending limits. Congress included provisions on disaster relief spending when it passed the BCA. The BCA sets overall discretionary spending caps and provides two types of adjustments that could be applied to make room for disaster assistance—a limited adjustment specifically for the costs of major disasters under the Stafford Act, and an unlimited adjustment for more broadly defined emergency spending. The proportion of DRF funding provided in annual appropriations legislation has grown since the passage of the BCA, and emergency funding for the DRF has been provided in supplemental appropriations legislation only once since FY2012, in response to Hurricane Sandy. It could be argued that catastrophic events such as Hurricane Sandy still represent a challenge to those who wish to reduce or eliminate emergency designations for disaster relief funding. Another potential challenge concerns how the allowable adjustment is calculated. The budgetary exemption for the cost of major disasters has been declining as a result of the way the formula is calculated, which does not capture the total federal costs of responding to and recovering from disasters. This increases the likelihood that Congress may again face the decision of whether to provide emergency funding for the DRF in the wake of disasters of a less catastrophic degree. The amount of money the federal government provides for disaster relief has been of congressional concern, particularly in recent years. While some might argue the expenditures are justified because they provide important assistance to states and localities, others may be interested in finding ways to reduce federal costs. With respect to the decline in the allowable adjustment for the cost of major disasters, Congress could choose to continue to use emergency funding to meet unbudgeted disaster relief needs, or explore changes to the allowable adjustment's underlying calculation that would increase it—and thus reduce the need for emergency funding. The allowable adjustment expires by existing law at the beginning of FY2022. Congress may choose to begin considering utility of the disaster relief adjustment and the effect it has had on federal disaster assistance. [author name scrubbed], Specialist in Science and Technology Policy ( [email address scrubbed] , 7 -7070 ) For further information, see CRS Report RL32341, Assistance to Firefighters Program: Distribution of Fire Grant Funding , and CRS Report RL33375, Staffing for Adequate Fire and Emergency Response: The SAFER Grant Program . Although firefighting activities are traditionally the responsibility of states and local communities, Congress has established federal firefighter assistance grant programs within DHS to provide additional support for local fire departments. In 2000, the 106 th Congress established the Assistance to Firefighters Grant Program (AFG), which provides grants to local fire departments for firefighting equipment and training. In the wake of the 9/11 attacks, the scope and funding for AFG were expanded. Additionally in 2003, the 108 th Congress established the Staffing for Adequate Fire and Emergency Response (SAFER) program, which provides grants to support firefighter staffing. In the 115 th Congress, debate over firefighter assistance programs is likely to take place within the appropriations and reauthorization process. With respect to annual appropriations, arriving at funding levels for AFG and SAFER is subject to two countervailing considerations. On the one hand, what fire grant supporters view as inadequate state and local public safety budgets have led them to argue for the necessity of maintaining, if not increasing, federal grant support for fire departments. On the other hand, concerns over reducing overall federal discretionary spending and the appropriateness of federal support for local firefighting have led others to question whether continued or reduced federal support for AFG and SAFER is warranted. Authorization for AFG and SAFER expires on September 30, 2017, and the 115 th Congress may consider reauthorization legislation. Historically, debate over the firefighter assistance reauthorization has reflected a competition for funding between career/urban/suburban departments and volunteer/rural departments. The continuing issue is how effectively grants are being distributed and used to protect the health and safety of the public and firefighting personnel against fire and fire-related hazards. [author name scrubbed], Specialist in Science and Technology Policy ( [email address scrubbed] , [phone number scrubbed]) For further information, see CRS Report R42543, The First Responder Network (FirstNet) and Next-Generation Communications for Public Safety: Issues for Congress , by [author name scrubbed]. Emergency communications systems support first responders and other emergency personnel, disseminate alerts and warnings to residents in endangered areas, and relay calls for help through 911 call networks. These networks support day-to-day needs to protect the safety of the public and deliver critical information before, during, and after disasters. The technologies that support emergency communications are converging toward a common platform using the Internet Protocol (IP). Federal, state, and local agencies are investing in IP-enabled communications infrastructure that can be shared to support all forms of emergency communications. Notable examples of new investment include interoperable public safety communications networks; digital alerts and warnings; and Next Generation 9-1-1 (NG 9-1-1) networks. The 115 th Congress is likely to continue overseeing the federal programs that have been established to promote and support emergency communications systems. Notable federal programs are the First Responder Network Authority (FirstNet); the Integrated Public Alert and Warning System (IPAWS); and the National 9-1-1 Program. FirstNet is an independent authority established within the National Telecommunications and Information Administration (NTIA) to develop a nationwide broadband network for emergency communications. IPAWS alert and warning capabilities are coordinated through the Federal Emergency Management Agency with the participation of the Federal Communications Commission. The activities of the National 9-1-1 Program, which focus on providing a base for improving 9-1-1 infrastructure, are conducted jointly by the National Highway Traffic Safety Administration and the NTIA. Coordination of these discrete programs is assisted by federal programs and guidance described in the DHS National Emergency Communications Plan . The Homeland Security Act of 2002 ( P.L. 107-296 ), Title XVIII, as amended, directs the DHS Office of Emergency Communications (OEC) to develop and periodically update a plan in consultation with federal, state, local, tribal, territorial, and private sector stakeholders. Currently, the OEC is developing the Nationwide Communications Baseline Assessment (NCBA) to evaluate the nation's ability to communicate during a response to routine incidents, natural disasters, acts of terrorism, and other man-made disasters. The National Emergency Communications Plan recognizes the advantages of converging emergency communications platforms and coordinating across federal, state, local, and tribal agencies. The plan identifies four categories of emergency response that in time should converge. These are: communications for incident response and coordination; notifications, alerts, and warnings; public information exchange; and requests for assistance and reporting. The top three priorities for the plan over the three to five years following publication are identifying and prioritizing areas for improvement in emergency responders' narrowband networks (Land Mobile Radio, or LMR); facilitating the adoption, integration, and use of broadband technologies, notably the broadband network to be deployed by FirstNet; and enhancing coordination among stakeholders across the emergency response community. [author name scrubbed], Analyst in Flood Insurance and Emergency Management ( [email address scrubbed] , [phone number scrubbed]) For further information, see CRS Report R44593, Introduction to the National Flood Insurance Program (NFIP) , by [author name scrubbed] and [author name scrubbed]. The National Flood Insurance Program (NFIP) was established by the National Flood Insurance Act of 1968 (NFIA, 42 U.S.C. §4001 et seq.) and was most recently reauthorized by the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12, Title II of P.L. 112-141 ). The general purpose of the NFIP is both to offer primary flood insurance to properties with significant flood risk, and to reduce flood risk through the adoption of floodplain management standards. A longer term objective of the NFIP is to reduce federal expenditure on disaster assistance after floods. The NFIP is managed by the Federal Emergency Management Agency (FEMA), through its subcomponent Federal Insurance and Mitigation Administration (FIMA). Currently 22,233 communities participate in the NFIP, with over five million policies in force and over $1.2 trillion in coverage. According to FEMA, the program saves the nation an estimated $1.87 billion annually in flood losses avoided because of the NFIP's building and floodplain management regulations. Floods are the most common natural disaster in the U.S. and in recent years all fifty states have experienced flood events. U.S. flood losses in 2016 were about $17 billion, which was six times greater than the overall flood damage in 2015, with losses from five flood-related events in 2016 exceeding $1 billion. Congress amended elements of BW-12, but did not extend the NFIP's authorization further in the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA-14, P.L. 113-89 ). The statute for the NFIP does not contain a comprehensive expiration, termination, or sunset provision for the whole of the program. Rather, the NFIP has multiple different legal provisions that generally tie to the expiration of key components of the program. Unless reauthorized or amended by Congress, the following will occur on September 30, 2017: The authority to provide new flood insurance contracts will expire. Flood insurance contracts entered into before the expiration would continue until the end of their policy term of one year. The authority for NFIP to borrow funds from the Treasury will be reduced from $30.425 billion to $1.5 billion. The authorization of appropriations for the flood hazard mapping program will expire. This program could continue, subject to appropriations, beyond this date. Other activities of the program would technically remain authorized following September 30, 2017, such as the issuance of FMA grants. However, the expiration of the key authorities described above would have varied and generally serious effects on these remaining NFIP activities. Issues which the 115 th Congress may consider as part of the reauthorization of the NFIP include NFIP debt and borrowing, affordability and solvency, and the role of private insurance in the NFIP. Congress has authorized FEMA to borrow no more than $30.425 billion from the U.S. Treasury in order to operate the NFIP. Prior to the 2005 hurricane season, the NFIP had generally been able to cover its costs, borrowing relatively small amounts from the U.S. Treasury to pay claims, and then repaying the loans with interests. The NFIP was forced to borrow heavily to pay claims in the aftermath of the 2005 hurricane season (Hurricanes Katrina, Rita, and Wilma) and Hurricane Sandy in 2012. Following Hurricane Sandy, Congress passed P.L. 113-1 to increase the borrowing limit of the NFIP from $20.775 billion to the current $30.425 billion. A reserve fund assessment was authorized by Congress in BW-12 to establish and maintain a Reserve Fund to cover future claim and debt expenses, especially those from catastrophic disasters. In addition to the reserve fund assessment, all NFIP policies are also being assessed a surcharge following the passage of HFIAA. However, despite these additional sources of income, in January 2017 the NFIP borrowed an additional $1.6 billion to cover incurred losses in 2016 and anticipated programmatic activities. FEMA's view is that "even if losses are somewhat favorable over an extended period, the NFIP will still not come close to repaying the debt." As of March 31, 2017, the NFIP owed $24.6 billion in debt to the U.S. Treasury, leaving $5.825 billion left in available borrowing authority, and FIMA had $1.266 billion available ($819 million in the National Flood Insurance Fund and $447 million in the Reserve Fund). Under its current authorization, the only means the NFIP has to pay off the debt is through the accrual of premium revenues in excess of outgoing claims, and from payments from the Reserve Fund. Congress may consider additional sources of funding or whether to forgive all or part of the existing debt. As a public insurance program, the goals of the NFIP are very different from the goals of private sector companies, as it encompasses social goals to provide flood insurance in flood-prone areas to property owners who otherwise would not be able to obtain it and reduce government's cost after floods. Congress has expressed concern related to the perceived affordability of flood insurance premiums and the balance between actuarial soundness and other goals of the NFIP. In BW-12, Congress required FEMA to commission a study with the National Academy of Sciences (NAS) regarding participation in the NFIP and the affordability of premiums, which was published report in two parts. In HFIAA-14, Congress also required FEMA to develop a Draft Affordability Framework "that proposes to address, via programmatic and regulatory changes, the issues of affordability of flood insurance sold under the National Flood Insurance Program, including issues identified in the affordability study…." Due 18 months following the submission of the Affordability Study, FEMA has not yet submitted the Framework. The deadline for the Framework, based on FEMA stated date of submittal of the Affordability Study, is September 10, 2017. Congress may consider how to define 'affordability' and how it might be achieved. The role of the private insurance industry in the flood insurance market is likely to be a major consideration in the reauthorization of the NFIP. Currently, while FEMA provides the overarching management and oversight of the NFIP, the bulk of the day-to-day operation of the NFIP, including the marketing, sale, writing, and claims management of policies, is handled by private companies. This arrangement between the NFIP and private industry is authorized by statute and guided by regulation. There are two different arrangements that FEMA has established with private industry. The first is the Direct Servicing Agent, or DSA, which operates as a private contractor on behalf of FEMA for individuals seeking to purchase flood insurance policies directly from the NFIP. The second arrangement is called the Write-Your-Own (WYO) Program, where private insurance companies are paid to directly write and service the policies themselves. With either the DSA or WYO Program, the NFIP retains the actual financial risk of paying claims for the policy (i.e., underwrites the policy), and the policy terms and premiums are the same. Roughly 86% of NFIP policies are sold by the over 70 companies participating the WYO Program. A number of private insurance companies and insurance industry organizations have expressed interest in private insurers offering primary flood insurance in competition with the NFIP. This would present a number of issues which Congress would need to consider, many of which were discussed in FEMA's report to Congress required by BW-12. Particular challenges identified by the report include how to maintain the funding of federal flood mapping and floodplain management activities, which are currently funded through the Federal Policy Fee charged on all flood insurance policies, and how to ensure the affordability and continued availability of flood insurance to property owners in flood zones. If private insurance companies enter the market in larger numbers, should they be expected to contribute to the cost of mapping and floodplain management? If so, how might this be addressed? How might private companies be prevented from "cherry-picking" (i.e., adversely selecting) the profitable, lower-risk policies and leaving the NFIP with the high-risk, actuarially unsound policies? [author name scrubbed], Analyst in Emergency Management and Homeland Security Policy ( [email address scrubbed] , [phone number scrubbed]) FEMA has several important authorizing statutes that arguably have not been comprehensively reauthorized in recent Congresses. These statutes include, but are not limited to, the Robert T. Stafford Disaster Relief and Emergency Assistance Act ( P.L. 93-288 , as amended, 42 U.S.C. §5121 et seq., henceforth the Stafford Act), the Homeland Security Act of 2002 ( P.L. 107-296 , as amended, 6 U.S.C. §101 et seq., henceforth HSA 2002), and the National Flood Insurance Act of 1968 (P.L. 90-488, as amended, 42 U.S.C. §4001 et seq., henceforth the NFIA). While only the NFIA has significant authorities that will expire during the 115 th Congress and require reauthorization, the 115 th Congress may also seek to reauthorize and reform multiple provisions of the Stafford Act or the HSA 2002. Such revisions have been considered in recent past Congresses but were not enacted into law. For instance, in the 114 th Congress, the House passed H.R. 1471 , the FEMA Disaster Assistance Reform Act of 2015, which included numerous provisions revising authorities of the Stafford Act. While the Senate passed portions of this bill separately, to include the ultimate passage into law of a reauthorization for FEMA's Urban Search and Rescue System ( P.L. 114-326 ), most other provisions of the bill were not enacted in both chambers. There are many, varied options the 115 th Congress could consider when looking at either the FEMA-related provisions of either the HSA 2002 or Stafford Act. Such legislative action could be pursued in response to a major future incident, as was the case for Hurricanes Sandy and Katrina, which provokes concerns in Congress regarding the sufficiency of FEMA's existing authorization. Alternatively, such legislative action could be pursued in conjunction with a likely debate on the reauthorization of the NFIA in the 115 th Congress. As hypothetical examples, the 115 th Congress could decide to limit or expand the forms of federal disaster assistance provided by FEMA through the Stafford Act, reauthorize the predisaster hazard mitigation (PDM) program and its authorization of appropriations in the Stafford Act, revise the Administrator's authorities related to the broader homeland security mission in the HSA 2002, or reauthorize the appropriations for the administration of FEMA in HSA 2002, as amended by the Post-Katrina Emergency Management Reform Act (PKEMRA). [author name scrubbed], Analyst in Emergency Management and Homeland Security Policy ( [email address scrubbed] , [phone number scrubbed]) The United States is threatened by a wide array of hazards, including natural disasters, acts of terrorism, viral pandemics, and manmade disasters such as the Deepwater Horizon oil spill. The way the nation strategically prioritizes and allocates resources to prepare for hazards can significantly influence the ultimate cost to society, both in the number of human casualties and the scope of economic damage. Subtitle C of the Post-Katrina Emergency Reform Act of 2006 (PKEMRA; P.L. 109-295 , 6 U.S.C. §741-764) requires the President, acting through the Administrator of FEMA, to create a "national preparedness goal" (NPG) and develop a "national preparedness system" (NPS) that will help " ensure the Nation's ability to prevent, respond to, recover from, and mitigate against natural disasters, acts of terrorism, and other man-made disasters." Currently, the creation of a NPG and NPS is guided by Presidential Policy Directive 8: National Preparedness (PPD-8), issued by then-President Barack Obama on March 30, 2011. PPD-8 rescinded the existing Homeland Security Presidential Directive 8: National Preparedness (HSPD-8), which was released and signed by then-President George W. Bush on December 17, 2003. As directed by PPD-8, the NPS is supported by numerous strategic component policies, national planning frameworks (e.g., the National Response Framework), and federal interagency operational plans (e.g., the Protection Federal Interagency Operational Plan). In brief, the NPS and its many component policies embody the strategic vision and planning of the federal government, with input from the whole community , as it relates to preparing the nation for all hazards. The NPS also establishes methods for achieving the nation's desired level of preparedness for both federal and nonfederal partners by identifying the core capabilities necessary to achieve the NPG. Furthermore, the NPS includes annual National Preparedness Reports that serve as pseudo report cards on progress being made toward achieving national preparedness objectives. The Reports rely heavily on a self-assessment process, called the Threat and Hazard Identification and Risk Assessment (THIRA), to incorporate the perceived risks and capabilities of the whole community into the national preparedness system (NPS). In this respect, the NPS's influence may extend to federal, state, and local budgetary decisions, the assignment of duties and responsibilities across the nation, and the creation of long-term policy objectives for disaster preparedness. The 115 th Congress may continue its oversight of the NPS. It is within the discretion of the Administration to retain, revise, or replace the overarching guidance of PPD-8. In either case, Congress may have interest in overseeing the NPS on a variety of factors, such as whether the NPS conforms to the objectives of Congress, as outlined in the PKEMRA statute; federal roles and responsibilities have, in the opinion of Congress, been properly assigned and resourced to execute the core capabilities needed to prevent, protect against, mitigate the effects of, respond to, and recover from the greatest risks; nonfederal resources and stakeholders are efficiently incorporated into NPS policies; and federal, state, and local government officials are allocating the appropriate amount resources to the disaster preparedness mission relative to other homeland security missions. Ultimately, if the NPS is determined not to fulfill the objectives of the 115 th Congress, Congress could consider amending the PKEMRA statute to create new requirements, or revising existing provisions, to manage the amount of discretion afforded to the President in creating the NPS. This could mean, for example, the 115 th Congress directly assigning certain preparedness responsibilities to federal agencies through authorizing legislation different than those indicated by national preparedness frameworks, or Congress prioritizing the amount of budget authority provided to some core capabilities relative to others. [author name scrubbed], Specialist in Public Health and Epidemiology ( [email address scrubbed] , [phone number scrubbed]) According to the U.S. Department of Health and Human Services (HHS), "National health security is a state in which the nation and its people are prepared for, protected from, and resilient in the face of incidents with health consequences." The nation's public health emergency management laws expanded considerably following the terrorist attacks in 2001 and Hurricane Katrina in 2005, in particular. Since then a varied slate of health incidents—including natural and man-made disasters and outbreaks of infectious disease—showed both improvements in the nation's readiness for public health and medical emergencies, and persistent gaps. For example, response plans may not sufficiently anticipate situations that arise. The technology needed to assess threats (such as radiation or chemical exposure) may be limited. Medical countermeasures (i.e., vaccines, antidotes, or treatments for harmful exposures) may not be available in adequate amounts, if at all. The means to distribute existing countermeasures in a timely manner may be limited. The medical system may lack adequate capacity to respond to mass casualty incidents. Funding for response costs may not be available immediately, or at all. Given the robust roles of the private sector and state and local governments in health security efforts, the federal government's ability to address these gaps through funding assistance and other policies may also be limited. Assistance under the Stafford Act can help federal, state, and local agencies with the costs of some types of public health emergency response activities, such as assuring food and water safety, and monitoring illnesses in affected communities. However, there is no federal assistance program designed specifically to cover the uninsured or uncompensated costs of individual health care—including mental health care—that may be needed as a consequence of a disaster. There is no consensus that this should be a federal responsibility. Nonetheless, when confronted with mass casualty incidents, hospitals, physicians, and other health care providers may face considerable pressure to deliver care without a clear source of reimbursement. In addition, the response to a public health incident could necessitate activities that begin before Stafford Act reimbursement to HHS has been approved, or activities that are not eligible for Stafford Act reimbursement. Although the HHS Secretary has authority for a no-year Public Health Emergency Fund (PHEF), Congress has not appropriated monies to this fund for many years, and no funds are currently available. On several occasions Congress and the President have provided supplemental appropriations to address uncompensated disaster-related health care costs and unreimbursed state and local response costs flowing from a public health incident. These incidents include Hurricane Katrina, the 2009 H1N1 influenza pandemic, the Haiti earthquake, Hurricane Sandy, and the Ebola and Zika virus outbreaks. Some policymakers, concerned about the inherent uncertainty in supplemental appropriations, have proposed dedicated funding approaches for public health emergency response. For FY2016, the Obama administration sought $110 million for the PHEF in its budget request. Legislative proposals in the 114 th Congress included H.R. 4525 , which would have made a supplemental appropriation to the PHEF; S. 3280 , which would have established a mechanism to appropriate and replenish funds to the PHEF; and H.R. 5926 and S. 3302 , each of which would have established and provided appropriations to a contingency fund at the Centers for Disease Control and Prevention (CDC). None of these proposals were adopted. [author name scrubbed], Analyst in Cybersecurity Policy ( [email address scrubbed] , [phone number scrubbed]) Cyberattacks pose a risk to the day-to-day processes of the U.S. economy and political system in a variety of ways, be it through disruption of economic activity, theft of intellectual property, compromise of critical infrastructure, espionage, or influence operations. Over the past decade, the United States has witnessed cyberattacks that have targeted both public sector and private sector data, sometimes stealing it, sometimes altering it, and sometimes denying access to it. The frequency of these attacks, and their potential effect on the economy, on our national security, and on people's lives has driven cybersecurity issues to the forefront of the national homeland security conversation. Development of sound cybersecurity policy at all levels of government and in the private sector represents a significant challenge for policymakers. Given the technical nature of this issue and the impact of cybersecurity across the homeland security enterprise, this section of the report is less compartmentalized by sub-issue than other sections of this report. Instead, it seeks to lay a basis of understanding for the reader on the federal government's role in cybersecurity and begin to familiarize the reader with certain concepts currently in discussion, in order to facilitate understanding of the risks, challenges, and opportunities posed by information technology in the homeland security realm. With that in mind, the section begins with a brief discussion about how cybersecurity may be defined, then examines how the federal government secures its networks and critical infrastructure with the involvement of DHS. The next subsections examine the relationship of the public and private sector in providing cybersecurity, and how the federal government organizes its response to a "cyber incident" (like disaster response). A subsection discussing some specific technologies in the cybersecurity policy debate follows, and the section closes with some examples from the transportation security sector of how cybersecurity comes into play in ensuring stable operating environments. [author name scrubbed], Analyst in Cybersecurity Policy ( [email address scrubbed] , [phone number scrubbed]) The United States government does not have a single definition describing cybersecurity. However, the Commission on Enhancing National Cybersecurity's "Report on Securing and Growing the Digital Economy" offers the following: The process of protecting information and information systems by preventing, detecting, and responding to unauthorized access, use, disclosure, disruption, modification, or destruction in order to provide confidentiality, integrity, and availability. The concepts of "confidentiality," "integrity," and "availability" are defined in U.S. Code as part of the "information security" triad. "Confidentiality" means that data is known only to authorized parties, "integrity" means that data is known to those parties in the manner they intend and not altered by another, and "availability" means that the data is available for access by those parties when they choose. These terms apply to the data stored, processed and transmitted by information technology (IT) systems, but also to the IT systems themselves. Growing in importance is a fourth term for information security—"authentication"—or the ability to confirm that parties using a system and accessing data are who they claim to be and have legitimate access to that data and system. With the information security framework, cyberattacks can be categorized by what the attack compromises. For example, a data breach compromises confidentiality of information, malware that instructs a system to take an action the user did not authorize compromises integrity, and a denial of service attack compromises the availability of information. [author name scrubbed], Analyst in Cybersecurity Policy ( [email address scrubbed] , [phone number scrubbed]) Compromise of federal government computer network security could cause significant disruption of day-to-day government functions, distort markets, economic activity, or threaten national security. The Federal Information Security Modernization Act (FISMA) establishes roles and responsibilities across the federal government for federal information technology security. The Office of Management and Budget (OMB) is responsible for overseeing agency adoption of cybersecurity practices and requiring agencies have a cybersecurity posture commensurate to their risk. NIST develops mandatory standards (i.e., the Federal Information Processing Standards) and permissive guidance (i.e., Special Publications) on security practices agencies are to adopt. DHS oversees agency adoption of cybersecurity programs, provides tools to protect agency networks, and coordinates government-wide efforts on federal cybersecurity. Inspectors General annually evaluate their agency's cybersecurity programs and provide recommendations on improving their cybersecurity posture. Ultimately, however, the agency head is responsible for ensuring risks are effectively managed in their own agency. According to provisions in FISMA, the responsibility for cybersecurity shall be delegated to a senior official, frequently a chief information security officer. Federal agencies are much like industry when it comes to cybersecurity in that, for the most part, neither is developing custom hardware and software for its own use. Instead, the government, like critical infrastructure sectors, is usually reliant on third-party companies to develop and maintain the hardware and software employed at agencies. The Congress exercises oversight over federal agency management, and the security of the agency's information technology is no exception. Congressional committees have held hearings on agencies' cybersecurity operations, frequently following a security incident. The appropriations committees and subcommittees consider an agency's cybersecurity efforts as they draft the annual appropriations bills. Information technology modernization has been growing as a topic for Congress to consider with regard to federal agency cybersecurity. GAO estimates that federal agencies spend over $80 billion annually on information technology. In the 114 th Congress, two bills in the House were merged and passed in the 114 th Congress that would have granted agencies a dedicated working capital fund to finance technology modernization with the goal to spending less to secure and maintain older technology with inherent security vulnerabilities. [author name scrubbed], Analyst in Cybersecurity Policy ( [email address scrubbed] , [phone number scrubbed]) The national policy regarding critical infrastructure security and resilience seeks to achieve those conditions against all threats and all hazards. Cyber threats and hazards are considered major hindrances to security and resilience. As such, the government has invested in mitigating cybersecurity risks. Critical infrastructure entities are under attack via cyberspace for a variety of reasons. Some attackers are seeking to steal trade secrets from targeted companies. Others are seeking information about the targets' customers or end users. There have been cyberattacks against critical infrastructure from nation-states, criminal organizations, and individuals, all of whom can pose a significant threat. Given the variety of motives and actors seeking to compromise critical infrastructure information and systems, owners and operators of critical infrastructure are encouraged by the government to adopt certain cybersecurity practices, and in some cases are required to do so by regulation. While not a national standard, the "Framework for Improving Critical Infrastructure Cybersecurity," more commonly known as the "NIST Cybersecurity Framework," provides entities with a structure and context to help manage their cyber risks. DHS serves as the lead federal agency for the delivery of resources to the private sector for cybersecurity and coordinating policy. In this capacity, the department encourages the sharing of information regarding cyber threats among companies and federal agencies. DHS facilitates the delivery of cyber threat analysis through its information sharing network, both analysis it has developed and the analysis of others. DHS offers tools to the private sector to help them understand their cyber risks and how to mitigate those risks as well as offering technical assistance (e.g., digital media analysis, investigations after a hack) when requested by a victim company. Each critical infrastructure sector has a sector-specific agency (SSA) responsible for developing policy for and coordinating sector-specific security and resilience efforts with sector companies. Some agencies with an SSA role, such as the Department of Energy, have developed cybersecurity programs for the sectors for which they are responsible. Others, such as the Environmental Protection Agency, rely more on partnerships with other government agencies to inform their sector's cybersecurity posture. The ability of an SSA to engage with its sector on cybersecurity is a function of the size (both in budget and manpower) of the agency, their primary responsibilities defined in law, and executive prioritization of agency activities. Although the government offers assistance, it is ultimately the responsibility of the critical infrastructure owners and operators to consider their risk and put into effect policies and practices to mitigate that risk. Information technology vendors and industry associations assist CI owners and operators by providing goods and services tailored to the sector's needs. Policy options exist to improve critical infrastructure cybersecurity. The NIST Cybersecurity Framework is currently in a review process to apply lessons learned from the past three years and to improve its applicability to adopters. Many cybersecurity experts encourage greater adoption of the Framework, but the question of whether it should be mandatory or a standard for industry to follow or face liability suits is still an open debate. To help critical infrastructure owners and operators improve their cybersecurity, incentives (e.g., grants, rate-recovery, and tax credits) have been considered but no proposal has been enacted or emerged as a favored approach. Further regulation of cybersecurity among critical infrastructure sectors is an option, but some experts express concern that technology-specific cybersecurity regulations are counterproductive as the risk space changes faster than the regulations can adapt. Some of these experts prefer the concept of basing legislation and regulation on the desired effect instead. [author name scrubbed], Analyst in Cybersecurity Policy ( [email address scrubbed] , [phone number scrubbed]) As is the case with other aspects of homeland security, cybersecurity responsibilities are not solely vested in the federal government. Private firms, public utilities, other levels of government, and individuals all have impacts on the security of the global network and activities carried out on it. The Obama Administration set forth a policy of cybersecurity as a shared responsibility. This approach asserts that there are roles for both the government and the private sector to play when it comes to ensuring our increasingly computing-reliant nation—whether government agencies, companies, or individuals—has proper cybersecurity strategies to choose from and adopt. In outlining this shared responsibility, the policy envisioned different roles for each of these players. Government could take direct action and regulate industry. On the other hand, government could convene industry with academia and government agencies to develop mutually acceptable and effective practices for various actors to implement. This latter course of action is frequently referred to as a public-private partnership. A third option is for the government to develop requirements—a set of characteristics it will mandate for products used by the government—which may then find their way into products for the private sector and general public. Industry, for their part of the shared responsibility model, serves as the innovator. As a counterpoint to the government course of action, industry contributes to the marketplace and the national policy debate by offering new thinking, alternative concerns, varying viewpoints and novel research and development. As mentioned earlier, industry also provides the products (e.g., hardware, software, services) that all sectors of society use. [author name scrubbed], Analyst in Cybersecurity Policy ( [email address scrubbed] ) In the wake of a cyber incident, like in the wake of a disaster, having an already-established plan for response and recovery can help minimize disruption and speed the return to normal activity. The government has established a policy and general plan for how the government will respond to just such a cyber incident. Presidential Policy Directive 41 (PPD-41) outlines a few guiding principles for cyber response: response is a shared responsibility among the victims, the private sector, and the government; responses must be risked-based to determine which resources to bring to bear; any response must respect the affected entities, responses will require a unity-of-effort from across federal agencies; and any response should be done in a manner that enables restoration and recovery of operations to the victim, not just retaliation against the hacker. PPD-41 also dictates that a government response will have concurrent lines of effort. "Threat response activities" will be led by the FBI and involve seeking out the hacker and delivering a response against them. "Asset response activities" will be led by DHS and involve efforts to help victims mitigate the effects of an attack. The intelligence community will provide assistance to both lines of effort. Following the release PPD-41, the government adopted the National Cyber Incident Response Plan (NCRIP). This plan follows a model as developed by the National Preparedness System under PPD-8, especially the National Response Framework, because it uses a core capability approach and adopts key aspects of the National Incident Management System (NIMS). Instead of prescribing specific actions for agencies to take, the NCIRP outlines how the government will activate a Cyber Unified Coordination Group to address the specific incidents. This is similar to how the government, in response to a natural disaster, activates a multi-agency group at a Joint Field Office to deliver federal resources. Lacking specific responses, or even a menu of options for the Cyber Unified Coordination Group to consider, the NCIRP is not an operational plan, and as such may not have a deterrent effect on adversaries. [author name scrubbed], Analyst in Cybersecurity Policy ( [email address scrubbed] ) Several technological developments represent challenges and opportunities in attempting to ensure "homeland cybersecurity." The following subsections explore encryption, automation, cloud computing, and the Internet of Things: four applications of technology with implications not only for our privacy and the efficiency of our economy, but also for our homeland security. Encryption has been around for hundreds of years as a method to ensure the confidentiality of communications. In the information age, however, it is also being deployed as a means to ensure not only privacy of traditional communications, but also safeguarding intellectual property, financial transactions, and critical infrastructure—all of which are exposed to cyberspace in today's world. Understanding encryption's uses and limitations is an important part of understanding its potential impact on our homeland security. Encryption is a process for transforming information into an unreadable form, which protects it from authorized access and manipulation. Encryption processes require five elements: the original information (the plaintext ), which is an input to an encryption method and combined with a key to produce the ciphertext. To transform the encrypted information back to readable information, a decryption method is used with the ciphertext and the key to reproduce the original plaintext. The application of encryption keeps data secure, but only in certain places. Data can be encrypted while it is stored, such as on a laptop or a phone, or while it is in transit, such as the email that is being sent. However, encryption cannot be applied to data while it is being created or edited—the document being filled out or the email being composed. So while encryption is a tool to ensure confidentiality it cannot provide security at all times, especially on networks where data is regularly accessed, as that data is likely to remain in a state of being unencrypted to facilitate access and processing. Systems using encryption as a way to ensure integrity can require a "signed command" before allowing that operation to run. A command can be cryptographically "signed" using encryption methods so the system can check to see if a command is legitimate. In this system, the command can execute if it can be verified using the systems encryption methods. Alternatively, if the file system is encrypted, any change to that system outside of the encryption method will cause an error in the system, alerting users to tampering. Much has been written about encryption and the encryption debate during the 114 th Congress. A large part of this debate was the "going dark" problem, of which encryption is one element. However, encryption also serves as a mitigating strategy from the risk posed by certain cyberattacks. As discussed earlier, there are a few elements to information security: confidentiality, availability, and integrity. There are many ways to attack availability such as denial of service attacks and ransomware attacks; there are also many ways to mitigate those attacks, such as increasing bandwidth and backups. However, there are fewer ways to mitigate than ways to attack. Encryption provides one of the few, effective ways to secure information against unwarranted access and to secure systems to ensure they operate in a trusted manner. There are also ways to use encryption against users, such as with ransomware. Ransomware is a specific form of malware (malicious computer software) that installs itself on a user's computer and encrypts the user's hard drive so that the user cannot access their files. In this attack, the attacker has the key, so the victim's data is unreadable unless the attacker provides them the key to decrypt the data. Automation has the potential to be disruptive to labor markets. However, for homeland security, it also has the potential to improve cybersecurity. The government has a program that automates sharing of cyber threat indicators from machine to machine. This is an example of machines taking autonomous action—in this case to facilitate information sharing and mitigation actions—without the influence from a human analyst. This has the potential to speed up the implementation of security practices, while also freeing up limited cybersecurity workforce resources to addressing areas of greater need. Cloud computing is a computing model which enables constant, ubiquitous, on-demand access to shared computing resources (e.g., storage, appliances, computational power) over a network. If one were running a business with a lack of cybersecurity workforce resources, migrating to a cloud architecture could free up company resources to be used on the company's main products or services. Cloud providers can offer dedicated security teams to ensure that the integrity and confidentiality of data remains secure. However, cloud computing relies on a connection to the public Internet. Those who move their data to the cloud are then at the mercy of their cloud service host and their internet service provider. Enterprises that transition to a cloud provider could have difficulty accessing their data if their connection to the public Internet is disrupted or their cloud provider has a disruption in service. The Internet of Things (IOT) has already demonstrated that it poses a security concern. IOT devices contain processing power, storage, and a network connection, and in many cases one or more sensors. This combination of features allows IOT devices to assist in the control of the physical world through the digital one. For instance, Internet-connected meters can report to utilities on power consumption, negating the need for meter-readers to physically visit each site. However, poorly secured devices pose a threat to other devices on the network and to the Internet as a whole by being the launch points for other attacks. Additionally, IOT devices may be the target of an attack, such as taking over a device to use it as a surveillance tool. Policy options for potential legislation addressing aspects of evolving technologies may be difficult to consider, as governmental actions may lead to unintended consequences in the market for these emerging technologies—such as product lock-in (i.e., the establishing of a product as the accepted technology moving forward, at the detriment of competitors or competing technologies), raised costs, or reduced innovation. However, by not taking any action the government relegates policy decisions about these emerging technologies to the private sector companies building them, or forfeits leadership opportunities over the technologies to other countries willing to take action—and for which the policies developed by those countries may not align with American national or homeland security interests. [author name scrubbed], Specialist in Aviation Policy ( [email address scrubbed] , [phone number scrubbed]) There is growing concern over cybersecurity threats to aircraft, air traffic control systems, and airports. TSA has indicated that its approach to cybersecurity thus far has not been through regulation, but rather through voluntary collaboration with industry. Under this framework, TSA formed the Transportation Systems Sector Cybersecurity Working Group, which created a cybersecurity strategy for the transportation sector in 2012. Also, in coordination with the FBI and industry partners, TSA launched the Air Domain Intelligence Integration Center and an accompanying analysis center in 2014 to share information and conduct analysis of cyber threats to civil aviation. In recognition of cybersecurity threats, FAA has developed a software assurance policy for all FAA-owned and FAA-controlled information systems. However, according to an April 2015 GAO report, while FAA has taken steps to protect air traffic control systems from cyber threats, it lacks a formal cybersecurity threat model. Moreover, GAO found that FAA faces continuing challenges in mitigating cyber threats, particularly as it transforms air traffic control systems under its NextGen modernization initiative. For systems onboard aircraft, FAA requires security and integrity to be addressed in the airworthiness certification process. Despite efforts to design aircraft systems to be resilient to cyber threats, in April 2015, TSA and the FBI issued warnings that the increasing interconnectedness of these systems makes them vulnerable to unauthorized access and advised airlines to look out for individuals trying to tap into aircraft electronics and for any evidence of tampering or network intrusions. [author name scrubbed], Specialist in Transportation Policy ( [email address scrubbed] , [phone number scrubbed]) In June 2015, the Coast Guard released a cyberstrategy document that identifies the agency's plans for addressing cybersecurity in the maritime environment. Vessel and facility operators use cyberdependent technologies for navigation, communication, cargo handling, and other purposes. The strategy document states the Coast Guard will be developing guidance for vessels and ports to address cybervulnerabilities, and will incorporate cybersecurity into existing enforcement and compliance programs. The strategy also states the Coast Guard will incorporate cybersecurity training in the requirements for mariner licensing and for port security officer qualifications. According to this document, the Coast Guard will modify an existing port risk assessment tool (MSRAM-Maritime Security Risk Assessment Model) to incorporate cyber risks. MSRAM is the primary tool used to assess risk to national infrastructure in the maritime domain, and is used extensively at the local, regional, and national levels, according to the Coast Guard. In the 114 th Congress, House-passed H.R. 3878 sought to promote cybersecurity risk information sharing among maritime stakeholders and provide industry with risk assessment tools. House-passed H.R. 5077 required DHS to report on U.S. maritime cyber threats and vulnerabilities (sec. 604). The Senate did not act on either bill. [author name scrubbed], Specialist in Homeland Security Policy and Appropriations ( [email address scrubbed] , [phone number scrubbed]) One of the unresolved debates from the development of DHS was the extent of department management involvement in the functioning of departmental components. Some policy experts supported a strong management function, which would replace the leadership of the components, while others supported a smaller management function that allowed components to function freely in their areas of expertise much as they had before. Once the department was established, it became clear that a small management cadre could not provide adequate coordination of policy or oversight of the department. The benefits of coordinated action by a large organization, including setting operational and budgetary priorities, were being lost due to the lack of strong leadership. As its components continued to perform their missions, the department undertook efforts to establish a unified identity and way of doing business. The term "One DHS" was used to describe these initiatives under Tom Ridge, the first secretary of the department, and the efforts continued through secretaries Michael Chertoff and Janet Napolitano. On April 22, 2014, Jeh Johnson, the fourth secretary of DHS, issued a memorandum to DHS leadership, entitled "Strengthening Departmental Unity of Effort." This now-widely circulated memorandum set out an agenda to reform the Department of Homeland Security way of doing business by implementing new analytical and decisionmaking processes to develop strategy, plan, and identify joint requirements. These would bring component leadership together above the component level to ensure unity of effort across the department. Secretary Johnson described it this way in a Federal Times interview: We've embarked on a unity of effort initiative that promotes greater coordination among department, greater centralized decision-making at headquarters, a more strategic approach to our budget building process, a more strategic departmentwide approach to our acquisition strategy. It is clearly a balance. Within the Department of Homeland Security there are components that long predated the Department of Homeland Security. And so what we are not asking components to do is to all act and behave together. They are distinct cultures.... But what we are asking and expecting our component leadership to do is participate with us in a more strategic approach to promote greater efficiency in how we operate, how we conduct ourselves, particularly in our budget process and in our acquisitions. The memorandum laid out four areas of initial focus. The first was to bring together senior leaders of the department in two groups: a Senior Leaders Council to discuss "overall policy, strategy, operations and Departmental guidance," and a Deputies Management Action Group (DMAG) to "advance joint requirements development, program and budget review, acquisition reform, operational planning, and joint operations." The second area was to make improvements to the departmental management processes for investments. Specifically, incorporating strategic analysis and joint requirements planning into the annual budget development process, directing the DMAG to develop and facilitate a component-driven joint requirements process, and reviewing and updating the DHS acquisition oversight framework. The third was developing a stronger strategy, planning, and analytic capability within the Office of Policy. The fourth was to improve coordination of cross-component operations. Bipartisan and bicameral support for these reforms was shown in several hearings during the 113 th and 114 th Congresses. Both House and Senate Appropriations Committee reports have included language supportive of the department's managerial reorganization, although there has been concern expressed about keeping Congress informed about progress and consequences of reorganizations in the field. Several of the action items included in the memorandum were completed in 2014, such as the establishment of a Cost Analysis Division in the Office of the Chief Financial Officer in May 2014. The role of this division is to ensure life-cycle cost estimates are part of major acquisition plans. DHS also completed development of a Southern Border and Approaches Campaign Plan—a four-year strategic framework for joint operations securing the southern border of the United States. At the end of the 114 th Congress, Title XIX of the FY2017 National Defense Authorization Act provided specific statutory authority to DHS for certain activities connected with the Unity of Effort initiative, including authorizing joint task forces and redefining the role of the former Office of Policy and renaming it the Office of Strategy, Policy, and Plans. At the confirmation hearing for Gen. John Kelly, interest in management reform and the future of Johnson's Unity of Effort initiative was apparent, with both General Kelly and some Senators praising the progress that had been made. Congress may debate the appropriate role of departmental level management at DHS, the level of engagement Congress should have as reforms go forward, the progress of management reforms, and whether they are having the desired effect. [author name scrubbed], Specialist in Science and Technology Policy ([email address scrubbed], [phone number scrubbed]) In 2013, Congress directed DHS to review its programs relating to chemical, biological, radiological, and nuclear threats and to evaluate "potential improvements in performance and possible savings in costs that might be gained by consolidation of current organizations and missions, including the option of merging functions of the Domestic Nuclear Detection Office (DNDO) and the Office of Health Affairs (OHA)." The report of this review was completed in June 2015. In July 2015, DHS officials testified that DHS plans to consolidate DNDO, OHA, and smaller elements of several other DHS programs into a new office, led by a new Assistant Secretary, with responsibility for DHS-wide coordination of chemical, biological, radiological, nuclear, and explosives (CBRNE) "strategy, policy, situational awareness, threat and risk assessments, contingency planning, operational requirements, acquisition formulation and oversight, and preparedness." The FY2017 budget request reflected this proposed reorganization. The budget proposed establishing a Chemical, Biological, Radiological, Nuclear, and Explosives Office containing the Domestic Nuclear Detection Office (DNDO), the Office of Health Affairs (OHA), the CBRNE threat awareness and risk assessment activities of the Science and Technology Directorate, the CBRNE functions of the Office of Policy and the Office of Operations Coordination, and the Office of Bombing Prevention from the National Protection and Programs Directorate (NPPD). In the 114 th Congress, the House passed H.R. 3875 , which would have implemented this proposed restructuring. The Senate did not pass a similar bill. Proponents of such a reorganization suggest that consolidating CBRNE activities would create a stronger focus within the department and improve interagency and interdepartmental coordination for these activities. However, skeptics of reorganization have questioned whether the benefits would outweigh the cost of disrupting current efforts, how well the differing agency cultures and missions would mesh, and why the new office would conduct research and development for nuclear defense but not biodefense. [author name scrubbed], Specialist in Homeland Security Policy and Appropriations ( [email address scrubbed] , [phone number scrubbed]) For further information, see CRS Report R44661, DHS Appropriations FY2017: Departmental Management and Operations . When DHS was established in 2003, components of other agencies were brought together over a matter of months, in the midst of ongoing budget cycles. Rather than developing a new structure of appropriations for the entire department, Congress and the Administration continued to provide resources through existing account structures when possible. In H.Rept. 113-481 , accompanying the House version of the FY2015 Department of Homeland Security Appropriations Act, the House Appropriations Committee wrote: "In order to provide the Department and the Committees increased visibility, comparability, and information on which to base resource allocation decisions, particularly in the current fiscal climate, the Committee believes DHS would benefit from the implementation of a common appropriation structure across the Department." It went on to direct the DHS Office of the Chief Financial Officer "to work with the components, the Office of Management and Budget (OMB), and the Committee to develop a common appropriation structure for the President's fiscal year 2017 budget request." Section 563 of Division F of P.L. 114-113 (the FY2016 Department of Homeland Security Appropriations Act) provided authority for DHS to submit its FY2017 appropriations request under the new common appropriations structure (or CAS), and implement it in FY2017. Under the act, the new structure was to have four categories of appropriations: Operations and Support; Procurement, Construction and Improvement; Research and Development; and Federal Assistance. Most of the FY2017 DHS appropriations request categorized its appropriations in this fashion. The exception was the Coast Guard, which was in the process of migrating its financial information to a new system. DHS has also proposed realigning its Programs, Project, and Activities (PPA) structure—the next level of funding detail below the appropriation level—possibly trying to align PPAs into a mission-based hierarchy. The Senate Appropriations Committee did not make its recommendation using the new structure, instead drafting its annual DHS appropriations bill and report using the same structure as was used in FY2016. The House Appropriations Committee made its recommendation using the new structure. Sec. 130 of the Continuing Appropriations Act, 2017 ( P.L. 114-223 ) included specific authority for DHS to obligate resources provided under the continuing resolution in a revised CAS, and the Trump Administration's supplemental appropriations request for FY2017 indicated that the Administration was continuing to organize DHS funding on that basis. Division F of P.L. 115-31 provided appropriations under a revised CAS for all DHS components except the U.S. Coast Guard, which has faced a series of challenges in updating its financial management systems. Congress will consider whether the new CAS provides the improved transparency it sought, whether the new PPA structure is sufficiently detailed, and also whether and how to integrate the Coast Guard into the new structures in the coming years. [author name scrubbed], Specialist in Homeland Security Policy and Appropriations ( [email address scrubbed] , [phone number scrubbed]) For additional information, see CRS Report R42753, DHS Headquarters Consolidation Project: Issues for Congress . The Department of Homeland Security's headquarters footprint occupies more than 7 million square feet of office space in about 50 separate locations in the greater Washington, DC, area. This is largely a legacy of how the department was assembled in a short period of time from 22 separate federal agencies which were themselves spread across the National Capital region. The fragmentation of headquarters is cited by the department as a major contributor to inefficiencies, including time lost shuttling staff between headquarters elements; additional security, real estate, and administrative costs; and reduced cohesion among the components that make up the department. To unify the department's headquarters functions, the department approved a $3.4 billion master plan to create a new DHS headquarters on the grounds of St. Elizabeths in Anacostia. According to GSA, this is the largest federal office construction since the Pentagon was built during World War II. $1.4 billion of this project was to be funded through the DHS budget, and $2 billion through the GSA. Thus far a total of over $2.5 billion has been appropriated for the project—$759 million for DHS and $1,548 million to GSA through FY2016. Phase 1A of the project—a new Coast Guard headquarters facility—has been completed with the funding already provided by Congress and is now in use. In 2013, a revised construction schedule was developed, projecting lower levels of appropriations and a longer timeline for the project. Under the new projection, the project would be completed in FY2026 at a cost of $4.5 billion. The project was criticized by GAO in September 2014 for not conforming to certain leading practices for capital decisionmaking processes. DHS and GSA revised its plans as a result of similar observations by GAO and other critics, announcing a new plan that would be completed in FY2021, and cost $3.7 billion. According to GSA, even with the cost increases from delaying funding, the project would still result in over $430 million in projected savings compared to leasing over the next 30 years. This estimate does not take into account the costs GSA would have to incur to stabilize and maintain the St. Elizabeths campus if the project were halted, or the efficiencies for DHS that a consolidated headquarters would generate. With the Coast Guard now operating from St. Elizabeths, any discussions on headquarters consolidation in the 115 th Congress are likely to focus on how to best use the available facilities on the campus, whether the latest revisions to the plan are acceptable to Congress, and how the headquarters consolidation will compete for resources within the DHS and GSA budgets. [author name scrubbed], Analyst in American National Government ( [email address scrubbed] , [phone number scrubbed]) An essential consideration underlying the mission and performance of the Department of Homeland Security (DHS) is human resource management (HRM). Responsibility for HRM is vested in the Office of the Chief Human Capital Officer (OCHCO), an entity organizationally and for appropriations purposes located within the Under Secretary for Management. The OCHCO plays a critical role in supporting and executing the department's "Strategic Plan for Fiscal Years 2014-2018." The Chief Human Capital Officer (CHCO) is the chief policy advisor on human resource management issues. At DHS, the CHCO is a career Senior Executive Service position. The incumbent CHCO assumed the position on January 11, 2016. During the 115 th Congress, the House of Representatives and the Senate may conduct oversight of personnel issues at DHS. Among the matters that may be considered are those related to the statutory responsibilities for the CHCO position, the department's human capital strategy for recruitment, millennials and federal government employment, the organizational culture at DHS, and collaboration between the department and its components through the Employee Engagement Steering Committee. Each of these issues is briefly discussed below. Hearings conducted by the House of Representatives and the Senate related to DHS appropriations or management matters could include review of these issues. Each May, during Public Service Recognition Week, the value of public service is discussed and the work of public servants, including federal employees, is highlighted and honored. This observance could provide an occasion for Congress to annually review human resource management at the department, either through meetings with DHS officials and the CHCO or an oversight hearing. Such activities could supplement congressional review and oversight of the OCHCO and current and developing HRM policies at DHS, throughout the year. [author name scrubbed], Analyst in American National Government ( [email address scrubbed] , [phone number scrubbed]). Title XIII, Sec. 1302 (The Chief Human Capital Officers Act of 2002) of P.L. 107-296 , the Homeland Security Act of 2002, enacted on November 25, 2002, authorizes the position of CHCO in the Cabinet departments and selected independent agencies. The 114 th Congress amended Section 704 of the Homeland Security Act to codify the responsibilities of the CHCO at DHS. Title XIX, Section 1904 of P.L. 114-328 , the National Defense Authorization Act (NDAA) for Fiscal Year 2017 ( S. 2943 ), enacted on December 23, 2016, specifies that the Chief Human Capital Officer reports directly to the Under Secretary for Management. The law provides that the department's CHCO has 10 responsibilities as follows: (1) develop and implement strategic workforce planning policies that are consistent with Government-wide leading principles and in line with Department strategic human capital goals and priorities, taking into account the special requirements of members of the Armed Forces serving in the Coast Guard; (2) develop performance measures to provide a basis for monitoring and evaluating Department-wide strategic workforce planning efforts; (3) develop, improve, and implement policies, including compensation flexibilities available to Federal agencies where appropriate, to recruit, hire, train, and retain the workforce of the Department, in coordination with all components of the Department; (4) identify methods for managing and overseeing human capital programs and initiatives, in coordination with the head of each component of the Department; (5) develop a career path framework and create opportunities for leader development in coordination with all components of the Department; (6) lead the efforts of the Department for managing employee resources, including training and development opportunities, in coordination with each component of the Department; (7) work to ensure the Department is implementing human capital programs and initiatives and effectively educating each component of the Department about these programs and initiatives; (8) identify and eliminate unnecessary and duplicative human capital policies and guidance; (9) provide input concerning the hiring and performance of the Chief Human Capital Officer or comparable official in each component of the Department; and (10) ensure that all employees of the Department are informed of their rights and remedies under chapters 12 and 23 of title 5, United States Code. Under the law, each DHS component, in coordination with the department's CHCO, is directed to develop a five-year workforce strategy that will support DHS goals, objectives, and performance measures for determining the proper balance of federal employees and private labor resources. In addition, the DHS Secretary is directed to submit a report related to workforce strategies and staffing to the House Committee on Homeland Security and the Senate Committee on Homeland Security and Governmental Affairs within 90 days after submitting the annual budget justification. Congress may be interested in examining the fulfillment of the CHCO's statutory responsibilities, including the policies and programs that are established, implemented, and evaluated to carry them out. Congress could also review the department's workforce strategies and staffing plans. [author name scrubbed], Analyst in American National Government ( [email address scrubbed] , [phone number scrubbed]). The responsibilities of the CHCO at DHS are centered around human capital planning. According to the Office of Personnel Management (OPM): human capital planning is the method by which an agency designs a coherent framework of human capital policies, programs, and practices to achieve a shared vision integrated with the agency's strategic plan. Implementation of the strategic human capital plan is a key step in an agency's progress to build a highly effective, performance-based organization by recruiting, acquiring, motivating, and rewarding a high-performing, top quality workforce. The plan becomes the road map for continuous improvement and the framework for transforming the culture and operations of the agency. An agency's recruitment strategy is part of its human capital strategic plan. DHS's planning process for hiring new employees is reportedly underway. Recruitment will occur against the backdrop of a recently-expired government-wide hiring freeze and directives to hire a specified number of employees in U.S. Immigration and Customs Enforcement (ICE) and U.S. Customs and Border Patrol (CPB). A Presidential Memorandum issued by President Donald Trump on January 23, 2017, instituted a 90-day hiring freeze in executive agencies. Executive Orders issued by President Trump on January 25, 2017, directed CBP to hire 5,000 border patrol officers and ICE to hire 10,000 Immigration Officers, subject to available appropriations, respectively. In testimony provided to the Senate Committee on Homeland Security and Governmental Affairs, Subcommittee on Regulatory Affairs and Federal Management in September 2016, the department's CHCO, Angela Bailey, stated that a "DHS Strategic Outreach and Recruitment (SOAR) Plan" had been prepared and is "focused on recruiting a highly qualified and diverse workforce." The testimony identified several of the department's mission critical occupations, including Transportation Security Administration (TSA) officers; CBP officers; Emergency Management personnel at the Federal Emergency Management Agency (FEMA); Budget, Cost, Internal Control, and Resource Analysts; and Accountants. Congress may be interested in examining the implementation and impacts of the hiring freeze and follow-on hiring policies on DHS, including positions exempted from hiring restrictions; the implementation of the Executive Order directives on hiring at ICE and CBP; and the department's recruitment strategy, especially as it relates to mission-critical occupations. Congress could also consider directing the department to include links to the relevant HRM policy documents on the OCHCO webpage to facilitate oversight. [author name scrubbed], Analyst in American National Government ( [email address scrubbed] , [phone number scrubbed]). Millennials who are considering employment with the federal government may be especially interested in the DHS recruitment strategy. Congress conducted oversight on the issue of millennials and federal employment in 2016. The Senate Committee on Homeland Security and Governmental Affairs, Subcommittee on Regulatory Affairs and Federal Management, for example, conducted a hearing titled Understanding the Millennial Perspective in Deciding to Pursue and Remain in Federal Employment on September 29, 2016. The Subcommittee Chairman, Senator James Lankford, and the Ranking Member, Senator Heidi Heitkamp, noted the retirement eligibility of a significant portion of the federal workforce over the next several years and the importance of recruiting and retaining "a new generation of federal employees." In his opening statement, Senator Lankford cited "the fact that many millennials believe government service is not a rewarding or fulfilling job" as an obstacle in hiring. Senator Heitkamp's opening statement expressed her belief that "it is important for the federal government to connect with the millennial generation in a way that speaks to their needs and their desire to pursue mission-oriented careers, while also demonstrating all that a career in the federal government has to offer." Stating that, "millennials are identified as a key demographic in our recruitment strategy," Angela Bailey, CHCO at DHS, provided testimony to the committee that millennials represent approximately 21% of the DHS workforce, compared to 18.68% across the federal government; over 50% of millennials at DHS identify as a member of a diverse racial or ethnic group; and some 36% of millennials at DHS are women. She also stated that younger millennials under age 30 represent approximately 9% of the DHS workforce (compared to 7% across the federal government); 59% identify as a member of a diverse racial or ethnic group; and 42% are women. According to the CHCO, millennials are employed in mission-critical occupations across the department, and include more than 17,000 Transportation Security Officers at TSA, almost 11,000 CBP officers and Border Patrol Agents, and almost 300 Emergency Management personnel at FEMA. During an interview with a federal news organization in early July 2016, the CHCO said, with regard to recruitment: It is okay to have this in-and-out of government career. We are really okay with the fact that in some ways, you become an ambassador for us. If we at least create the best experience that we can, that you gain the most knowledge that can from this, and that you then take it to your private sector career.... We're not looking for 30-year-career employees. We're actually looking for folks that want to come in, they want to get this excellent experience and then they take it to the private sector, and then they come back again. DHS Excellence in Leadership (DEL) is an official, independent employee association at the department. The organization's mission is "to foster 'Unity of Effort' through professional development and community engagement." The organization's webpage posts information on issues of interest to members, including federal employment of millennials. Congress may be interested in examining HRM policies and programs for millennials, including the recruitment strategy, recruitment and retention rates, and demographics for this workforce within the department and its components. Congress could also encourage the department to survey its millennial employees with regard to their experiences in working for DHS, perhaps in coordination with DHS Excellence in Leadership. [author name scrubbed], Analyst in American National Government ( [email address scrubbed] , [phone number scrubbed]). In June 2006, then-DHS Secretary Michael Chertoff "directed the Homeland Security Advisory Council (HSAC) to establish a Culture Task Force (CTF) to provide recommendations for creating, achieving and maintaining an empowering, energetic, dedicated, mission-focused culture within the Department and within the spectrum of its state, tribal, local and private sector partners." The Task Force report, issued on January 23, 2007, included recommendations that it believed would assist the Secretary and DHS leaders in creating and sustaining an organization "that leverages, focuses, strengthens and synergizes the multiple capabilities of its components and empowers them to continuously improve the Department's operational capacities and the security of the Nation." According to the report, "'Culture' is about people relationships and inspirations, and how the people of the Department view its Leadership, the organization itself and its purposes, and the importance of one's individual role within the Department." Among the report's six recommendations were suggestions that the department (1) implement homeland security management and leadership models and (2) create leadership-empowered teamwork and a "Blended Culture." In making the first recommendation, the task force found that DHS should adopt two models: "a closed loop management model that sets the key relationships between strategic accountabilities, organizational units, performance expectations and management processes to achieve DHS goals" and "a leadership and training model, including 'joint duty and training' experience that will help all DHS leadership to focus collaboratively on key leadership expectations and objectives." With regard to the second recommendation, the task force found that "No single Homeland Security culture is possible or—for that matter—wise. DHS must leverage its Components' unique cultures to create organizational and operational capacities greater than is the sum of their parts." On September 19, 2016, then-DHS Secretary Jeh Johnson and then Deputy Homeland Security Secretary Alejandro Mayorkas issued a fact sheet titled, "Changing the Culture at DHS." The document stated that the DHS officials "have made employee engagement and morale one of their highest priorities and have taken action to create an engagement-supportive culture across DHS." The document affirmed policies and listed action steps in five areas related to departmental management: (1) active involvement of a strong Employee Engagement Steering Committee (EESC); (2) recognizing and rewarding excellence in pursuit of mission; (3) enhancing communication; (4) increasing leadership accountability, awareness, and empowerment related to employee engagement; and (5) increasing transparency and fairness in the hiring and promotion process. Congress may be interested in reviewing the department's initiatives related to organizational culture, employee engagement, and the implementation and results of the Culture Task Force Report recommendations and the fact sheet on changing the culture of DHS. Congress could also examine coordination between the department's strategies related to organizational culture and the "Unity of Effort" initiative and DHS implementation of any policies on joint duty assignments for employee development. [author name scrubbed], Analyst in American National Government ( [email address scrubbed] , [phone number scrubbed]). In December 2016, the Homeland Security and Defense Business Council and its member company, Grant Thornton, released the second survey of its five-year 20/20 Project on the Homeland Security Enterprise (HSE). According to the document, "The overall Project aims to capture perspectives from government and industry executives engaged in homeland security missions on critical challenges and future opportunities facing [DHS] and the broader interagency and public-private partnership that is the [HSE]." The survey identified interagency collaboration as an example of an excellent management practice that "exist[s] across DHS that should be acknowledged, examined, and replicated." Within the department, the EESC has a central role in coordinating interagency collaboration among DHS components that work together "on common DHS-wide programs" and implement "customized initiatives reflecting their particular needs and cultures." The Under Secretary for Management chairs the committee, which is made up of leaders from the department's operational components. The leaders are to "advise DHS leadership on their perspectives for department-wide approaches," share "best practices and brainstorming ideas" and report "on what is working and what needs to be improved." During an April 27, 2016, hearing conducted by the House Committee on Oversight and Government Reform, Subcommittee on Government Operations, the DHS CHCO, Angela Bailey, provided testimony that the steering committee's input had informed a new employee action engagement plan applicable department-wide. She said that the action plan focuses on "selecting and empowering high performing leaders, developing excellent leaders at all levels, and enhancing communication." With regard to the communication focus, a DHS report explained that this referred to "two-way communication and inclusion utilizing labor management forums, diversity and inclusion councils, and ideation platforms." Congress may be interested in examining the department's existing policies and planned initiatives related to collaboration between DHS and its components and the operation and activities of the EESC. Congress could also direct the department to publish a link to the employee engagement action plan, and any other related HRM policy documents, on the OCHCO's webpage.
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In 2001, in the wake of the terrorist attacks of September 11th, "homeland security" went from being a concept discussed among a relatively small cadre of policymakers and strategic thinkers to a broadly discussed issue among policymakers, including those in Congress. Debates over how to implement coordinated homeland security policy led to the passage of the Homeland Security Act of 2002 (P.L. 107-296) and the establishment of the Department of Homeland Security (DHS). Evolution of America's response to terrorist threats has continued under the leadership of different Administrations, Congresses, and in a shifting environment of public opinion. DHS is currently the third-largest department in the federal government, although it does not incorporate all of the homeland security functions at the federal level, even if one constrains the definition of homeland security to the narrow field of prevention and response to domestic acts of terrorism. In policymaking terms, homeland security is a very broad and complex network of interrelated issues. For example, in its executive summary, the Quadrennial Homeland Security Review issued in 2014 delineates the missions of the homeland security enterprise as follows: prevent terrorism and enhance security; secure and manage the borders; enforce and administer immigration laws; safeguard and secure cyberspace; and strengthen national preparedness and resilience. This report outlines an array of homeland security issues that may come before the 115th Congress. After a brief discussion of the definitions of homeland security, the homeland security budget, and the role of homeland security actors in the intelligence community, the report divides the specific issues into five broad categories: Counterterrorism and Security Management; Border Security and Trade; Disaster Preparedness, Response, and Recovery; Cybersecurity; and DHS Management Issues. Each of those areas contains a survey of topics briefly analyzed by Congressional Research Service experts. The information included only scratches the surface of most of these selected issues. More detailed information on these topics and others can be obtained by consulting the CRS reports referenced herein, or by contacting the relevant CRS expert.
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Experts commonly list Pakistan among the most strategically important countries for U.S. policy makers. The 113 th Congress is grappling with troubled and even deteriorated U.S.-Pakistani relations, as well as the need to balance Pakistan's importance to U.S. national security interests with U.S. domestic budgetary pressures. In the post-9/11 period, assisting in the creation of a more stable, democratic, and prosperous Pakistan actively combating religious militancy has been a central U.S. foreign policy effort. Global and South Asian regional terrorism, and a nearly 12-year-long effort to stabilize neighboring Afghanistan, are viewed as top-tier concerns. Pakistan's apparently accelerated nuclear weapons program and the long-standing dispute with India over Kashmir continue to threaten regional stability. Pakistan is identified as a base for numerous U.S.-designated terrorist groups and, by some accounts, most of the world's jihadist terrorist plots have some connection to Pakistan-based elements. With anti-American sentiments and xenophobic conspiracy theories remaining rife among ordinary Pakistanis, persistent economic travails and a precarious political setting combine to present serious challenges to U.S. decision makers. Opinion surveys show a large and consistent majority of Pakistanis holding strongly unfavorable views toward the United States. Meanwhile, Americans tend to have poor views of Pakistan; one survey—taken soon after the May 2011 bin Laden raid—found only 2% identifying Pakistan as a U.S. "ally." Aware of these and other concerns, the U.S. government has provided large-scale foreign assistance to Pakistan with an eye toward short-term U.S. security interests and longer-term interests in realizing a more stable, democratic, and prosperous Pakistani state. The United States has provided significant aid to Pakistan over the nearly 66 years since that country's independence, but at levels that fluctuated widely. Major aid flows during some periods and drastic cuts in others contributed to creating a perception among many in Pakistan that the United States is not a fully reliable ally. At the same time, some U.S. lawmakers continue to question providing large amounts of aid to a Pakistani government that is seen as an unreliable partner in U.S. counterterrorism efforts—as evidenced in 2011 by revelations that Al Qaeda founder Osama bin Laden found refuge in a Pakistani city for several years and that the Haqqani Network of Afghan insurgents may continue to receive support for Pakistan's main intelligence service. To many, Pakistan also appears incapable of providing sustainable economic development and security for its own people, and often is unaccountable to the United States for aid results. Beyond these issues, some question whether the aid results in public diplomacy benefits for the United States. Meanwhile, only a small percentage of Pakistanis appear to view U.S. assistance to their country as having a positive impact. Pakistan is a poor, fragile, and insecure state, representing a daunting challenge to U.S. and other foreign donors. Pakistan's estimated per capita GDP of $2,881 (at purchasing power parity) in 2012 ranks it 141 st of 187 world countries (by comparison, the U.S. figure is $51,248 and India's, with seven times as many citizens as Pakistan, is $4,063). From 2008 to 2010 the country experienced aggregate inflation of nearly 50% against GDP growth of less than 13%. Pakistan's education sector is among the world's least effective: the government devotes less than 3% of GDP to education and nearly one-quarter of primary school age children have no formal education of any kind. Less than half of Pakistanis have access to modern energy services, and the energy infrastructure is so overburdened that chronic electricity shortages result in rolling blackouts lasting 16 or more hours per day, even in vital business centers such as Karachi. Potable water shortages are widespread, and a dilapidated health sector provides insufficient access to basic health services, meaning that many citizens—women and children, especially—die each year from preventable diseases. Meanwhile, security threats remain rife: Pakistan is home to multiple Islamist, separatist, sectarian, and other politically motivated militants and terrorist groups. Reports indicate that as many as 49,000 Pakistanis have died in terrorism- and/or insurgency-related violence since September 2001; more than 5,100 civilians are said to have been killed in bomb blasts or suicide attacks since 2008. The post-2001 U.S. assistance program for Pakistan has seen notable accomplishments, not least in the area of humanitarian relief related to that country's devastating 2005 earthquake and 2010 floods. U.S. aid has measurably improved Pakistan's energy, health, and education sectors, bolstered its infrastructure, and facilitated better governance and gender equity. In the security realm, U.S. assistance has provided Pakistan's military and law enforcement agencies with equipment and training that has improved their capacity to combat the country's indigenous terrorism threat. It has also contributed to successes realized by the Pakistani military in offensive military operations undertaken in tribal areas, and enabled Pakistan to better support U.S.-led military operations in Afghanistan. Pakistani law enforcement agencies have received equipment and training. However, by most objective measures, U.S. assistance to Pakistan since 2001 has not achieved its central goals, especially as Islamist extremism and militancy there have increased, the civilian government remains unstable, and the national economy continues to suffer. Many independent assessments of the U.S. aid program are critical of the way Washington has delivered and overseen aid. In the representative words found in a June 2012 study, International, particularly U.S., military and civilian aid has failed to improve Pakistan's performance against jihadi groups operating on its soil or to help stabilize its nascent democracy. Lopsided focus on security aid after the 11 September 2001 attacks has not delivered counterterrorism dividends, but entrenched the military's control over state institutions and policy, delaying reforms and aggravating Pakistani public perceptions that the U.S. is only interested in investing in a security client. This critique, like many others, urges the United States to apply conditions on military, but not civilian, assistance, and to give both the U.S. Agency for International Development (USAID) and its implementing partners more freedom to devise and prioritize their efforts. Some observers fault the U.S. government for failing to put security aid and development aid on distinct tracks. These analysts further contend that the Obama Administration and Congress may both have overestimated the pace at which the United States could enlarge the assistance program, and been too optimistic about the ability of U.S. agencies to quickly and extensively implement KLB effectively. The National Defense Authorization Act (NDAA) for FY2013 became P.L. 112-239 just days before the 112 th Congress adjourned. The act contains limitations, conditions, and waiver authorities for Coalition Support Fund (CSF) reimbursements and Pakistan Counterinsurgency Fund (PCF) disbursements. In addition, the certification requirements for most forms of U.S. assistance found in Section 7046 of the Consolidated Appropriations Act, 2012 ( P.L. 112-74 ) continue to obtain in FY2013, as do certification requirements for the release of most security aid found in Section 203 of the Enhanced Partnership with Pakistan Act of 2009 ( P.L. 111-73 ). Section 1227 of the FY2013 NDAA limits CSF reimbursements to Pakistan to $1.2 billion in the current fiscal year, and it prohibits any such reimbursements for the roughly seven-month period (November 2011-July 2012) that Pakistan had barred NATO from transiting along its Ground Lines of Communication (GLOCs) linking Afghanistan with the Arabian Sea. Payment of FY2013 CSF to Pakistan cannot be made unless the Secretary of Defense certifies that security is being maintained along the GLOCs, that Pakistan is taking demonstrable steps on counterterrorism efforts against al Qaeda, Tehrik-i-Taliban Pakistan, and other militant extremist groups, and that it is countering the threat of improvised explosive devices (IEDs). The Secretary may waive this certification requirement in the interest of U.S. national security. Section 1228 of the act extends PCF through the current fiscal year. Disbursement of such funds requires the Secretary of Defense, in consultation with the Secretary of State, to certify that Pakistan is demonstrating efforts to counter IEDs, cooperating on counterterrorism efforts, and not detaining Pakistani citizens, including Dr. Shakil Afridi, as a result of their cooperation with the U.S. government on counterterrorism efforts. The Secretary may also waive this certification requirement in the interest of U.S. national security. Section 1211 of the pending NDAA for FY2014 ( H.R. 1960 ), passed by the full House on June 14, 2013, would limit FY2014 CSF reimbursements to Pakistan to $1.5 billion. Furthermore, disbursement of such funds would require the Secretary of Defense to certify that Pakistan is maintaining the security of and not interfering with the movement of U.S. shipments along its GLOCs; that it is taking demonstrable steps to support counterterrorism operations, to disrupt the conduct of cross-border attacks on NATO and allied troops in Afghanistan, to counter the threat of IEDs, and to conduct cross-border coordination with Afghan and U.S. troops; and that it is not using its military or any security assistance provided by the United States to persecute nonviolent minority groups for their political or religious beliefs. The bill would allow the Secretary to waive this certification requirement in the interest of U.S. national security. Section 9014 of the pending Department of Defense Appropriations Act for FY2014 ( H.R. 2397 ), introduced in the House on June 17, 2013, would preclude any FY2014 CSF payments to Pakistan unless the Secretary of Defense, in coordination with the Secretary of State, certifies that Pakistan is cooperating with U.S. counterterrorism efforts in the region (for the first time naming the anti-India Lashkar-e-Taiba among the targeted groups); not supporting terrorist activities against U.S. or allied troops in Afghanistan and Pakistani security agencies are not intervening extra-judicially in the country's political and judicial processes; dismantling IED networks; preventing nuclear proliferation; implementing policies to protect judicial independence and due legal process; issuing visas in a timely manner for U.S. visitors engaged in counterterrorism efforts or assistance programs; and providing humanitarian organizations access to detainees. The bill would provide the Secretary of Defense, in consultation with the Secretary of State, authority to waive these restrictions in the interest of U.S. national security. The FAULT Act ( H.R. 1922 , referred to House committees on May 9, 2013) would limit assistance to Iran, North Korea, Syria, Egypt, and Pakistan on the finding that U.S. taxpayer dollars "should not be distributed to those who seek to do harm to Americans or our allies," and that Pakistan is among those countries that "have engaged in activities that undermine the security and foreign policy objectives of the United States...." Enactment would end all foreign assistance to listed countries with the exception of an annual maximum $50 million in agricultural or medical goods. Such limitations on a specific country could be waived if the President reports to Congress that the country has made fundamental changes in an extensive array of governmental policies or for humanitarian aid. The bill would also require the President to terminate Pakistan's status as a Major Non-NATO Ally. In August 2012, the State Department quietly notified Congress of its intention to cite U.S. national security provisions in waiving two certification requirements that placed conditions on U.S. assistance to Pakistan. These provisions required the Secretary of State to certify that Pakistan was cooperating with the United States on a range of counterterrorism, nonproliferation, democracy, and other issue-areas. Weeks later, then-Secretary Clinton formally notified Congress that the Administration would continue the U.S. aid flow by waiving certifications required in Section 203 of the Enhanced Partnership with Pakistan Act of 2009 ( P.L. 111-73 ) and in Section 7046 of the Consolidated Appropriations Act, 2012 ( P.L. 112-74 ), finding that it was in the national security interest of the United States to do so. This marked the first time the Obama Administration waived aid sanctions on Pakistan. In February 2013, in order to resume arms transfers to Pakistan in the current fiscal year, the Administration issued a more limited Section 203 waiver when Deputy Secretary of State Thomas Nides quietly removed restrictions on the issuance of export licenses for major defense equipment. License applications are now being considered on a case-by-case basis. To date, the Administration has neither certified Pakistan nor issued a blanket national security waiver for FY2013 under Section 203 provisions. In May 2012, a tribal court in Pakistan convicted Shakil Afridi of treason and sentenced him to 33 years in prison. Afridi was a physician who had worked with the CIA in an apparently unsuccessful attempt to collect DNA samples from Osama bin Laden's Abbottabad compound previous to the May 2011 U.S. commando raid there. Members of the U.S. Congress reacted strongly and with considerable bipartisan anger to news of Afridi's sentencing. A day later, a Senate Appropriations Subcommittee approved an amendment to the FY2013 State and Foreign Operations Appropriations bill that would withhold $33 million ($1 million for each year of the sentence) of requested Foreign Military Financing aid to Pakistan. Senator Rand Paul was among several Members who have sought to end all foreign assistance to Pakistan until Afridi is released and the charges dropped; he pushed for the Senate to consider such provisions in his bill ( S. 3576 ). On September 22, 2012, the bill was defeated by a vote of 10-81. Some Members of the 113 th Congress remain seized of the issue. In the Senate, the pending S. 158 would naturalize Dr. Afridi as a U.S. citizen, and S. 164 would prohibit further U.S. assistance to Pakistan until he is released and the charges dropped. A pending House resolution with 18 cosponsors ( H.Res. 86 ) would express the sense of the House that Afridi is an American hero and should be immediately released from Pakistani custody. During an April 2013 House hearing on the Administration's FY2014 foreign affairs budget proposal, one Member asked Secretary of State John Kerry how long the United States will use "quiet diplomacy" in an effort to see Afridi freed, "rather than just cutting off their aid?" The Secretary responded by saying, Cutting off aid to Pakistan would—would not be a good move, certainly at this point in time, for a lot of different reasons. We are working with Pakistan with respect to nuclear safety and nonproliferation. We are working with Pakistan to get our supplies both in and out of Afghanistan. The aspiration to provide $1.5 billion in annual nonmilitary assistance to Pakistan for FY2010-FY2014, as authorized by the Enhanced Partnership with Pakistan Act of 2009 (EPPA, also known as the Kerry-Lugar-Berman or "KLB bill"), was met only in FY2010. Amounts fell short by $414 million in FY2011, by $433 million in FY2012, and by $428 million in the FY2013 request. For FY2014, the Administration has requested just over half of the legislation's authorized amount. By way of explanation, Administration officials say Congress did not appropriate the funds for FY2011 and FY2012. For FY2013 and FY2014, the Administration request fell significantly short of $1.5 billion due mainly to budgetary constraints. The legislation includes a sense of Congress that its provisions be extended for another five years (FY2015-FY2019), however the authorization itself ends in FY2014. Perhaps the most pressing problem facing the new Pakistani government of Prime Minister Nawaz Sharif, seated in June 2013, is the country's shambolic energy sector. The proximate issue is an estimated $5 billion in "circular debt" in the power sector, debt caused largely by a failure of most Pakistanis to pay their electricity bills (theft and corruption are other major factors). Electricity shortages are a problem that has become increasingly severe over the past decade, and Pakistani homes and businesses now commonly face "rolling blackouts" of up to 16 hours per day in cities and up to 22 hours per day in rural areas due to load shedding. A peak national demand of about 15,000 megawatts (MW) is often 50% greater than generation capacity. The crisis is said to shave as much as 4% from the country's GDP and 1.5% from the GDP's rate of growth. The government's current goal is to reduce load shedding to just three or four hours per day within six months. According to the State Department's FY2014 Congressional Budget Justification, assistance to Pakistan's energy sector is the "highest priority," and the Administration's request for $265 million in FY2014 funding for this effort accounts for more than one-third of all civilian aid requested for the coming fiscal year. The goal is to support the Pakistani government in "developing a policy environment that will attract private sector investment and increase cost recovery, decrease technical and commercial losses, and add megawatts to the grid through visible generation projects." By the end of 2013, U.S. AID expects to have added fully 900 MW to Pakistan's power grid, enough to power some 2 million homes and businesses. An added 300 MW is planned by the end of 2014. The great majority of this added capacity will come from improvements of the Muzafargarh and Jamshoro power stations (serving the cities of Multan and Hyderabad, respectively), as well as modernization of the Tarbela Dam near Islamabad. There is a particular focus on boosting Pakistan's hydropower potential by funding projects to improve capacity at five dams (Mangla, Kurram Tangi, Gomal Zam, Satpara, and Tarbela). The Tarbela Dam is one of the world's largest and supplies fully 16% of the country's electricity. In March 2013, a project to restore three of the dam's generators was completed, adding 128 megawatts to the national power grid. The United States had provided the $16.5 million needed for the repairs. In mid-2012, Congress released $280 million in new assistance for Pakistan's energy sector; these funds will support projects at Mangla and Kurram Tangi. The Office of the Inspector General (OIG) for USAID and the Departments of State and Defense issues quarterly reports on the progress and oversight of the U.S assistance program in Pakistan. The most recent covers developments through March 2013, at which time the AID Mission in Pakistan had a total of 258 staff, with a net gain of 8 so far in 2013. It conveys U.S. Embassy reporting that, to date, $3.98 billion in FY2010-FY2013 civilian assistance funds had been obligated. The report notes serious and continuing challenges to effective aid delivery: Challenges to implementation of the civilian assistance program in Pakistan remain in every sector. Limited local technical capacity has affected the implementation of many assistance efforts. Many programs operate under difficult security conditions, and implementing partners and program participants have been subject to criticism and harassment for their association with U.S. Government efforts. Program staffing and events have been hampered by the denial of visas and visa extensions to U.S. Government employees and implementing partners, and project personnel have been kidnapped and killed in areas where security is lacking. Despite these challenges, implementation of assistance programs continued. May 2013 parliamentary elections held the promise of a historic, peaceful transfer of civilian power in Pakistan that, in turn, had the potential to produce changes in government priorities and the direction of assistance programs. The USAID OIG has taken action, including investigations and audits, to protect against waste and theft. The report also lays out nine major risk factors that jeopardize the U.S. aid program in Pakistan: 1. Political risks (political and economic instability limits progress in aid delivery); 2. Operating restrictions (strict Pakistani government rules limiting the ability of U.S. personnel to travel hinder project implementation and monitoring); 3. Resistance to reform (entrenched interests sometimes resist needed economic policy reforms and political interference undermines the decision-making process of managers in the Pakistani power sector); 4. Vulnerability to natural disasters (flooding is exacerbated by poor water storage and management practices, and delays project implementation in affected areas); 5. Leadership turnover (high-level officials in both countries will often spend less than two years in their positions, affecting program planning, coordination, and implementation); 6. Adverse environmental impact (some projects have the potential to degrade the natural or physical environment); 7. Limited institutional capacity (outside of Punjab, many Pakistani institutions have low capacity and a dearth of experienced staff, increasing the risk of resources being lost through inefficiency and/or theft); 8. Inadequate financial management in Pakistani government institutions (increases the difficulty of accountability and reporting): and 9. Security risks (U.S. officials have reduced ability to conduct direct monitoring and evaluation in conflict-affected areas). Strategies to mitigate each of these risks are being implemented. These include numerous capacity-building and NGO training programs; the use of accounting firms to conduct pre-award assessments and audits; maintenance of an in-country oversight presence; and working cooperatively with Pakistan's National Accountability Bureau, the country's lead law enforcement agency for corruption investigations, among others. In angry response to the inadvertent killing of 24 Pakistani soldiers by NATO forces in late 2011, Islamabad closed the vital ground lines of communication (GLOCs) used by NATO forces to access Afghanistan and placed bilateral relations "on hold." Ties then remained largely frozen during the first half of 2012. In July 2012, negotiations finally succeeded in resolving the bilateral impasse and the GLOCs were reopened. The breakthrough came following a telephone call to Foreign Minister Hina Rabbani Khar in which Secretary of State Hillary Clinton said, "We are sorry for the losses suffered by the Pakistani military." The State Department indicates that civilian aid flows were uninterrupted during the seven-month period. In an apparent quid pro quo for the GLOCs' reopening, the Administration announced it would release $1.18 billion in Coalition Support Fund (CSF) military reimbursements for Pakistan's support during the period July 2010-May 2011. Congress took no action to block the transfer. The payment, the first since December 2010, equaled 60% of the $1.88 billion claimed by Pakistan for that period. At the close of 2012, the Defense Department issued another $688 million CSF payment covering the period June-November 2011. Congress has prohibited any provision of CSF for the period that the Pakistani GLOCs were closed. At present, CSF requests for July 2012 and beyond are being taken under consideration. For three consecutive summers (2010-2012), Pakistan experienced major seasonal flooding that resulted in hundreds of deaths and negatively affected nearly 5 million people with deteriorated living conditions. The most recent round, in 2012, forced some 350,000 people to flee their homes, bringing the total still-displaced population to more than 750,000 at year's end. According to the U.N. Office for the Coordination of Humanitarian Affairs, the Islamabad government pledged $91 million toward relief and continues to coordinate response efforts. State Department and USAID humanitarian and complex emergency assistance for Pakistan totaled nearly $135 million in FY2012, bringing total FY2010-FY2012 U.S. flood-relief provided to Pakistan to more than $735 million in funds and in-kind aid and services. During the first half of the current fiscal year, another $77 million in humanitarian assistance had been disbursed. Over the past six decades, the United States has turned aid to Pakistan on and off to correspond with U.S. foreign policy objectives and to reflect the state of the bilateral relationship. Aid was provided or restricted for numerous reasons over those 60 years. In some years, U.S. aid would support balance in the region and contain Soviet expansionism; in other years, the U.S. government would withhold aid because of nuclear weapons proliferation and lack of democratization gains. U.S. aid levels to Pakistan (after adjusting for inflation) peaked in 1962 when Pakistan aligned itself with the West by joining two regional defense pacts, the South East Asia Treaty Organization (SEATO) and the Central Treaty Organization (CENTO, also known as the "Baghdad Pact"; see Figure A -1 ). President Dwight D. Eisenhower famously called Pakistan America's "most allied ally in Asia." In contrast, U.S. aid to Pakistan was at its lowest level in the 1990s after the Soviet Army withdrew from Afghanistan in 1989, and President George H. W. Bush suspended aid to Pakistan in 1990 because of its nuclear activities. During and immediately after the Indo-Pakistani wars of 1965 and 1971, the United States suspended military assistance to both sides. This resulted in a cooling of the Pakistan-U.S. relationship and a perception among many in Pakistan that the United States was not a reliable ally. In the mid-1970s, new strains arose over Pakistan's efforts to respond to India's 1974 underground nuclear test by seeking its own nuclear weapons capability. President Jimmy Carter suspended most U.S. aid in response to Pakistan's covert construction of a uranium enrichment facility. However, in 1979, the Soviet Union invaded Afghanistan, and the United States viewed Pakistan as a frontline ally in the effort to block Soviet expansionism. In 1981, therefore, the Reagan Administration negotiated a five-year, $3.2 billion economic and military aid package with Pakistan. As a result, Pakistan became a key transit country for arms supplies to the Afghan resistance, as well as home for millions of Afghan refugees, many of whom have yet to return. In 1985 Congress passed the Pressler Amendment (§620E(e) of the Foreign Assistance Act of 1961) that required the President to certify to Congress that Pakistan did not possess a nuclear explosive device during the fiscal year for which the aid was provided. President Reagan and President George H. W. Bush certified Pakistan each year until 1990. After the 1990 suspension of aid to Pakistan, U.S. aid to that country remained at low levels not seen since the early 1950s, largely due to a disengagement from Pakistan and Afghanistan after the defeat of the Soviet Union there, as well as an overall reduction in foreign aid in an effort to balance the U.S. budget. This left a lasting effect on Pakistani perceptions of the United States. Former Pakistani Army Chief and President Musharraf repeatedly voiced a narrative in which Pakistan joined the United States to "wage jihad" in Afghanistan in the 1980s, only to see "disaster" follow when the "military victory was bungled up" and the United States then left the region "abandoned totally." When combined with ensuing sanctions on U.S. aid, this left many Pakistanis with the sense they had been "used and ditched." According to the succeeding Pakistani President Asif Zardari, writing in January 2009, "Frankly, the abandonment of Afghanistan and Pakistan after the defeat of the Soviets in Afghanistan in the 1980s set the stage for the era of terrorism that we are enduring." Unpredictability of U.S. aid has contributed to Pakistan's view that the United States is an unreliable partner. That view may play a role in Pakistan's level of cooperation with the United States on various national security issues while keeping its options open with U.S. competitors, such as China. The Pakistani Prime Minister's May 2011 state visit to Beijing was viewed by many as an implicit response to a recent deterioration in U.S.-Pakistan ties. Following a decade of alienation in the 1990s, U.S. relations with Pakistan were once again transformed in dramatic fashion, this time with the September 11, 2001, terrorist attacks on the United States and the ensuing enlistment of Pakistan as a pivotal ally in U.S.-led counterterrorism efforts. Post-9/11 U.S. aid to Pakistan rose dramatically and included a $600 million emergency cash transfer in September 2001. In 2003, President George W. Bush hosted then-Pakistani President General Pervez Musharraf at Camp David, MD, where he vowed to work with Congress on establishing a five-year, $3 billion aid package for Pakistan. Annual installments of $600 million each, split evenly between military and economic aid, began in FY2005. From FY2000 at $36.76 million to FY2001 at $187.7 million, U.S. aid increased five-fold, and in FY2002 (the first post-9/11 fiscal year) aid increased by another nearly 11-fold to $2,000 million. Aid trended up between 2006 and 2010; FY2007 was the first year of the Bush Administration's plan to devote $750 million in U.S. development aid to Pakistan's tribal areas over a five-year period. The 2010 U.S. aid to Pakistan of some $4.3 billion represented an increase of 2,185% when compared to the pre-9/11 level in FY2001. In FY2010, Pakistan ranked second among top U.S. aid recipients, after Afghanistan and before Israel. It ranks third in FY2012 with U.S. aid estimated at $2.1 billion, about half of the FY2010 peak. About two-thirds of U.S. aid from FY2002 to FY2012, some $15.8 billion (including Coalition Support Fund reimbursements), has supported security assistance in Pakistan. Of that, about $9.5 billion has been funded through Defense Department appropriations, with $6.4 billion in security assistance for Pakistan funded through the Department of State appropriations. Economic assistance for Pakistan from FY2002 to FY2012 has totaled more than $7.8 billion. About 85% (or $6.6 billion) of that was within the Economic Support Fund (ESF), which grew dramatically in FY2009 and FY2010, but has been scaled back since. Over the years, disbursements of aid to Pakistan generally track appropriation levels of aid. However, in some years not all aid appropriated is actually disbursed. For example, of the $400 million in PCF/PCCF funds in 2009, a total of $125 million has been received by Pakistan. With other accounts, some funds are transferred to meet certain needs on the ground. During years of natural disasters, some funds from ESF have been transferred to the International Disaster Assistance (IDA) or the Migration and Refugee Assistance (MRA) account. (See Table 1 for both appropriation and disbursement levels.) The United States provides bilateral economic, development, and humanitarian assistance to Pakistan through a number of funding accounts: the Economic Support Fund (ESF), Food for Peace Title II (P.L. 480), Global Health and Child Survival, as well as International Disaster Assistance (IDA), and Migration and Refugee Assistance (MRA). Often funds within ESF are transferred to IDA or MRA for emergency assistance, such as in response to the Pakistan flooding crisis in 2010. In FY2012, ESF funds reflected about 85% of U.S. economic assistance to Pakistan, with the above-noted accounts making up the remaining 15% (see Table 1 ). Some of the largest increases in ESF funding were from FY2009 and FY2010 supplemental appropriations passed by Congress. ESF is used to fund a wide array of activities. In Pakistan the program is used to help establish political parties and bolster Pakistan's ability to conduct elections; help the government provide services to its citizens; promote delivery of health-related technologies, such as vaccines; provide basic education support, such as building schools and providing funds for text books and teachers; and improve the quality of universities in Pakistan. ESF funds also provide help for the government of Pakistan to pursue economic reforms, such as improving tax collection, strengthening border management, and building infrastructure—roads and power supply—to improve citizens' faith in their government and promote job growth and stability. ESF promotes agriculture, which is a key component of job growth in rural districts, and supports linkages between farmers, markets, and business service providers to increase access to modern farm equipment. ESF also promotes private-sector competitiveness to strengthen the business community, create jobs, and expand the economy. Food for Peace aid to Pakistan fluctuates from year to year, largely related to needs on the ground. During years of humanitarian crisis (either natural or war-related), food aid levels can rise dramatically. The 2010 floods in Pakistan created a severe humanitarian crisis, affecting more than 20 million people and resulting in the United States more than doubling food aid over the previous year's level, from $55 million in 2009 to $124 million in 2010. Global Health and Child Survival (GHCS) funding levels within the past decade range from $14 million in FY2002 to $34 million in FY2009 and totaled $249 million from FY2002 to FY2012. This program provides funds to Pakistani nongovernmental organizations, national, and provincial organizations to partner and fight more effectively the spread of HIV/AIDS and support the national HIV/AIDS strategy, among other things. Pakistan's western tribal areas are remote, isolated, poor, and traditional in cultural practices. The social and economic privation of the inhabitants may make the region an attractive breeding ground for violent extremists. The U.S.-assisted development initiative for the Federally Administered Tribal Areas (FATA), launched in 2003, has sought to improve the quality of education, develop healthcare services, and increase opportunities for economic growth and micro-enterprise specifically in Pakistan's western tribal regions. A senior USAID official estimated that, for FY2001-FY2007, about 6% of U.S. economic aid to Pakistan was allocated for projects in the FATA. Facilitating economic development through road-building has been a key aspect of the effort; to date, the United States has devoted more than $280 million for roads and other infrastructure projects in Pakistan's tribal region. Skepticism has arisen about the potential for the policy of significantly boosted FATA-specific funding to be effective. Corruption is endemic in the tribal region and security circumstances are so poor that Western nongovernmental contractors find it extremely difficult to operate there. Moreover, as much as half of the allocated funds reportedly are devoted to administrative costs. Islamabad insists that implementation of aid programs in the FATA be carried out wholly by Pakistani civil and military authorities and that U.S. aid, while welcomed, must come with no strings attached. Attacks on aid workers exacerbate a circumstance in which corruption and tangled bureaucracy thwart U.S. aid efforts in the FATA. In 2009, the KPk governor himself complained that very little new assistance funds were reaching the tribal belt. According to former USAID Afghanistan-Pakistan Task Force Director James Bever, aid efforts in the FATA have been hampered by the limited presence of Pakistani federal ministries and constrained provision of services. Some Pakistan-based analysts raise like concerns and have recommended that the United States and other international donors refrain from handing control of development programs in the crucial FATA region to the Pakistani government until political reforms and effective financial oversight mechanisms are in place. Given such limitations, USAID's primary aim is to build confidence in the Pakistani government by working with the FATA Secretariat on small-scale projects in relatively secure areas. All of the activities are developed, monitored, and evaluated in partnership with the FATA's civilian authorities. A key aspect of the Obama Administration's early approach to Pakistan was an intention to triple annual nonmilitary aid to improve the lives of the Pakistani people, with a particular focus on conflict-affected regions, and increased U.S. military aid to Islamabad on counterinsurgency goals while conditioning such aid on that government's progress in both combating militancy and further democratizing. As Senators in the 110 th Congress, President Obama, Vice President Joe Biden, and Secretary of State Clinton all supported the Enhanced Partnership With Pakistan Act of 2008 (which was never voted upon), and they strongly encouraged the 111 th Congress to pass a newer version of that legislation. During the first session of the 111 th Congress, the full House passed a parallel Pakistan Enduring Assistance and Cooperation Enhancement Act of 2009 ( H.R. 1886 ) and, three months later, the Senate unanimously passed The Enhanced Partnership With Pakistan Act of 2009 ( S. 1707 ), both authorizing a tripling of nonmilitary aid to Pakistan for at least five years (through FY2014). President Obama signed the resulting Enhanced Partnership with Pakistan Act (EPPA) of 2009 into P.L. 111-73 in October 2009. The legislation is sometimes referred to as the "Kerry-Lugar-Berman" or "KLB" bill (see the law's principles and purposes in Appendix D ). Then-Senate Foreign Relations Committee Chairman and current Secretary of State John Kerry lauded the legislation as the product of extensive "bicameral, bipartisan, and inter-branch consultation" that was meant to "forge a new long-term relationship between the people of America and Pakistan." Then-House Foreign Affairs Committee Chairman Representative Howard Berman emphasized the importance of forging a "true strategic partnership with Pakistan and its people." Then-Secretary of State Clinton called the legislation's passage "a historic chapter" in bilateral relations that would "strengthen the bonds of friendship and cooperation between the American people and the Pakistani people." Independent analysts viewed the legislation as a landmark expression of the U.S. Administration's and Congress's intent to provide significant, long-term support for its Pakistani allies. The EPPA authorizes $1.5 billion annually for economic and development aid to Pakistan from FY2010 to FY2014 to support democratic institutions and the expansion of rule of law, promote economic freedoms and sustainable economic development, support investment in people, and strengthen public diplomacy in Pakistan. The act states that no funds may be made available unless the Administration submits a Pakistan Assistance Strategy Report to the appropriate congressional committees (the Administration submitted the report in December 2009). It also limits aid to $750 million unless the President's Special Representative to Afghanistan and Pakistan (or, if vacant, the Secretary of State) certifies to Congress that aid provided thus far is making reasonable progress toward achieving U.S. objectives. The act allows for the Secretary of State to waive this certification requirement if it is in the U.S. national security interests to do so. It provides a sense of Congress that the same level of economic aid should continue in FY2015-FY2019 "subject to an improving political and economic environment in Pakistan." The Department of State has been bundling ongoing aid programs for Pakistan as EPPA economic assistance, including what some would label security assistance (for law enforcement and nonproliferation). Using this tactic, the EPPA goal of providing $1.5 billion of economic aid to Pakistan was met in the first year, but not in FY2011 or FY2012. State Department officials say that the shortfall occurred because Congress did not fully fund the FY2011 or FY2012 requests. The FY2013 request was also below the EPPA funding authority level, and the FY2014 request is about half of the $1.5 billion goal. The decrease to civilian assistance for FY2014 is primarily a reflection of both overall budgetary and implementation constraints, according to Department of State officials. They believe that despite the reduction, the FY2014 request reflects a continued U.S. commitment to robust civilian assistance cooperation, particularly in the priority sectors: energy, economic growth (including agriculture), stabilization, education, and health. (See Table 2 .) A November 2011 State Department report on civilian engagement with Afghanistan and Pakistan repeatedly emphasized a need for patience in implementing an aid program as large and complex as that with Pakistan. It asserted that the approach under KLB is innovative in four notable ways: (1) a focus on alignment with Pakistani priorities ; (2) a focus on visible infrastructure projects, especially "signature" projects such as dams and roads; (3) a focus on priority sectors and regions vulnerable to violent extremism ; and (4) a whole of government effort that taps expertise from a variety of U.S. agencies. In 2011, State reduced the number of projects in an effort to create a "more streamlined, visible portfolio." The EPPA authorizes each year from FY2010 to FY2014 "such sums as may be necessary" for security assistance. Security assistance and arms transfers are prohibited by the act unless the Secretary of State certifies that the government of Pakistan is continuing to cooperate with U.S. efforts to dismantle nuclear weapons-related material supplier networks and make significant efforts to combat terrorist groups, and if Pakistan's security forces are not impeding political or judicial processes there. The Secretary of State may waive these limitations if doing so is deemed to be in the U.S. national security interest. Secretary Clinton issued the first such certification in March 2011. The EPPA also clarifies activities related to the Pakistan Counterinsurgency Capability Fund (PCCF), established by Congress in the Supplemental Appropriations Act, 2009 ( P.L. 111-32 ), including that aid within the PCCF is in addition to any other authority to provide assistance. In what many considered to be a surprisingly visceral reaction, significant segments of Pakistani officialdom and society were highly critical of the EPPA, seeing in its language an intent to interfere with and dictate to Pakistan on sensitive foreign policy and national security issues, perhaps even with malicious goals. The "conditioning" of assistance was the focus of criticism. The main opposition party in Islamabad (the Pakistan Muslim League-Nawaz or PML-N) expressed "strong reservations" over the law's conditions and requested that the government present the details for parliamentary approval. Even secular parties within the ruling coalition described the bill as "interference" in Pakistani affairs. The Lahore High Court Bar Association unanimously passed a resolution rejecting the law, saying its imposition of "cruel conditions" represented a violation of Pakistani integrity and sovereignty. In one representatively rancorous statement, a Pakistani commentator said the law was "less an assistance program than a treaty of surrender," and he criticized its terms and conditions as amounting to a "ten-fold increase in national humiliation." Another saw the conditions as aimed at "clipping the wings of Pakistan's mighty security establishment." President Zardari himself rejected all such complaints as misguided and misinformed. The most serious criticism, however, came from the Pakistani military establishment itself. A statement following the 122 nd Corps Commander Conference in October 2009 included an expression of "serious concern regarding clauses [of the law] impacting on national security." In the diplomatic context, this was taken as an unusually explicit and strong condemnation; Army chief General Ashfaq Pervez Kayani was reported to have energetically complained in person to visiting U.S. commander General Stanley McChrystal, focusing especially on clauses related to civilian control over the military, and references to the Afghan "Quetta shura" and the Lashkar-e-Taiba's Muridke compound, which locate U.S.-designated terrorists on Pakistani territory. The widely negative and oftentimes vitriolic nature of Pakistani reactions caught many U.S. officials by surprise and spurred the Senate Foreign Relations Committee leadership to issue an unusual formal rebuttal of "myths" surrounding the bill. Primary among these was the widely held—and patently false—assumption that conditions had been placed on the $7.5 billion in nonmilitary aid authorized for Pakistan. Other important corrections of the record included clarifications that nothing in the bill threatened Pakistani sovereignty in any way; that the conditions placed on military aid only reinforced standing policies of the Pakistani government and military; and that the United States neither required nor desired an oversight role in internal Pakistani military operations such as promotion decisions, among several others. Senator Kerry then traveled to Islamabad days later in a largely successful effort to allay Pakistani concerns. Secretary of State Clinton was in Islamabad the same month, only two weeks after Senator Kerry and, when asked about the strongly negative reactions in Pakistan to the U.S. legislation, she expressed American "shock": For the United States Congress to pass a bill unanimously saying that we want to give $7.5 billion to Pakistan in a time of global recession when we have a 10 percent unemployment rate, and then for Pakistani press and others to say we don't want that, that's insulting—I mean, it was shocking to us. So clearly, there is a failure to communicate effectively. Many independent observers saw the unexpectedly strong Pakistani reaction as being fueled and perhaps even generated by a combination of military elements and opposition political forces who shared a common cause of weakening the Pakistan People's Party-led civilian government. Anti-government media outlets eagerly participated. More specifically, this perspective had Army Chief Kayani engaged in an ongoing struggle with President Zardari and Prime Minister Gilani over ultimate control of the country's military. One effect of the U.S. legislation was to place the United States in the middle of this battle. However, the spate of criticisms ended almost as quickly as it had begun, and by the end of 2009, Pakistani officials and most media critics had fallen silent. As noted above, U.S.-Pakistan security cooperation accelerated rapidly in the post-9/11 period, and President George W. Bush formally designated Pakistan as a Major Non-NATO Ally in 2004. The close U.S.-Pakistan security ties of the Cold War era, which came to a near halt after the 1990 aid cutoff, were restored as a result of Pakistan's role in the U.S.-led anti-terrorism campaign. In 2002, the United States began allowing commercial sales that enabled Pakistan to refurbish at least part of its fleet of American-made F-16 fighter aircraft and, three years later, Washington announced that it would resume sales of new F-16 fighters to Pakistan after a 16-year hiatus. During the Bush Administration, a revived U.S.-Pakistan Defense Consultative Group (DCG)—moribund from 1997 to 2001—sat for high-level discussions on military cooperation, security assistance, and anti-terrorism. The forum continued under the Obama Administration. Pentagon officials have for some time been frustrated by the allegedly feckless counterinsurgency efforts of the internally squabbling Islamabad government. Reports indicate that U.S. officials have been disheartened by signs that the Pakistani military is slow to shift away from a conventional war strategy focused on India, and they have made clear the United States stands ready to assist Pakistan in reorienting its army for counterinsurgency efforts. This is not a task the Pakistani military leadership has appeared eager to complete. In an effort to more effectively channel U.S. security assistance so as to specifically strengthen Pakistan's counterinsurgency capabilities, the Pentagon proposed, and Congress later endorsed, creation of a dedicated fund, the Pakistan Counterinsurgency Fund (PCF), later designated as the Pakistan Counterinsurgency Capability Fund (PCCF). In addition to conditions on security assistance found in the EPPA, Pakistan is subject to more general conditionality on such aid. For example, in the spring of 2010, concerns arose that allegedly serious human rights abuses by the army—especially in the Swat Valley northwest of Islamabad—including extrajudicial killings and the holding of thousands of suspected militants in indefinite detention, would trigger so-called "Leahy Amendment" restrictions on future U.S. security assistance (§620J of the Foreign Assistance Act of 1961 (P.L. 87-195, as amended)), also known as the Leahy Amendment, states that "No assistance shall be furnished under this Act or the Arms Export Control Act to any unit of the security forces of a foreign country if the Secretary of State has credible evidence that such unit has committed gross violations of human rights"). Later that year, the Obama Administration announced that it would abide by these provisions by withholding train and equip funding for several Pakistani army units believed to be complicit in human rights abuses, and it remains concerned about potential mass disappearances of detainees into the hands of Pakistani security forces. At the Bush Administration's behest, Congress in FY2002 began appropriating billions of dollars to reimburse Pakistan and other nations for their operational and logistical support of U.S.-led counterterrorism operations. These "coalition support funds" (CSF) have accounted for nearly half of U.S. financial transfers to Pakistan since 2001; as of June 2013, nearly $10.7 billion had been disbursed. The amount equals roughly one-fifth to one-quarter of Pakistan's total military expenditures during this period. Nearly all reimbursements are for Pakistan army expenses; navy and air force expenses account for only about 2% of all Pakistani military claims under CSF. According to the Department of Defense, CSF payments have been used to support many scores of Pakistani army operations and help to keep more than 100,000 Pakistani troops in the field in northwest Pakistan by paying for their food, ammunition, clothing, and housing. They also compensate Islamabad for coalition usage of Pakistani airfields and seaports. Roughly half of CSF payments are for food and ammunition: A Pentagon document shows that, of the $672 million paid to reimburse the Pakistani army for support during June-November 2011, $212 million was for food and another $116 million was for ammunition. During the latter years of the Bush Administration, concerns grew in Congress and among independent analysts that standard accounting procedures were not being employed in overseeing these large disbursements from the U.S. Treasury. The Government Accountability Office (GAO) was tasked to address oversight of coalition support funds that go to Pakistan. Its 2008 report found that, until about one year before, only a small fraction of Pakistani requests were disallowed or deferred. In early 2007, the value of rejected requests spiked considerably, although it still represented one-quarter or less of the total. The apparent increased scrutiny corresponded with the arrival in Islamabad of a new U.S. Defense Representative, Vice Admiral Michael Lefever, who reportedly played a greater role in the oversight process. GAO concluded that increased oversight and accountability was needed over Pakistan's reimbursement claims for coalition support funds. The State Department claims that Pakistan's requests for CSF reimbursements are carefully vetted by several executive branch agencies, must be approved by the Secretary of Defense, and ultimately can be withheld through specific congressional action. However, a large proportion of CSF funds likely have been lost to waste and mismanagement over the years, given a dearth of adequate controls and oversight. The Bush Administration may have concluded in late 2008 that Pakistan diverted much of the funds toward a military buildup focused on India. Senior Pentagon officials reportedly have taken steps to overhaul the process through which reimbursements and other military aid are provided to Pakistan. The National Defense Authorization Act (NDAA) for FY2008 ( P.L. 110-181 ) for the first time required the Secretary of Defense to submit to Congress itemized descriptions of coalition support reimbursements to Pakistan. More recent NDAAs require the Secretary of Defense to submit to Congress detailed quarterly reports on the uses of CSF. In 2010, the now deceased Special Representative for Afghanistan and Pakistan Ambassador, Richard Holbrooke, claimed that about 60%-65% of Pakistan reimbursement requests under CSF are fulfilled (a Pentagon document shows that the payment of $688 million made in December 2012 represented about 68% of the total Pakistani claim). When questioned about CSF oversight at a 2011 House hearing, the Commander of U.S. Central Command stated that he had "some very keenly attentive field grade officers in Islamabad" who track the money "very, very carefully." Subsequent press reporting suggests that this is being accomplished, and that U.S. auditors are now more attentive in their examination of Pakistani claims. Major U.S. arms sales and grants to Pakistan since 2001 have included items useful for counterterrorism operations, along with a number of "big ticket" platforms more suited to conventional warfare. In dollar value terms, the bulk of purchases are made with Pakistani national funds, although U.S. grants have eclipsed this in recent years. The Pentagon reports total Foreign Military Sales agreements with Pakistan worth $5.2 billion for FY2002-FY2011 (sales of F-16 combat aircraft and related equipment account for more than half of this). Congress also has appropriated more than $3 billion in Foreign Military Financing (FMF) grants to Pakistan since 2001; more than two-thirds has been disbursed to date. These funds are used to purchase U.S. military equipment for longer-term modernization efforts. Pakistan also has been granted U.S. defense supplies as Excess Defense Articles (EDA). Major post-2001 defense supplies provided or soon to be provided under FMF include eight P-3C Orion maritime patrol aircraft and their refurbishment (valued at $474 million; four delivered, but three of these were destroyed in a 2011 Islamist militant attack on Pakistan Naval Station Mehran); 2,007 TOW anti-armor missiles ($186 million); at least 5,600 military radio sets ($163 million); six AN/TPS-77 surveillance radars ($100 million); six C-130E transport aircraft and their refurbishment ($76 million); the USS M cInerney , an ex-Perry class missile frigate (via EDA, $65 million for refurbishment, delivered and now the PNS Alamgir ); and 20 AH-1F Cobra attack helicopters (via EDA, $48 million for refurbishment, 12 delivered). Supplies paid for with a mix of Pakistani national funds and FMF include up to 60 Mid-Life Update kits for F-16A/B combat aircraft (valued at $891 million, with $477 million of this in FMF; Pakistan's plans are to purchase 45 such kits, 8 have been delivered); and 115 M-109 self-propelled howitzers ($87 million, with $53 million in FMF). Notable items paid for entirely with Pakistani national funds include 18 new F-16C/D Block 52 combat aircraft (valued at $1.43 billion); F-16 armaments including 500 AMRAAM air-to-air missiles; 1,450 2,000-pound bombs; 500 JDAM bomb tail kits for gravity bombs; and 1,600 Enhanced Paveway laser-guided bomb kits, also for gravity bombs ($629 million); 100 Harpoon anti-ship missiles ($298 million); 500 Sidewinder air-to-air missiles ($95 million); and six Phalanx Close-In Weapons System naval guns ($80 million). Other major articles transferred via EDA include 14 F-16A/B combat aircraft; and 59 T-37 military trainer jets. Under Coalition Support Funds (part of the Pentagon budget), Pakistan has received 26 Bell 412 utility helicopters, along with related parts and maintenance, valued at $235 million. Under Section 1206 (global train and equip), Frontier Corps, and PCF/PCCF authorities, Pakistan has received 4 Mi-17 multirole helicopters (another 6 were provided temporarily at no cost), 4 King Air 350 surveillance aircraft, 450 vehicles for the Frontier Corps, 20 Buffalo explosives detection and disposal vehicles, helicopter spare parts, night vision devices, radios, body armor, helmets, first aid kits, litters, and other individual soldier equipment. Pakistan is eager to receive more counterinsurgency hardware for use in western Pakistan, potentially including armored personnel carriers, laser target designators, laser-guided munitions, and more night-vision goggles and surveillance gear. They also request better and more sophisticated surveillance and communications equipment, along with more attack and utility helicopters. Despite the provision of equipment suited to unconventional warfare, some analysts have continued to criticize the programming of security-related aid to Pakistan. Foremost among these are assertions that the Pakistani military maintains an institutional focus on conventional war-fighting capabilities oriented toward India and that it has used U.S. security assistance to bolster these capabilities while paying insufficient attention to the kinds of counterinsurgency capacity that U.S. policy makers might prefer to see strengthened. For example, of the some $2.1 billion in Foreign Military Financing disbursed for Pakistan from FY2002-FY2012, more than half has been used by Islamabad to purchase weapons of limited use in the context of counterterrorism (of that amount, about $1.2 billion was used to upgrade P-3C maritime patrol aircraft and F-16 combat aircraft, and for the purchase of TOW anti-tank missiles and launchers). Counterarguments contend that such purchases facilitate regional stability and allow Pakistan to feel more secure vis-à-vis India, its better equipped neighbor. During the course of late 2009 fighting in South Waziristan, Pakistan received low-profile but significant U.S. assistance in the form of transport helicopters, parts for helicopter gunships, and infantry equipment, along with unprecedented intelligence and surveillance video sharing from American UAVs. In anticipation of further counterinsurgency operations, the United States provided the Pakistani air force with about 1,000 quarter-ton bombs, along with up to 1,000 kits for making gravity bombs laser-guided-capable. The Defense Department has characterized F-16 fighters, P-3C patrol aircraft, and anti-armor missiles as having significant anti-terrorism applications. The State Department has claimed that, since 2005, FMF funds have been "solely for counterterrorism efforts, broadly defined." Such claims elicit skepticism from some observers, and analysts who emphasize the importance of strengthening the U.S.-India strategic partnership have called U.S. military aid to Pakistan incompatible with U.S. strategic goals in the region. Moreover, U.S. officials are concerned that Pakistan has altered some conventional U.S.-supplied weapons in ways that could violate the Arms Export Control Act. Such alleged modifications include expanding the capability of both Harpoon anti-ship missiles and P-3C naval aircraft for land-attack missions. The Islamabad government categorically rejects the allegations. Indian observers were unsurprised by the claims; New Delhi's leaders continuously complain that Pakistan diverts most forms of U.S. defense assistance toward India. Some more suspicious analysts even see purpose in such a dynamic: a U.S. wish to maintain Pakistan's viability as a regional balancer to Indian hegemony. Pakistani officials have continued to complain that U.S.-supplied defense equipment, especially that most needed for counterinsurgency operations such as attack and utility helicopters, has been too slow in coming. The then-Pakistani Ambassador to the United States was quoted as claiming that, in his first two years in Washington (2008-2010), Pakistan received only eight used Mi-17 transport helicopters and that Pakistan's military operations were hindered by a lack of equipment. Such claims rile U.S. officials, who document that the United States has provided Pakistan with at least 50 helicopters since 2006—12 of them armed Cobra models—and who note that the delivery of more top-line attack helicopters was delayed only by Pakistani inaction. The George W. Bush Administration launched an initiative to strengthen the capacity of the Frontier Corps (FC), a 65,000-man paramilitary force overseen by the Pakistani Interior Ministry. The FC has primary responsibility for border security in Pakistan's western Khyber Pakhtunkhwa (KPk) and Baluchistan provinces, which border Afghanistan. In 2007, the Pentagon began using its funds to train and equip the FC, as well as to increase the involvement of the U.S. Special Operations Command in assisting with Pakistani counterterrorism efforts. Americans have also engaged in training Pakistan's elite Special Service Group commandos with a goal of doubling that force's size to 5,000. These efforts continued under the Obama Administration. The U.S. program to train Pakistan's paramilitary forces reportedly has been hampered by Pakistan's reluctance to send troops who are needed for urgent operations elsewhere. Some analysts also contend that only U.S. military personnel (as opposed to contractors) can effectively train Pakistani soldiers. The Balochistan Frontier Corps may be committing serious human rights violations against suspected separatist militants there. Other security-related programs for Pakistan are aimed especially at bolstering Islamabad's counterterrorism and border security efforts, and have included U.S.-funded road-building projects in the KPk and FATA. The United States also has undertaken to train and equip new Pakistan Army Air Assault units that can move quickly to find and target terrorist elements. U.S.-funded military education and training programs seek to enhance the professionalism of Pakistan's military leaders, and develop respect for rule of law, human rights, and democratic values. At least 2,000 Pakistani officers have received such training since 2001. U.S. security assistance to Pakistan's civilian sector is aimed at strengthening the country's law enforcement capabilities through basic police training, provision of advanced identification systems, and establishment of a new Counterterrorism Special Investigation Group. U.S. efforts may be hindered by Pakistani shortcomings that include poorly trained and poorly equipped personnel who generally are underpaid by ineffectively coordinated and overburdened government agencies. Pakistan's weak criminal justice sector is marked by conviction rates below 10%, poorly trained investigators, and rampant corruption. Some analysts link the problem to democratization more broadly, and urge much greater U.S. and international attention to bolstering Pakistan's civilian security sector. The findings of a 2008 think-tank report reflected a widely held view that Pakistan's police and civilian intelligence agencies are better suited to combating insurgency and terrorism than are the country's regular army. The report found that Pakistan's police forces are "incapable of combating crime, upholding the law, or protecting citizens and the state against militant violence," and placed the bulk of responsibility on the politicization of the police forces. The report recommended sweeping reforms to address corruption and human rights abuses. Title III of the Supplemental Appropriations Act, 2009 ( P.L. 111-32 ; H.Rept. 111-105 ), appropriated $400 million for the Secretary of Defense, with the concurrence of the Secretary of State, for the newly established Pakistan Counterinsurgency Fund (PCF) to provide assistance for Pakistan's security forces to bolster their counterinsurgency efforts. The House Appropriations Committee recommended that the funding be in the DOD appropriations for FY2009 and that the Secretary of Defense authority would expire with the expiration of the funds. An additional $400 million was appropriated within the State Department appropriations to be made available as of September 30, 2009, for its Pakistan Counterinsurgency Capability Fund (PCCF). The committee recommended that the Secretary of State authority (PCCF) would be assumed in subsequent fiscal years. The committee noted that DOD would be responsible for delivery of the assistance. Of the $5.1 billion in total aid committed for Pakistan in 2010, about 24% was from multilateral agencies and 76% from bilateral sources. The United States is the largest single bilateral donor of development assistance to Pakistan, providing more than half of all bilateral commitments (56.3%) in 2010. Japan committed 11.7%, Germany committed 5.5%, and the United Arab Emirates committed 1.7% that same year. The largest multilateral agency commitments in 2010 were $430 million from the World Bank's International Development Association (as compared with $1.9 billion in FY2009), $270 million from European Union Institutions, and $290 million from the Asian Development Fund. See Appendix C for bilateral economic development aid commitments to Pakistan by other donor countries in FY2009. Global cooperation involving a "Friends of Democratic Pakistan" (FODP) group was launched in September 2008, when President Zardari and the top diplomats of the United Arab Emirates, Britain, and the United States were joined by foreign ministers from Australia, Canada, France, Germany, Italy, Japan, and Turkey, and representatives of China, the European Union, and the United Nations. A resulting statement expressed agreement to work in strategic partnership with Pakistan to combat violent extremism; develop a comprehensive approach to economic and social development; coordinate an approach to stabilizing and developing border regions; address Pakistan's energy shortfall; and support democratic institutions. In April 2009, 31 countries and 18 international institutions sent representatives to an FODP/Donors' Conference in Tokyo. There Ambassador Holbrooke announced the Administration's intent to provide a total of $1 billion in assistance to Pakistan over the 2009-2010 period, bringing to more than $5 billion the total offered by the international community in addition to the $11.3 billion International Monetary Fund package first arranged in late 2008. In the lead-up to the 2009 conference, Pakistani officials called for a "Marshall Plan" for Pakistan that would provide $30 billion in international donations over a five-year period. The Pakistani Ambassador to the United States is among those who called the proposed $5.7 billion in aid "miniscule" when compared to the bailouts being provided to American automobile and other companies, a characterization that rankled some in Congress. At an FODP summit meeting in New York in September 2010 co-chaired by President Obama, President Zardari, and British Prime Minister [author name scrubbed], the forum reiterated its central goals, but no further specifics were discussed pending more detailed Pakistani development proposals. The FODP's Third Ministerial Meeting took place in October 2010, when donors continued to press Pakistan to reform its economy, especially through an expansion of the tax base. China, a close and long-standing ally of Pakistan in part because of its own rivalry with India, has provided some aid and loans to Pakistan, but nothing close to the level of the United States and other major donors. Between 2004 and 2009, China provided $9.0 million in grant assistance and $217 million in loans to Pakistan. China, through large-scale and mainly extractive investment projects, stands to gain access to resources in Pakistan, and may even benefit from a planned pipeline that would deliver Iranian natural gas through Pakistan. The FY2014 budget request indicates the level of importance the Obama Administration places on a stable, democratic, and prosperous Pakistan because of its "critical role" in the region with respect to U.S. counterterrorism efforts, nuclear nonproliferation, regional stability, the peace process in Afghanistan, and regional economic integration and development: "As the United States withdraws its troops from Afghanistan, FY2014 U.S. assistance needs to reflect [America's] continued robust engagement of Pakistan and its role in the region." For FY2014, the Administration is requesting a total of $1,162.57 million within the International Affairs 150 function (State-Foreign Operations Appropriations). Of this amount, about two-thirds is for economic assistance and one-third is for security assistance. The total includes $281.2 million, considered to be Overseas Contingency Operations (OCO) that is not part of the core request but is identified by the Administration as extraordinary, temporary funding needs for frontline states. Consistent with the EPPA, the FY2014 civilian assistance will focus on five key areas: energy, stabilization, social services (especially health and education), economic growth (including agriculture), and improving governance, including transparency and gender equality. Security assistance will focus on building counterinsurgency and counterterrorism capabilities, strengthening military-to-military cooperation, and supporting the ability for Pakistan to provide security for its citizens, particularly along the Afghanistan-Pakistan border. The Administration's FY2014 budget request seeks $765.7 million (and $252.2 million in OCO funds) within the Economic Support Fund (ESF) for energy assistance, economic growth and agriculture, education, health, and cross-cutting issues, such as supporting gender equality, human rights, better governance, and political participation. Energy — Within ESF, the Administration is requesting $264.7 million to support a policy of attracting private sector investment, increase cost recovery, decrease technical and commercial losses, and add power to the grid. Economic Growth —The $137.0 million request for FY2014 ESF funds would promote international and regional trade, develop manufacturing and service sector links, and support the private sector. The USAID agriculture program would continue to provide training to farmers to improve productivity and learn new techniques and management practices. Education —The FY2014 request of $53.0 million would be used to support provincial governments in Pakistan to improve basic education programs, provide scholarships for talented, but economically disadvantaged students to attend a top Pakistani university, and improve academic programs at the university level. Health— A FY2014 request for $58.0 million within ESF would support improvements in delivering essential family planning, maternal, and child health services through high-impact, evidence-based interventions. Cross-cutting Issues — Other ESF funds are requested for FY2014 to support gender equity, human rights, civil society, strengthening good governance, and increasing political participation. Foreign Military Financing (FMF) , $300 million for Pakistan in the FY2014 request, would provide support for the counterinsurgency (COIN) and counterterrorism (CT) capabilities of Pakistan's security forces and would encourage U.S.-Pakistan military-to-military engagement. International Military Education and Training (IMET) , $5.0 million for Pakistan in the FY2014 request would build professional and personal ties between U.S. and Pakistani military personnel. Students would receive instruction at military schools in the United States and learn about democratic values, as well as military techniques. Nonproliferation, Antiterrorism, Demining, and Related Programs (NADR) , $17.87 million for Pakistan in the FY2014 request would provide training to build the capacity for Pakistan to detect, deter, and respond to terrorist threats and improve border security. International Narcotics Control and Law Enforcement (INCLE) , $45.0 million (plus $29.0 million of OCO funds) for Pakistan in the FY2014 request would help through training, equipment, and instructor development, to build Pakistan's capability for civilian law enforcement and criminal investigative techniques and crime management. It would also build on successes to reduce opium poppy production and illegal narcotics trafficking. Monitoring and Program Evaluation. The Administration continues to foster community and third-party oversight of aid programs in Pakistan. The oversight combines with USAID monitoring and regular audits done by State and USAID Inspector Generals, the U.S. Government Accountability Office, the Pakistan Auditor General, and Pakistani accounting firms to expand the capability of conducting audits. In August 2011, USAID initiated a five-year, $71 million monitoring and evaluation contract that provides for third-party monitoring and evaluation services across all USAID projects. Critics contend that many of the stated institutional and development goals of U.S. assistance to Pakistan remain largely unmet. For much of the post-2001 period, this was at least in part due to a perceived U.S. overreliance on security-related aid, which has accounted for the great bulk of U.S. assistance to Pakistan. Many observers argue that it would be more useful to target U.S. assistance programs in such a way that they more effectively and more directly benefit the country's citizens. A number of issues concern many in Congress about making Pakistan one of the top U.S. aid recipients, not the least of which is its willingness or capability to be a reliable partner. Notable issues follow. One idea long floated in foreign assistance critiques is the "conditioning" of aid to Pakistan, mainly through the creation of benchmarks and certification that they have been met. For example, in 2003, a task force of senior American South Asia watchers issued a report on U.S. policy in the region that included a recommendation to directly link U.S. support for Islamabad to that government's own performance in making Pakistan a more "modern, progressive, and democratic state." Some commentators have emphasized that, to be truly effective, conditionality should be applied by many donor countries rather than just the United States and should be directed toward the Pakistani leadership—especially the military—to the exclusion of the general public. In the wake of political crises and deteriorating security circumstances in Pakistan in the late 2000s, some senior Members of Congress became more vocal in calling for conditions on further U.S. assistance in the absence of improvements in these areas. Many analysts, however, including policymakers in the George W. Bush Administration and some in the Obama Administration, have contended that conditioning U.S. aid to Pakistan had a past record of failure and likely would be counterproductive by reinforcing Pakistani perceptions of the United States as an unreliable partner. From this perspective, putting additional pressure on an already weak Islamabad government might lead to significant political instability in Pakistan. For numerous Pakistan watchers, a policy of enhanced cooperation and structured inducements is viewed as likely to be more effective than a policy based on pressure and threats. In a May 2011 Senate Foreign Relations Committee hearing, Ranking Member Senator Richard Lugar stated, "American conditionalities, 'you need to do A, B and C,' is not necessarily helpful. What is helpful is identifying the most appropriate projects and then following through, not changing midcourse." One senior Washington-based analyst, a longtime advocate against placing conditions on U.S. aid to Pakistan, instead offered an admittedly modest approach: he argued for modifying current U.S. policy through more forceful private admonitions to Islamabad to better focus its own counterterrorism efforts while also targeting Taliban leadership, increasing provision of U.S. counterinsurgency technologies and training to Pakistani security forces, and establishing benchmarks for continued provision of coalition support funding. Private admonitions are considered by some analysts to be meaningless in the absence of public consequences, however. Since the deterioration of bilateral relations in 2011, more analysts have urged the U.S. government to use its leverage in Pakistan by increasing the cost to Islamabad of persisting with its alleged support for selected Islamist militant groups. This would come through greater conditionality, perhaps leading to (limited) aid sanctions. For Pakistanis themselves, aid conditionality in U.S. legislation can raise unpleasant memories of 1985's so-called Pressler Amendment, which led to a near-total aid cutoff in 1990. Islamabad's sensitivities are thus acute: in 2007, the Pakistan Foreign Ministry said aid conditions legislated in the Implementing the 9/11 Commission Recommendations Act of 2007 ( P.L. 110-53 ) "cast a shadow" on existing U.S.-Pakistan cooperation and create linkages that "did not serve the interest of bilateral cooperation in the past and can prove to be detrimental in the future." Calls for further conditionality from some in Congress led Islamabad to again warn that such moves could harm the bilateral relationship and do damage to U.S. interests. Nevertheless, the State Department in 2009 reported being "comfortable" with congressional conditions and "confident" that required certifications could be issued (such certifications were issued only once and the requirements were waived by the Admiration for FY2012 and FY2013). After Osama bin Laden was found in a military cantonment city not far from Islamabad, expert witnesses at a May 2011 Senate hearing asserted that certification and conditionality should be taken far more seriously than they have been in the past, but that economic assistance to Pakistan should continue. However, Senator Carl Levin, chairman of the Senate Armed Services Committee, reportedly suggested at the time that he would favor a curtailment of development rather than security aid, the argument being that short-term U.S. interests in combating terrorism and Afghan insurgents trump longer-term interests in seeing Pakistan transformed into a more prosperous and democratic state. Senior Pakistani officials continue to insist that "onerous" restrictions on aid are counterproductive, arguing that Pakistan needs support, not criticism. The most notable sets of conditions on U.S. assistance to Pakistan are found in two laws: the country-specific Enhanced Partnership with Pakistan Act of 2009, and the State and foreign operations appropriations provisions found in the Consolidated Appropriations Act, 2012 ( P.L. 112-74 ). In the former, Section 203 contains the most explicit and stringent conditions on U.S. aid to Pakistan in the post-2001 period. As noted above, these substantive conditions apply only to security-related assistance for FY2011-FY2014 and arms transfers for FY2012-FY2014 (nonmilitary aid is not subject to conditions in this law). The law precludes such assistance and transfers until the Secretary of State certifies annually for Congress that the Pakistani government (1) is continuing to cooperate with the United States in efforts to dismantle supplier networks relating to the acquisition of nuclear weapons-related materials, such as providing relevant information from or direct access to Pakistani nationals associated with such networks; (2) had during the preceding fiscal year has demonstrated a sustained commitment to and is making significant efforts towards combating terrorist groups ... including taking into account the extent to which the Government of Pakistan has made progress on matters such as A) ceasing support, including by any elements within the Pakistan military or its intelligence agency, to extremist and terrorist groups, particularly to any group that has conducted attacks against United States or coalition forces in Afghanistan, or against the territory or people of neighboring countries; B) preventing al Qaeda, the Taliban and associated terrorist groups, such as Lashkar-e-Taiba and Jaish-e-Mohammed, from operating in the territory of Pakistan, including carrying out cross-border attacks into neighboring countries, closing terrorist camps in the FATA, dismantling terrorist bases of operations in other parts of the country, including Quetta and Muridke, and taking action when provided with intelligence about high-level terrorist targets; and C) strengthening counterterrorism and anti-money laundering laws; and (3) is ensuring that its security forces are not materially and substantially subverting the political or judicial processes of Pakistan. The law includes a provision allowing the Secretary to waive this certification requirement if s/he finds that it is important to U.S. national security interests to do so. Section 7046(c) of the Consolidated Appropriations Act, 2012 added another layer of conditionality requiring special certification from the Secretary of State to release assistance funds. These provisions would restrict all FY2012 transfers under ESF, INCLE, FMF, and PCCF, and so for the first time placed conditions on military and nonmilitary aid. Under this law, the Secretary was required to certify that Pakistan was (1) cooperating with the United States in counterterrorist efforts against Haqqani Network, the Quetta Shura Taliban, Lashkar-e-Taiba, Jaish-e-Mohammed, Al Qaeda, and other domestic and foreign terrorist organizations, including taking steps to end support for them and preventing them from basing and operating in Pakistan and carrying out cross border attacks into neighboring countries; (2) not supporting terrorist activities against U.S. or coalition forces in Afghanistan, and Pakistan military and intelligence agencies are not intervening extra-judicially into political and judicial processes in Pakistan; (3) dismantling improvised explosive devices (IED) networks and interdicting precursor chemicals used to manufacture IEDs; (4) preventing the proliferation of nuclear-related material and expertise; (5) issuing visas in a timely manner for U.S. visitors engaged in counterterrorism efforts and assistance programs in Pakistan; and (6) providing humanitarian organizations access to detainees, internally displaced persons, and other Pakistani civilians affected by the conflict. This law also contained a national security waiver (not included in the House-passed version, but inserted in the Senate). In apparent conflict with problematic U.S. government reporting on Pakistan's progress in the areas of counterterrorism cooperation came a March 2011 certification by Secretary Clinton as required under Section 203 of the EPPA. In the wake of subsequent revelations that Al Qaeda's founder was living in plain sight in a Pakistani city, and with top U.S. military officials persistently complaining that Pakistan has failed to take action against the Haqqani network of Afghan insurgents in the FATA, this certification was met with deep skepticism and appeared to many observers to be driven primarily by political considerations rather than realities on the ground. When asked about the certification during an October 2011 House hearing, Clinton insisted she had "closely considered the requirements set forth in the statute" and "determined that on balance Pakistan had met the legal threshold." By mid-2012, however, conditions were such that a second certification under the EPPA appeared extremely difficult to justify. The November 2011 Salala border incident had spurred an angry Islamabad to close vital supply lines used by NATO forces in Afghanistan, and these remained closed for more than seven months until difficult negotiations finally resulted in their reopening in early July 2012 (in an apparent quid pro quo , Washington days later released nearly $1.2 billion in pending CSF payments). Despite this breakthrough, U.S.-Pakistan relations remained uneasy and, with the fiscal year in its final quarter, the Administration faced having to make a decision on if and how to free planned FY2012 aid to Pakistan, given congressional conditions. In mid-August 2012, the State Department quietly notified Congress of its intent, "consistent with U.S. national security interests," to waive the certification requirements of the EPPA. The stated justification was that proceeding with "cooperation and joint action in areas of mutual interest with Pakistan" requires the Administration to have available all foreign policy tools, including foreign assistance. One month later, on September 14, the relevant congressional committees received formal notification from Secretary Clinton that she found it important to the national security interests of the United States to waive the limitations on security aid to Pakistan found in Section 203 of P.L. 111-73 . The Secretary's accompanying justification for the waiver was delivered in classified form. Also on September 14, Secretary Clinton notified the House and Senate Appropriations Committees that she was waiving the Pakistan-related certification requirements in Section 7046(c) of P.L. 112-74 . This waiver was similarly made under the law's national security provision. In February 2013, in order to resume arms transfers to Pakistan in the current fiscal year, the Administration issued a more limited Section 203 waiver when Deputy Secretary of State Thomas Nides quietly removed restrictions on the issuance of export licenses for major defense equipment. License applications are now being considered on a case-by-case basis. To date, the Administration has neither certified Pakistan nor issued a blanket national security waiver for FY2013 under Section 203 provisions. The politics of reforming Pakistan's governance process and tax structure may be among the most important obstacles to improving aid effectiveness. The United States has provided assistance in recent years to help build governance capacity in Pakistan, improve political party competition, promote participation of women and religious minorities in government, and expand rule of law training. On several occasions Secretary Clinton has pushed Pakistan on tax reform. For example, when speaking about Pakistan's flood crisis in October 2010 she said The international community can only do so much. Pakistan itself must take immediate and substantial action to mobilize its own resources, and in particular, to reform its economy. The most important step that Pakistan can take is to pass meaningful reforms that will expand its tax base. The government must require that the economically affluent and elite in Pakistan support the government and people of Pakistan.... It is absolutely unacceptable for those with means in Pakistan not to be doing their fair share to help their own people while taxpayers of Europe, the United States, and other contributing countries are all chipping in to do our part. Secretary Clinton is one of several top U.S. officials critical of Pakistan's 9% tax-to-GDP ratio, one of the lowest in the world. For most observers, this represents what essentially is mass tax evasion by the country's economic elite, and is exacerbated by a federal budget overemphasizing military spending. The government in office from 2008 to 2013 pursued tax reform through legislation, but was unable to win sufficient parliamentary support for what were considered even modest changes. The government of Prime Minister Nawaz Sharif, seated in June 2013, seeks to implement modest tax increases, including a 1% hike in the General Sales Tax. To many, the energy sector provides another representative example of needed government reform. International donors have for many years pressed Pakistani leaders to reduce price subsidies on electricity, without success. In the words of one group of aid experts, Time and again, project documents cite the same problems, the donors recommend the same solutions, the government of Pakistan promises to implement the same reform, the government breaks (and donors lament) the same promises. Meanwhile, the basic politics maintaining the status quo have not changed-there are too many reaping the benefits of subsidized power, and ordinary consumers feel they aren't getting service that warrants paying more. In late 2010, Pakistan's then-prime minister contended that his government was firmly committed to economic reforms, but asked donors to "kindly be patient" with this "work in progress." Nevertheless, there has been significant resistance to long-term policy reform in Pakistan, and this may counter any progress U.S. aid achieves. More than two years after the leader's plea no meaningful reforms have been effected. Corruption is endemic to South Asia and to Pakistan in particular. It presents a persistent and serious problem for the national economy, harming both domestic and foreign investment rates, as well as creating skeptical international aid donors. In its most recent annual report, Berlin-based Transparency International (TI, an organization that tracks global corruption trends) placed Pakistan 134 th out of 183 countries in its annual ranking of world corruption levels for 2011, giving it a lower ranking than such countries as Mozambique and Bangladesh, among others. A 2010 agreement between the U.S. government and TI established a hotline through which people can report any misuse of U.S. assistance funds. TI subsequently contended that its workers in Pakistan faced threats and harassment, and there were even reports that the Islamabad government planned legal action against TI for allegedly paying bribes to officials to extract information. Corruption and lack of sufficient transparency is identified as a key obstacle to effective implementation of U.S. aid programs in Pakistan, and has drawn significant attention in Congress. A 2009 House hearing addressed what one senior Member called the "serious accountability and transparency concerns that have plagued U.S. programs and operations in both Afghanistan and Pakistan for the past seven years." At the hearing, Administration witness Ambassador Holbrooke expressed his support for expanding the responsibilities of the Special Inspector General for Afghanistan Reconstruction (SIGAR) to monitor U.S. aid programs in Pakistan. At a subsequent House hearing on potential fraud and waste in U.S. aid to Pakistan and Afghanistan, a senior House Member expressed "serious concerns about the [U.S. aid] community's ability to provide comprehensive coverage that keeps pace with the rapid boom in U.S. activities in the region." During a 2010 hearing on security and stability in Pakistan, the chairman of the House Armed Services Committee acknowledged that the Administration had developed "good metrics" for tracking progress in Pakistan, but expressed being disappointed that insufficient information was being provided to Congress. Ambassador Robin Raphel, the U.S. Coordinator for Economic and Development Assistance in Pakistan, vowed in 2009 that the United States will employ the "highest standards of accountability" in efforts to minimize future administrative outlays. While such efforts are no doubt sincere, evidence of substantive improvements is scarce four years later. Moreover, U.S. funds to the government of Pakistan for budget support have been comingled with other resources, according to a 2010 U.S. Inspectors General report, contributing to further ongoing accountability and reporting challenges. A reliance on foreign contractors may have fueled significant resentment among Pakistanis who saw them as enriching themselves with aid dollars. According to skeptics, large-scale U.S. aid only engenders Pakistani corruption and has allowed Islamabad to boost its India-oriented military capabilities in ways that would not have otherwise been possible. Corruption concerns reportedly have led to resentment in Pakistan, where some officials feel slighted after launching a vigorous and risky campaign against militants. There are concerns that consulting fees and administrative overhead account for too large a proportion of appropriated aid, meaning significant sums may never reach the people they are meant to benefit. Press reports suggest that roughly half of all U.S. assistance pledged for Pakistan is spent on administrative costs, including highly paid foreign experts, thus forwarding the argument that aid flows would be more effective if channeled through Pakistani agencies. Pakistani officials have tended to agree with those in the United States who believe that administrative costs can be reduced by channeling U.S. aid primarily through Pakistani government agencies rather than through NGOs. Under the late Ambassador Holbrooke's guidance, the State Department in 2009 made plans to significantly scale back its use of U.S. aid contractors in Pakistan and begin channeling more money directly to Pakistani officials and local groups. This shift did not come without resistance from some quarters, with analysts warning that Pakistan's civilian bureaucracies do not have sufficient capacity to be effective implementing partners. A 2011 GAO report listed substantive risk mitigation strategies undertaken by USAID in its shift to increased reliance upon local and Pakistani government implementing partners—now accounting for more than half of economic assistance disbursements—while also recommending executive action going forward: To help prevent waste, fraud, and abuse of U.S. funds, it is important that USAID effectively implement and monitor efforts to address the weaknesses and enhance the capacity of these [local] organizations, particularly those that are identified as having a high-risk or medium-risk of not meeting standards for managing U.S. funds.... To enhance the accountability of U.S. civilian assistance to Pakistan, we recommend that the USAID Administrator should ensure that U.S. assistance to Pakistani organizations identified as high- or medium-risk be provided through contracts, grants, or agreements that require these organizations to address weaknesses identified in their preaward assessment that would improve the accountability of funds. In a sign that oversight of its assistance to Pakistan was becoming more stringent, USAID had in late 2010 suspended a U.S.-based nonprofit organization from receiving new awards pending an investigation into "evidence of serious corporate misconduct, mismanagement, and internal controls." Problems with USAID-run programs have persisted. A February 2011 report issued by the Inspectors General of USAID, State, and the Pentagon addressed in some detail USAID's improved oversight and monitoring of its programs, especially though the conducting of pre-award assessments of local implementing partners, and with the establishment of oversight entities to ensure that aid funds are protected against waste and theft. However, it also found that, during the period October-December 2010, two audited U.S. aid development programs in the FATA "had made little progress" in achieving their goals. While sections of the report on "risk and mitigation strategies" and "oversight status" listed numerous initiatives meant to ensure better aid management, the auditors identified a considerable lack of progress overall: "We believe that USAID has an imperative to accumulate, analyze, and report information on the results achieved under its programs. One year after the launch of the civilian assistance strategy in Pakistan, USAID has not been able to demonstrate measureable progress " [emphasis added]. Similarly, a late 2011 IG audit determined that USAID's "Firms Project"—a four-year, $90 million effort to boost productivity and competitiveness in small- and medium-sized Pakistani firms—was "not on track to achieve its main goal" two years after its May 2009 launch. Despite a sustained effort, "no measureable increases in sales or employment" were found in the five sectors engaged (leather, livestock, textile, date, and mango). Auditors determined that the AID mission's performance management plan did not meet agency standards, that the approving official did not provide sufficient procurement oversight, and that the mission had failed to complete required annual performance evaluations. Lack of success caused the mission to curtail project activities in all but the mango sector, but even this effort became stalled. The Firms Project was one of three USAID Pakistan projects to appear in a U.S. Senator's annual "Wastebook" guide to "some of the most wasteful and low priority government spending." The State Department and USAID have responded to congressional pressure for better oversight of Pakistan assistance. A 2011 State Department report acknowledged that increased funding, an unstable security environment, and the decision to implement through Pakistani institutions combine to create significant oversight challenges. Steps taken to address these include subjecting all Pakistani organizations, including government agencies, to pre-award assessments to ensure that an adequate level of financial and management controls are in place before any U.S. funds are disbursed; establishment of State and USAID Inspectors General offices in Islamabad to uncover waste and/or fraud, and to boost the capacity of the Auditor General of Pakistan; minimizing the risk of fraud with fixed amount reimbursements made only after infrastructure work is completed and inspected; establishment of a Transparency International hotline for anonymous reporting of any suspicious activity related to U.S.-funded projects; increased personnel and improved process for oversight and monitoring ; and initiation of a nation-wide monitoring and evaluation (M&E) contract with a U.S. firm to provide third-party oversight. The report expressed confidence that substantial mechanisms are in place "to discourage deliberate fraud, identify and prosecute fraud cases, and help our Pakistan partners develop better monitoring and evaluations systems of their own." Security concerns in Pakistan raise several issues, including the inability of American aid workers to deliver aid and therefore the need to have Pakistani institutions handle much of the delivery; the difficulty in monitoring and evaluating the effectiveness of the aid; and the security risks associated with showing the American flag or labeling the aid as coming from the American people (see following section). Security woes continue to hamper implementation of many foreign assistance programs, especially in the KPk and FATA regions. Because of militant attacks, the Pakistani army's public works division is carrying out numerous U.S. aid projects in the form of roads, water, and electricity in South Waziristan. A senior Pakistani government official in the region said that the projects have gained support, but it is too dangerous to put any USAID logos on them because of possible reprisals against the workers. A tribal elder in the region said that while locals support the road between the towns of Tank and Makin, they "don't like America any more" as a result. In 2010, the U.S.-based Mercy Corps agency halted operations and shut nearly 50 offices due to security issues in both Sindh and Baluchistan. Similarly, World Food Program operations in northwest Pakistan were temporarily halted in 2010 after a suicide bomb attack at a Bajaur food station killed 46 people. Most recently, militants have targeted vaccination workers implementing immunization campaigns—12 such attacks were recorded in 2012 and Along with direct attacks on NGO operations, Pakistani public perceptions of NGOs appear largely unfavorable. Revelations of a CIA-run ruse employing a phony vaccination campaign in an effort to pinpoint bin Laden's location reinforced conspiracy theories that foreign agents were using the cover of Western humanitarian projects. The uproar led Islamabad to establish new restrictions on foreign aid operations and deeply angered the humanitarian community. The Pakistani doctor involved, Shakil Afridi, had claimed to be working for the aid group Save the Children, spurring that organization to fly eight expatriate workers out of the country for fear they would face detention. In September 2012, the Islamabad government ordered the group's six remaining expatriate staffers to leave the country. Meanwhile, the International Committee of the Red Cross elected to shut down at least three of its KPk offices after personnel access to the locations became too difficult, and it later suspended all operations in Peshawar and Karachi after a British national working for the group was found beheaded. Anti-American sentiment is powerful and pervasive in Pakistan. There is a widely held view that substantial, long-term development assistance is the only way to win hearts and minds in that country, and that this should be delivered predictably and through transparent processes that are in large part prioritized and monitored by locals. Some studies support the argument that donor countries can reap public diplomacy benefits, perhaps especially through humanitarian aid. A study of the relationship between foreign disaster assistance following Pakistan's 2005 earthquake and local attitudes found evidence that trust of foreigners was measurably increased in areas closest to the fault-line: "The results provide a compelling case that trust in foreigners is malleable, responds to humanitarian actions by foreigners and is not a deeply-rooted function of local preferences." In 2010, there were reports of U.S. public diplomacy benefits resulting from the provision of flood relief in Swat and other areas. A rebuttal to these conclusions contends there is very little evidence that humanitarian or development assistance is effective in promoting greater stability or improved public perceptions of the United States in Pakistan, and it offers a warning that "greater instrumentalization and securitization of aid" give the military too large a role in the humanitarian and reconstruction sectors. Figure 1 (below) suggests there is no notable correlation between U.S. humanitarian aid and Pakistani views of the United States, and that, in Pew Center surveys over the past decade, favorable views of the United States have never been found in more than 27% of the Pakistani population. Some evidence suggests that even Pakistanis who directly benefitted from U.S.-funded aid organizations after the catastrophic 2010 floods did not change their views of the United States—an increasingly negative view has persisted even after the U.S. provision of more than $700 million in related humanitarian assistance. This attitude may be partially explained by the many Pakistanis who are ill-informed about levels of U.S. assistance to their country and express being unaware of any benefits, as well. The perception gap to an extent may have resulted from the portions of aid lost to corruption and the lack of labeling of aid as coming from America in some provinces due to security concerns. Some reports have U.S. officials seeking greater public diplomacy benefits by pressing international aid groups to more prominently advertise the source of the goods and services they provide. Ambassador Holbrooke was himself among those expressing concern that the United States was not receiving sufficient credit for its assistance efforts. Yet many of those groups are reluctant, fearing that such visibility would make them targets for militants; 11 of them penned a letter to USAID asking that requirements on use of U.S. government labels be reconsidered. Some observers contend that too much emphasis on branding may have distorted the effects of U.S. aid by making the focus short-term public diplomacy gains rather than long-term development improvements. Anti-American sentiment related to perceived gross sovereignty violations—including the May 2011 Abbottabad raid, NATO raids across the Pakistan-Afghanistan border that have left Pakistani soldiers dead, and ongoing drone strikes—has led the U.S. government to minimize its "footprint" when providing aid in certain regions, especially those bordering Afghanistan. This has meant that some projects are conducted in ways similar to covert operations under the cover of Pakistani government agencies. Although such an approach facilitates delivery of aid, public diplomacy gains can be sacrificed when aid beneficiaries are unaware of the origin of the assistance they are receiving. Because development of Pakistan's tribal areas is identified as a key U.S. national security goal in and of itself, such costs may be considered acceptable. Press reports indicate, however, that in 2011 the U.S. government began pressuring aid groups to more openly advertise their delivery of American assistance. Even a previous ban on such branding in the FATA was replaced with case-by-case evaluations, and the U.S. Ambassador began requiring that the American flag be added to the printed AID logo to better ensure that illiterate Pakistanis know the source of aid. The new policy upset aid organizations that fear such branding will make them more vulnerable to targeting by religious militants. The international humanitarian aid group CARE is among those that have at times rejected U.S. funding due to AID's branding requirements. Still, some Pakistanis believe branding is the only means by which the United States can significantly increase local awareness of projects. In a response to the Administration's December 2009 Pakistan Assistance Strategy, a report by a large coalition of U.S.-based international nongovernmental organizations lauded the new U.S. approach while also presenting numerous recommendations meant to ensure greater accountability and effectiveness in U.S. civilian aid to Pakistan. In 2011, a working group convened by a Washington, DC, think tank issued a report strongly endorsing the so-called "KLB approach" to civilian aid for Pakistan as being of vital importance to both countries. The report offered nearly 30 recommendations for "mid-course changes," many of which were subsequently made. Also in 2011, the Washington, DC-based Center for Global Development (CGD) issued a substantive report aimed at "fixing" the U.S. development strategy in Pakistan. This report contained 10 key recommendations. A year later, CGD analysts revisited the topic and gave the U.S. government generally poor "grades" on relevant progress, saying, "Despite some improvements in individual projects and agencies, the government-wide development strategy for Pakistan still lacks clear leadership, mission, transparency, and adequate exploration of nonaid tools." The sole bright spot identified in the report was AID's support for Pakistani reformers; a perceived absence of effective metrics and continued obstacles to Pakistani access of U.S. markets both earned failing grades. In early 2012, CGD sent a letter to the State Department with three specific recommendations for improving the effectiveness of U.S. aid to Pakistan: (1) expand market access for Pakistani goods while dropping plans to establish ROZs; (2) task the U.S. Overseas Private Investment Corporation with establishing a new facility for small business lending in Pakistan; and (3) publically signal U.S. support for the proposed Diamer-Bhasha dam project. Major upheavals in U.S.-Pakistan relations in 2011 caused the already troubled bilateral relationship to further sour. Following NATO's late 2011 border incursion, bilateral ties were largely put "on hold" by Islamabad as the Pakistani Parliament completed a comprehensive review of ties, a review that called for stringent new restrictions and conditions on future engagement. Several measures within the defense authorization and appropriations bills to restrict U.S. aid to Pakistan in FY2014 are pending in the 113 th Congress, reflecting Members' ongoing concerns. Nevertheless, many U.S. government and independent analysts continue to assert that U.S. strategic interests are inextricably linked with a stable Pakistan that can effectively rule all of its territory, assist the United States with efforts to stabilize Afghanistan, as well as with the fight against terrorism, and contribute to the stability in the region. While there are numerous concerns about whether Pakistan can be accountable in how it uses U.S. aid and whether its newly seated government will pursue needed reforms, these observers emphasize the importance of maintaining a close bilateral engagement, with an eye toward encouraging and facilitating Pakistani democratization. Given the current budgetary constraints facing the United States and the recent strained relationship, some in the 113 th Congress question the return on such large investments in Pakistan, among the largest recipients of U.S. aid. Lawmakers will continue to seek the right balance between U.S. aid expenditures to promote U.S. national security interests in Pakistan and the region versus belt-tightening budget cuts to foreign aid programs and accountability measures to address the lack of trust between the two governments. Appendix A. History of U.S. Aid to Pakistan Appendix B. Current Year Request Appendix C. Major Donor Bilateral Development Assistance to Pakistan, CY2010 Appendix D. Principles and Purposes of the Enhanced Partnership with Pakistan Act of 2009 Principles: 1. Pakistan is a critical friend and ally to the United States and share goals of combating terrorism, firmly establishing democracy and rule of law , and promoting social and economic development in Pakistan; 2. U.S. aid to Pakistan is to supplement, not replace, Pakistan's own efforts; 3. The United States requires a balanced, countrywide strategy that provides aid throughout the country; 4. The United States supports Pakistan's struggle against extremism and recognizes its sacrifices in this regard; 5. The United States intends to work with the Government of Pakistan to build mutual trust by strengthening mutual security, stability, and prosperity of both countries; to support the people of Pakistan and democracy there, including strengthening its parliament, judicial system, and rule of law in all provinces; to promote sustainable long-term development and infrastructure projects, including healthcare, education, water management, and energy programs; to ensure all people of Pakistan have access to public education; to support curricula and quality of schools throughout Pakistan; to encourage public-private partnerships in Pakistan top support development; to expand people-to-people engagement between the United States and Pakistan; to encourage capacity to measure program success and increase accountability; to help Pakistan improve its counterterrorism financing and anti-money laundering; to strengthen Pakistan's counterinsurgency/counterterrorism strategy to prevent any territory of Pakistan from becoming a base for terrorist attacks; to aid in Pakistan's efforts to strengthen law enforcement and national defense forces under civilian leadership; to have full cooperation on counterproliferation of nuclear weapons; to assist Pakistan in gaining control and addressing threats in all its areas and along its border; and to explore ways to consult with the Pakistani-American community. Purposes of Democratic, Economic, and Development Assistance: 1. To support democratic institutions in Pakistan to strengthen civilian rule and long-term stability; 2. to support Pakistan's efforts to expand rule of law, build capacity, transparency, and trust in government, and promote internationally recognized human rights; 3. to support economic freedom and economic development in Pakistan such as investments in water resource management systems, expansion of agricultural and rural development (i.e., farm-to-market roads), and investments in energy; 4. to invest in people, particularly in women and children, regarding education, public health, civil society organizations, and to support refugees; and 5. to strengthen public diplomacy to counter extremism. Purposes of Security Assistance: 1. To support Pakistan's paramount national security need to fight and win the ongoing counterinsurgency within its borders; 2. to work with the Pakistani government to improve Pakistan's border security and control and help prevent any Pakistani territory from being used as a base or conduit for terrorist attacks in Pakistan, or elsewhere; 3. to work in close cooperation with the Pakistani government to coordinate action against extremist and terrorist targets; and 4. to help strengthen the institutions of democratic governance and promote control of military institutions by a democratically elected civilian government.
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In the post-2001 era, the United States has viewed Pakistan as a key ally, especially in the context of counterterrorism and Afghan and regional stability. Pakistan has been among the leading recipients of U.S. foreign assistance both historically and in recent years, although assistance levels have fluctuated considerably over the decades of Pakistani independence. In the wake of 9/11, however, aid to Pakistan increased steadily. Since 1948, the United States has pledged more than $30 billion in direct aid, about half for military assistance, and more than two-thirds appropriated in the post-2001 period. Many observers question the gains accrued to date, variously identifying poor planning, lack of both transparency and capacity, corruption, and slow reform by the Pakistani government as major obstacles. Moreover, any goodwill generated by U.S. aid is offset by widespread and intense anti-American sentiment among the Pakistani people. Developments in 2011 put immense strains on bilateral relations, making uncertain the future direction of the U.S. aid program. Relations have remained tense since that time, although civilian aid has continued to flow and substantive defense transfers are set to resume later in 2013. Disruptions in 2011 included the killing of Osama bin Laden in a Pakistani city and a NATO military raid into Pakistani territory near Afghanistan that inadvertently left 24 Pakistani soldiers dead. The latter development led Islamabad to bar U.S. and NATO access to vital ground lines of communication (GLOCs) linking Afghanistan to the Arabian Sea for a period of more than seven months. More recently, the 113th Congress is focusing on measures to reduce the federal budget deficit. This backdrop appears to be further influencing debate over assistance levels to a top-ranking recipient that many say lacks accountability and even credibility as a U.S. ally. For many lawmakers, the core issue remains balancing Pakistan's strategic importance to the United States—not least its role in Afghan reconciliation efforts—with the pervasive and mutual distrust bedeviling the bilateral relationship. The 111th Congress passed the Enhanced Partnership with Pakistan Act of 2009 (P.L. 111-73) authorizing the President to provide $1.5 billion in annual nonmilitary aid to Pakistan for five years (FY2010-FY2014) and requiring annual certification for release of security-related aid. Such conditionality is a contentious issue. Congress also established two new funds in 2009, the Pakistan Counterinsurgency Fund (PCF, within Defense Department appropriations) and the Pakistan Counterinsurgency Capability Fund (PCCF, within State-Foreign Operations Appropriations). The 112th Congress enacted further conditions and limitations on assistance. Among these were certification requirements for nearly all FY2012 assistance (in the Consolidated Appropriations Act, 2012—P.L. 112-74) and for FY2013 Coalition Support Funds (CSF, military reimbursements funded out of the Pentagon) and PCF (in the National Defense Authorization Act for FY2013—P.L. 112-239). Similar provisions appear in pending FY2014 legislation. In September 2012, the Administration waived FY2012 certification requirements under included national security provisions and, in February 2013, it issued a waiver to allow for the transfer of major defense equipment in FY2013. The Administration has requested nearly $1.2 billion economic and security aid to Pakistan for FY2014. This represents a steep decline from total FY2012 assistance of about $1.9 billion (excluding CSF). Estimated FY2013 allocations are not yet available. This report will be updated as warranted by events. For broader discussion, see CRS Report R41832, Pakistan-U.S. Relations, by [author name scrubbed]. See also CRS Report R42116, Pakistan: U.S. Foreign Aid Conditions, Restrictions, and Reporting Requirements, by [author name scrubbed] and [author name scrubbed].
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In the 19 th century and first half of the 20 th century, the federal government made determinations about which groups of Indians were tribes on an ad hoc basis when negotiating treaties and determining which groups of Indians could reorganize their governments under the Indian Reorganization Act. In the 1970s, the number of requests for tribal recognition by the Department of the Interior (Department) increased exponentially in the wake of the decisions in United States v. Washington , which recognized tribal treaty fishing rights in the Pacific Northwest, and Joint Tribal Council of Passamaquoddy v. Morton , which recognized a tribal land claim on the East Coast. Faced with many requests for tribal recognition, in 1978, the Department adopted a uniform process and uniform criteria for considering whether a group should be acknowledged as an Indian tribe. Acknowledgment or recognition as an Indian tribe has important legal and practical significance. One scholar on tribal acknowledgment explains the significance of tribal recognition as follows: An administrative determination that a group is a tribe (i.e., that it merits federal acknowledgment or recognition) establishes a government-to-government relationship between it and the United States. A positive determination under the regulations means that the group has inherent sovereign authority independent of the state in which it is located and independent of the United States, although it remains a domestic dependent nation. A group acknowledged under the regulations has continuously existed throughout history. A tribe, consequently, has sovereign immunity and may exercise jurisdiction over its territory and establish tribal courts, administer funds under the Indian Self-Determination and Education Assistance Act, establish gaming facilities under the Indian Gaming Regulatory Act, bring a land claim under the Indian Trade and non-Intercourse Act, exercise treaty hunting and fishing rights, and obtain other federal benefits and exercise their own sovereign authority, except as limited by federal law. General prohibitions or limitations also apply to federally recognized tribes. For example, possession of liquor is prohibited in Indian country absent publication of a certified liquor ordinance, and the sale of land is limited. Thus, a determination that a group is or is not a tribe is a decision with significant impacts on the group itself, federal and state governments, other Indian tribes, and non-Indians. The process set forth in 25 C.F.R. Part 83 includes procedures that the Department must follow and establishes the burden of proof for petitioners and the criteria that Indian groups must satisfy in order to be acknowledged as Indian tribes. The acknowledgment process is available to "American Indian groups indigenous to the continental United States." Only "groups that can establish a substantially continuous tribal existence and which have functioned as autonomous entities throughout history until the present" may be acknowledged. Therefore, groups that recently came together and "[s]plinter groups, political factions, communities or groups of any character that separate from the main body of a currently acknowledged tribe" may not be acknowledged. Groups that were subject to congressional termination may not use the process to be acknowledged. Finally, groups that have been through the process and failed may not re-petition for acknowledgment. The acknowledgment process begins when a group files a letter of intent, signed by the governing body of the group, requesting that the group be acknowledged. However, the review process does not begin until a group submits a documented petition. The minimum amount of time from the start of active consideration of the group's petition until a final determination is 25 months. Groups have an unlimited amount of time to file a documented petition. A documented petition must contain "thorough explanations and supporting documentation in response to all of the criteria." In 2002, the office within the Department responsible for reviewing documented petitions reported to Congress that petitions were ranging in size from 30,000 to over 100,000 pages. The Office of Federal Acknowledgment (OFA) reviews the documented petition and makes recommendations to the Assistant Secretary—Indian Affairs (Assistant Secretary). Before OFA actively considers the petition, OFA conducts a preliminary review for the purpose of providing technical assistance to the group (petitioner) so that the petitioner may supplement or revise its petition. After the petitioner responds to the technical assistance, OFA will inform the petitioner in writing of any "obvious deficiencies or significant omissions." The petitioner may supplement the petition with additional information or withdraw the petition prior to OFA's active consideration to do further work on it. Once the documented petition is completed to the petitioner's satisfaction, it is ready for active consideration by OFA. A team within OFA, generally composed of a historian, a genealogist, and a cultural anthropologist, reviews the documented petition to see if it satisfies all of the following mandatory criteria. "A criterion shall be considered met if the available evidence establishes a reasonable likelihood of the validity of the facts relating to that criterion." 25 C.F.R. Section 83.7(a) requires that the group "has been identified as an American Indian entity on a substantially continuous basis since 1900." Section 83.7(a) lists the kind of evidence of identification that is accepted. However, just about any evidence of identification as an Indian entity by someone other than a member of the group is accepted. 25 C.F.R. Section 83.7(b) requires that "a predominant portion of the petitioning group comprises a distinct community and has existed as a community from historical times until the present." Section 83.7(b) provides examples of the kind of evidence that can prove the existence as a community, including marriage patterns; social or economic relationships connecting the group; strong patterns of discrimination by nonmembers; shared sacred or ritual activities among most of the group; and cultural patterns that distinguish the group from the surrounding non-Indian population. A petitioner that can show the following is deemed to have provided sufficient evidence of community at a particular point in time: more than 50% of the members live in a geographical area exclusively or almost exclusively and the remaining members maintain consistent interaction with members of the group; at least 50% of the marriages in the group occur between members; at least 50% of the members have a distinct culture, such as a language or religion; or distinct community social institutions encompass most of the group. 25 C.F.R. Section 83.7(c) requires that "[t]he petitioner has maintained political influence or authority over its members as an autonomous entity from historical times to the present." "Political influence or authority" is defined to mean "a tribal council, leadership, internal process of other mechanism which the group has used as a means of influencing or controlling the behavior of its members in significant respects, and/or making decisions for the group which substantially affect its members, and/or representing the group in dealing with outsiders in matters of consequence." Section 83.7(c) identifies the kind of evidence that can demonstrate political influence or authority. A petitioner will be deemed to have established this criterion for a given point in time if it shows that group leaders or some other mechanism within the group allocates group resources; settles disputes among members or subgroups; exerts strong influence on the behavior of members; or organizes or influences economic subsistence efforts among the group. Any petitioner that uses one of these methods for demonstrating political influence will be deemed to have established community for that point in time. 25 C.F.R. Section 83.7(d) requires the petitioner to provide a copy of the governing document, including membership criteria. 25 C.F.R. 83.7(e) requires that the petitioner's membership consists of individuals who descend from a historical Indian tribe or from historical Indian tribes that combined and operated as a single entity. Section 83.7(e) also requires petitioners to provide membership lists. 25 C.F.R. Section 83.7(f) requires that the petitioner's membership is "composed principally of persons who are not members of any acknowledged North American Indian tribe." 25 C.F.R. Section 83.7(g) requires that the petitioner establish that "[n]either the petitioner nor its members are the subject of congressional legislation that has expressly terminated or forbidden the Federal relationship." If a petitioner can demonstrate "unambiguous previous Federal acknowledgment," the proof required for the mandatory criteria is different. The Assistant Secretary will make a determination about previous federal acknowledgment during the technical assistance review. Evidence to demonstrate previous federal acknowledgment can include treaty relations with the United States; congressional or executive denomination of the group as a tribe; or federal acknowledgment of collective interest in tribal lands or funds. The proof under the criteria changes in the following ways. First, a petitioner with previous federal acknowledgment must demonstrate identification as an Indian entity from the date of the last federal acknowledgment. Second, the petitioner needs to demonstrate only that it is presently a community. Third, the petitioner must demonstrate political influence or authority at present, as well as from the last date of federal acknowledgment, and it can use "identification by authoritative, knowledgeable external sources[] of leaders and/or a governing body who exercise political influence or authority" together with one form of evidence listed in Section 83.7(c). Alternatively, the petitioner can demonstrate identification, community, and political influence or authority from the date of last federal acknowledgment to the present. After technical assistance but before active consideration of the petition, the team within OFA reviews any petitions that it believes contains little or no evidence that establishes that its members descend from a historical Indian tribe or tribes; its members are not members of a federally recognized tribe; and it has not been the subject of congressional termination. If the evidence "clearly establishes" that the group does not meet any of those criteria, the Assistant Secretary will not review the entire petition. Rather, the Assistant Secretary will decline to acknowledge the petitioner as an Indian tribe. The Assistant Secretary has one year from the time the team begins active consideration of a petition until when he must publish a proposed finding in the Federal Register . The Assistant Secretary may suspend consideration of the petition if there are technical problems with the petition or administrative problems that temporarily prevent active consideration of the petition. The Assistant Secretary has discretion to grant a petitioner's request for suspension of consideration for good cause. Upon publication of the proposed finding, the petitioner, interested parties, and informed parties have 180 days to submit arguments and evidence to rebut or support the proposed finding. The Assistant Secretary has discretion to extend the comment period for up to 180 days for good cause. Upon request by the petitioner or an interested party, the Assistant Secretary will hold a formal hearing for the purposes of inquiring into the reasoning, analysis, and factual basis for the proposed finding. The petitioner has 60 days to respond to the comments of an interested or informed party. Depending on the extent of the comments, the petitioner's response time may be extended at the Assistant Secretary's discretion. At the end of the comment period, the Assistant Secretary consults with the petitioner and interested parties to determine "an equitable timeframe" for consideration of the materials submitted during the response period. The Assistant Secretary has 60 days from the time the team begins consideration of the arguments and evidence supporting or rebutting the proposed finding to publish a final determination in the Federal Register . The Assistant Secretary has discretion to extend this period depending on the extent of the comments received in response to the proposed finding. The final determination becomes final 90 days from publication in the Federal Register unless a request for reconsideration is filed by the petitioner or an interested party with the Interior Board of Indian Appeals (IBIA). There is an opportunity for review of the final determination if the petitioner or an interested party requests reconsideration from the IBIA within 90 days of publication of the final determination in the Federal Register . If the IBIA receives no request within 90 days, the final determination becomes a final agency action for the Department, and becomes effective 120 days after the final determination was published in the Federal Register . The Department does not defend the final determination during the reconsideration process. Rather, the petitioner and the interested parties submit briefs supporting or challenging the final determination. There are four grounds for limited independent reconsideration by the IBIA: "[T]here is new evidence that could affect the determination;" "[A] substantial portion of the evidence relied upon in the [final] determination was unreliable or was of little probative value;" The petitioner's or the Assistant Secretary's research "appears inadequate or incomplete in some material respect;" "[T]here are reasonable alternative interpretations, not previously considered, of the evidence used for the final determination, that would substantially affect the determination that the petitioner meets or does not meet one or more of the criteria." The IBIA can either affirm the Assistant Secretary's determination, if it finds that the petitioner or interested party has failed to establish, by a preponderance of the evidence, at least one of the above grounds, or vacate and remand the determination, if it finds that the petitioner or interested party has succeeded in establishing, by a preponderance of the evidence, one of the above grounds. The IBIA does not have authority to reverse the Assistant Secretary's final determination. If the IBIA affirms the final determination but finds that the petitioner or interested party has alleged other grounds for reconsideration, the IBIA must send the requests for reconsideration to the Secretary of the Interior (Secretary). The Secretary has discretion to request the Assistant Secretary to reconsider the final determination on those grounds. In considering whether to request the Assistant Secretary to reconsider, the Secretary may consider any information, including information outside the record. When the IBIA has sent the Secretary a request for reconsideration, the petitioner and interested parties have 30 days from receiving notice of the IBIA's decision to submit comments to the Secretary. If an interested party files comments opposing the petitioner's request for reconsideration, the petitioner has 15 days to respond. The Secretary has 60 days after receiving all the comments to decide whether to request the Assistant Secretary to reconsider. If the Secretary decides not to request reconsideration by the Assistant Secretary, the final determination becomes final on the date the parties are notified of the Secretary's decision. After a remand from the IBIA or a request for reconsideration by the Secretary, the Assistant Secretary has 120 days from receipt of the IBIA's decision or the request from the Secretary to issue a reconsidered determination. A reconsidered final determination becomes final and effective upon publication of the notice of the reconsidered determination in the Federal Register . In May 2014, Interior proposed a new rule for Part 83 that would comprehensively change the acknowledgment process. The preamble to the proposed rule explains that Interior issued the proposed rule in response to criticism that the acknowledgment process is too slow, expensive, inefficient, burdensome, intrusive, less than transparent, and unpredictable. Accordingly, the proposed rule would change Part 83 in an effort "to make the process and criteria more transparent, promote consistent implementation, and increase timeliness and efficiency, while maintaining the integrity of the process." The public may submit comments on the proposed rule until August 1, 2014. The proposed rule would make several changes to the criteria. First, the proposed rule would change criterion (a) from identification as an Indian entity from 1900 to the present to a narrative explaining, and proof of, tribal existence at some point in 1900 or before. Current criteria 87.3(b) and (c) require proof of community and proof of political authority from historical times to the present. Proposed criteria (b) and (c) would require proof of community and political authority from 1934 to the present "without substantial interruption." "Without substantial interruption" would be defined to mean without gaps of more than 20 years. In addition to the current bases for finding community and political authority, the proposed rule would establish as acceptable proof maintaining a state reservation by the petitioner since 1934, or the United States holding land for the petitioner at any point since 1934. For criterion (b) the current rule requires that a predominant portion of the petitioner's membership be a distinct community. The proposed rule would require that at least 30% of the petitioner's membership be a distinct community. The proposed rule would also provide that proof of boarding school attendance by petitioner's children would constitute proof of community. For criterion (e), descent from a historical tribe, the proposed rule would make three changes. First, under the current rule the term "historical" is defined to mean the later of 1789 or first non-Indian settlement or government presence in the area. The proposed rule would define historical as 1900 or before. Second, the proposed rule would change the requirement of proof that the tribe's membership descends from a historical tribe to proof that 80% of the membership descends from a historical tribe. Third, the proposed rule would establish that criterion (e) may be satisfied by a roll prepared either by Interior or at the direction of Congress, and that Interior will rely on such a roll as an accurate roll of descendants of the tribe that existed in historical times. In the absence of such a roll, the petitioner may rely on the most recent available evidence for the historical period (1900 or before). Criterion 83.7(f) requires that the petitioner is composed principally of persons who are not members of federally recognized tribes. The proposed rule would add that members of a petitioner who filed its petition by 2010 who then joined a federally recognized tribe would not count against the petitioner. Finally, criterion 83.7(g) now requires petitioners to establish that they are not subject to legislation forbidding or terminating the tribal-federal relationship. The proposed rule would shift the burden to Interior to show that Congress has forbidden or terminated the federal relationship with the petitioner. The proposed rule would make several changes to the acknowledgment process, the most significant of which are described below. Under the current practice, OFA makes recommendations to the Assistant Secretary, whom the current regulations charge with making proposed findings and final determinations. Under the proposed rule, OFA would issue proposed findings and the Assistant Secretary would make final determinations. The Assistant Secretary's decision would be final for Interior, with no consideration by the IBIA. The proposed rule would provide for consideration of the criterion in stages and provide that petitioners receiving a negative proposed finding at any stage could appeal the finding to a judge within the Office of Hearings and Appeals (OHA). The OHA judge could hold a hearing and would issue recommendations for the Assistant Secretary to consider in making the final determination. During the first stage of making proposed findings, OFA would consider criterion (e) (descent from a historical tribe). If a petitioner satisfied criterion (e), OFA would then consider criteria (a) (tribal existence), (d) (governing document), (f) (membership), and (g) (congressional prohibition or termination). Finally, if the petitioner satisfied those criteria, OFA would consider criteria (b) (community) and (c) (political authority). If a petitioner made it through all stages of review, OFA would issue a positive proposed finding. The proposed rule would provide that, in limited circumstances, petitioners that received negative final determinations under the current rule could re-petition. First, if the Assistant Secretary issued a negative final determination and the petitioner appealed to the IBIA or federal court and lost, the petitioner could re-petition if it obtained the consent of the prevailing party, if any, in those proceedings. Second, if a petitioner did not seek review by the IBIA or a federal court, or it did but there was no opposing party, a petitioner could re-petition if an OHA judge determined that the petitioner had demonstrated by a preponderance of the evidence that changes in the rules warranted a reconsideration of the final determination or that the wrong standard of proof was used in the final determination.
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In 1978, the Department of the Interior (Department) adopted a final rule setting forth the process by which a group may be recognized (also acknowledged) as an Indian tribe by the Department. Prior to that time, the Department made decisions on an ad hoc basis. However, in the wake of the treaty fishing rights case United States v. Washington and eastern land claims, more groups started seeking recognition as Indian tribes, and the Department could no longer manage the recognition requests on a case-by-case basis. The acknowledgement process, codified in 25 C.F.R. Part 83, sets forth a uniform process and uniform criteria for acknowledging that groups exist as Indian tribes. The key to federal acknowledgment under the current regulations is continuous political existence of an Indian group from historical times to the present. The federal acknowledgment process does not create tribes, and it does not give groups sovereignty. Rather, it acknowledges a political entity that already exists. To do this, 25 C.F.R. Section 83.7 provides seven mandatory criteria that groups must satisfy in order to establish that they exist and have existed as an autonomous political entity. First, in order to be acknowledged, a group must establish that it has been identified as an Indian entity from 1900 to the present. Second, it must establish that it has existed as a community from historical times to the present. Third, it must establish that it has exercised political control over its members from historical times to the present. Fourth, the group must provide a copy of its governing document, including membership criteria. Fifth, the group must establish that its members descend from a historical Indian tribe or historical Indian tribes that combined and functioned as a single autonomous political entity. Sixth, the membership must be composed principally of persons who are not members of a federally recognized tribe. Finally, the group must establish that it is not the subject of congressional legislation terminating or forbidding the federal-tribal relationship. The current regulations assign responsibility to the Assistant Secretary—Indian Affairs (Assistant Secretary) to issue initial proposed findings and then final determinations. The Office of Federal Acknowledgment (OFA) makes recommendations to the Assistant Secretary on the proposed findings and the final determinations. A final determination may be appealed on limited grounds to the Interior Board of Indian Appeals. Acknowledgment as an Indian tribe means that the group becomes a federally recognized tribe with which the United States has a government-to-government relationship. This relationship makes the tribe and its members eligible for certain benefits, as well as subject to certain protections. It also means that the tribe may exercise jurisdiction over its territory and members generally free from state law, subject to limitations of federal law. After years of criticism of the acknowledgment process, the Department of the Interior has proposed several changes to the acknowledgment regulations. First, the proposed rule would change some of the criteria. Second, the proposed rule would assign responsibility for the proposed findings to OFA but keep responsibility for the final determinations with the Assistant Secretary. In rendering the proposed finding, OFA would consider the criteria in stages. Petitioners could appeal a negative proposed finding at any of the stages. The appeal would be heard by a judge within the Office of Hearings and Appeals (OHA) who would issue a recommended decision for the Assistant Secretary to consider in issuing the final determination. The Assistant Secretary's decision would be final for the Department.
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Animal agriculture is a $100 billion per year industry in the United States. Livestock and poultry are raised on an estimated 1.3 million farms throughout the nation. About 238,000 of these farms are considered animal feeding operations (AFO)—agriculture enterprises where animals are kept and raised in confinement. An estimated 95% of these are small businesses: most AFOs raise fewer than 300 animals. Very large AFOs, housing 300 or more animals such as cows (or equivalent numbers of other animal species), are defined as concentrated animal feeding operations, or CAFOs. For more than two decades, organizational changes within the industry to enhance economic efficiency have resulted in larger confined production facilities that often are geographically concentrated. Increased facility size, greater numbers of animals being raised at large feedlots, and regional concentration of livestock and poultry operations have, in turn, given rise to concerns over the management of animal wastes from these facilities and potential impacts on environmental quality. From an environmental quality standpoint, much of the public and policy interest in animal agriculture has focused on impacts on water resources, because animal waste, if not properly managed, can adversely impact water quality through surface runoff and erosion, direct discharges to surface waters, spills and other dry-weather discharges, and leaching into soil and groundwater. However, animal feeding operations can also result in emissions to the air of particles and gases such as ammonia, hydrogen sulfide, and volatile organic chemicals (VOC). At issue today are questions about the contribution of AFOs to total air pollution and corresponding ecological and possible public health effects. Resolving those questions is hindered by a lack of adequate, accurate, scientifically credible data on air emissions from AFOs, data that are needed to gauge possible adverse impacts and subsequent implementation of control measures. This report provides background on these issues. It first reviews the types of air emissions from livestock and poultry operations and their human health and environmental impacts. It then discusses provisions of several federal laws concerned with environmental impacts, beginning with the Clean Water Act, because protecting water resources has been the primary regulatory focus regarding livestock and animal operations. The Environmental Protection Agency (EPA) has authority to address AFO air emissions under several laws—the Clean Air Act; the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, or Superfund); and the Emergency Planning and Community Right-to-Know Act (EPCRA)—which are discussed next. Questions about the applicability of these laws to livestock and poultry operations have been controversial in several arenas and have drawn congressional attention. Agricultural emissions of greenhouse gases that have been of interest in connection with proposals to address the global challenge of climate change are discussed. Studies by the National Research Council concerning air emissions are reviewed, as are relevant activities of the states and the U.S. Department of Agriculture. Finally, the report identifies a number of key research questions needed to characterize and evaluate animal agriculture emissions. AFOs can affect air quality through emissions of gases (ammonia and hydrogen sulfide), particulate matter (PM), volatile organic compounds (VOC), hazardous air pollutants, microorganisms, and odor. AFOs also produce gases (carbon dioxide and methane) that are associated with climate change. The generation rates of odor, manure, gases, particulates, and other constituents vary with weather, time, animal species, type of housing, manure handling system, feed type, and management system (storage, handling, and stabilization). Emission sources include barns, feedlot surfaces, manure storage and treatment units, silage piles, animal composting structures, and other smaller sources, but air emissions come mostly from the microbial breakdown of manure stored in pits or lagoons and spread on fields. Each emission source will have a different profile of substances emitted, with rates that fluctuate through the day and the year. The sources, fate, and transport of AFO emissions are illustrated in Figure 1 . Pollutants associated with AFOs have a number of environmental and human health impacts. Most of the concern with possible health effects focuses on ammonia, hydrogen sulfide, and particulate matter, while major ecological effects are associated with ammonia, particulates, methane, and oxides of nitrogen. The nitrogen in animal manure can be converted to ammonia (NH 3 ) by a combination of processes. Ammonia released from the surface of liquid manure storage structures rapidly adheres to particles in the air, due to its cohesive properties, thus contributing to the formation of ambient particulate matter, specifically ammonium nitrate and ammonium sulfate. These particles form to a varying degree in the presence of ammonia and oxides of nitrogen or sulfur (see below). Once emitted, ammonia also is re-deposited back to earth in rainfall that can harm surface waters and aquatic life in lakes and streams. Ammonia aerosols in rainfall contribute to oxygen depletion of aquatic systems and excessive growth of algae, as well as acidification of the environment. It is estimated that emissions from animal waste account for about one-half of the total natural and anthropogenic ammonia emitted in the United States annually. Ammonia has a strong, sharp, characteristic odor that disperses rapidly in the air. Health effects at low concentrations include eye, nose, and throat irritation; exposure at very high short-term concentrations can be lethal. Particles are highly complex in size, physical properties, and composition. For regulatory purposes, airborne particulate matter (PM) is commonly considered as coarse particles (those less than 10 microns in diameter, referred to as PM 10 ), or fine particles, those less than 2.5 microns in diameter (referred to as PM 2.5 ). PM 10 and PM 2.5 can be directly emitted geologic material, including from unpaved roads and other dust. Agriculture is a major direct source of PM 10 , from sources such as grain mills or storage facilities, feeding equipment, and particles generated in other mechanical processes. In contrast, PM 2.5 is a different class of particles, resulting more from evaporation and atmospheric chemical processes than from direct emissions. Fine particles are formed in the atmosphere through the chemical interaction of precursor emissions such as sulfur oxides, nitrogen oxides, and VOCs. AFOs can contribute directly to particulate matter through several mechanisms, including animal activity, animal housing ventilation units, and particles of mineral and organic material from soil and manure that adhere to air molecules. As described above, particulate matter can contribute indirectly to fine particle formation by emissions of ammonia, nitrogen oxides, and hydrogen sulfide, which are converted to aerosols through reactions in the atmosphere. Particle formation is highly dependent on atmospheric temperature, humidity, concentrations of the precursor compounds, and other factors, so the particle formation is variable and difficult to predict. Particles of differing sizes have been linked to health effects. Larger particles tend to be deposited in the upper airways of the respiratory tract, whereas small particles have both health and environmental effects: they can be deposited in the smallest airways in the lungs and, while still airborne, also play an important role in formation of regional haze. Populations with long-term exposure to heavier loads of particles have higher rates of mortality from major cardiovascular diseases, as well as increased rates of morbidity. The primary environmental and ecological effects of particles are related to haze and decreased visibility, which is caused by the suspended aerosols that both absorb and scatter light. Hydrogen sulfide (H 2 S) is a colorless gas with a strong and generally objectionable rotten egg odor. It is produced in anaerobic (oxygen-deprived) environments from the microbial reduction of sulfate in water and the decomposition of sulfur-containing organic matter in manure. Acute human health effects include respiratory and cardiovascular irritation, as well as headaches. H 2 S may have local effects of concern—especially odor—and may contribute to the atmospheric sulfur burden of regions with a high density of AFOs, but few other sources. Methane and nitrous oxide are greenhouse gases that are known to contribute to global warming. An estimated one-half of global methane comes from manmade sources, of which agriculture is the largest source, with livestock production being a major component within the sector. EPA estimates that more than 30% of the nation's methane emissions come from livestock. Agricultural methane is produced by ruminant animals, but also is emitted during microbial degradation of organic matter under anaerobic conditions. Nitrous oxide forms via the microbial processes of nitrification and denitrification. In the United States, manure management accounts for about 5% of nitrous oxide emissions and 7.5% of methane emissions. (See " Agricultural Emissions of Greenhouse Gases ," below, for discussion.) Many of the complaints about AFOs are generated by odor . Odor from AFOs is not caused by a single substance, but is rather the result of a large number of contributing compounds, including ammonia, VOCs, and hydrogen sulfide. As classes of compounds, odor and VOCs can be considered together. VOCs (also referred to as reactive organic compounds, or ROG) vaporize easily at room temperature and include a large number of constituents, such as volatile fatty acids, sulfides, amines, alcohols, hydrocarbons, and halocarbons. In terms of their health and environmental effects, some VOCs may irritate the skin, eyes, nose, and throat. They also can be precursors to the formation of PM 2.5 and ozone (smog). Adverse effects of ozone include lung damage and exacerbated respiratory disease, as well as diminished visibility. Ozone in the troposphere, the lowest layer of the atmosphere which is closest to the Earth, has both natural and anthropogenic sources. It can damage forests, crops, and manmade materials, and harm respiratory tissue through inhalation. Ozone that occurs naturally at ground-level is generally at low concentrations that are not believed to threaten human health or the environment. Ozone that is a byproduct of human activity is formed through the interaction of sunlight with VOCs, nitrogen oxides, and other substances and adds to the total atmospheric burden of the pollutant. Other types of emissions associated with agricultural operations include biologically active agents (bacteria, mold spores, allergens, and toxins). Effects of these pollutants occur on a variety of scales, as shown in Table 1 . Manure management varies widely across animal species, region, and farm type, depending on climate, soil productivity, farm size, and other factors. Systems and strategies now in wide use by farmers are those that have proved the most cost-effective and reliable at achieving their design objectives. Land application has been and remains the predominant method for disposing of manure and recycling its nutrient and organic content. For the most part, design objectives for managing manure do not include minimization of emissions of ammonia, methane, or other gaseous compounds, but rather focus on odor and dust control, avoidance of direct discharge to surface water, and land application at rates that are beneficial to growing crops. As noted above, emissions of odors, gases, and dust from livestock production facilities arise from buildings, manure storage, and land application. Eliminating emissions from one of these sources will likely not eliminate emissions entirely, as control technologies often address only one of the three sources. Many of the available technologies reduce emissions; none eliminates them. Some technologies have been evaluated to the point of demonstrating efficacy, but most have not been evaluated systematically. Emissions from buildings can be reduced by inhibiting contaminant generation, or by capturing and treating the air as it leaves the building (e.g., by using biofilters to treat ventilation air, or wet or dry scrubbing of air as it passes through evaporative pads before release). Frequent manure removal is one of the best ways of reducing contaminant generation within the building. Other methods that can be used inside buildings include using bedded solid manure (i.e., manure mixed with bedding that creates a solid stack of material), chemical additives on animal litter, and diet manipulation. There are four general types of manure storage: deep pits, outdoor slurry storage, anaerobic lagoons, and solid stacks. Outdoor storage is the most apparent source of odors. Controls that have been shown to be effective when managed properly include various types of covers (permeable and impermeable, natural such as straw or cornstalks, and synthetic). Techniques to manipulate the manure to minimize emissions also exist but have certain limitations. For example, separating solids from liquid manure reduces the load on anaerobic lagoons, but also creates a second waste stream to manage which may be detrimental to overall air quality. Proper aeration will eliminate odors from outdoor storage, but it is expensive in a liquid system. Anaerobic digesters reduce odors, but they are also not economically feasible. Emission control during land application is best done by direct injection of liquid manure below the soil surface. Solid manure is generally less odorous than liquid, but because it cannot be injected, rapid incorporation into the soil by plowing or similar techniques is the best method to minimize odors. While many treatment technologies are available that may be important in mitigating emissions, the effectiveness of most of them is not well quantified. Extensive research programs are underway in the United States and Europe, and many options of varying cost and effectiveness are being evaluated. Livestock emission mitigation research is being performed by the University of California at Davis, California State University Fresno, Purdue University, Texas A&M University, and others, and information on available control measures and strategies for agricultural sources of air pollution is being presented. Experts believe that cost, increased management requirements, and a lack of economic or regulatory incentives to encourage or require their use are the primary reasons that more poultry and livestock producers have not adopted technologies to reduce emissions. The animal sector of agriculture has undergone major changes in the last several decades, a fact that has drawn the attention of policymakers and the public. In the United States there are an estimated 238,000 animal feeding operations where livestock and poultry are confined, reared, and fed, according to the U.S. Department of Agriculture's 1997 Census of Agriculture. Organizational changes within the industry to enhance economic efficiency have resulted in larger confined production facilities that often are geographically concentrated. The driving forces behind structural change in livestock and poultry production are no different than those that affect many other industries: technological innovation and economies of scale. From 1982 to 1997, the total number of U.S. operations with confined livestock fell by 27%. At the same time, the number of animals raised at large feedlots (generally confining 300 animals or more) increased by 88%, and the number of large feedlots increased by more than 50%. The traditional image of small farms, located in isolated, rural locales, has given way to very large farming operations, some on the scale of industrial activities. Increased facility size and regional concentration of livestock and poultry operations have, in turn, given rise to concerns over the management of animal wastes from these facilities and potential impacts on environmental quality. Agricultural operations often have been treated differently from other types of businesses under numerous federal and state laws. In the area of environmental policy, one observer noted that agriculture is "virtually unregulated by the expansive body of environmental law that has developed in the United States in the past 30 years." Some laws specifically exempt agriculture from regulatory provisions, and others are structured in such a way that farms are not subject to most, if not all, of the regulatory impact. The Clean Water Act (CWA), for example, expressly exempts most agricultural operations from the law's requirements, while under the Clean Air Act (CAA), most agricultural sources are not subject to that law's regulatory programs because the majority of them do not meet the CAA's minimum emission quantity thresholds. Moreover, in implementing environmental laws, federal and state regulators have traditionally focused more effort on controlling the largest and most visible sources of pollution to the water, air, and land—factories, waste treatment plants, motor vehicles—than on smaller and more dispersed sources such as farms. Nevertheless, certain large animal feeding operations are subject to environmental regulation. The primary regulatory focus on environmental impacts has been on protecting water resources and has occurred under the Clean Water Act. In addition, facilities that emit large quantities of air pollutants may be regulated under the Clean Air Act. Some livestock operations may also be subject to the release reporting requirements of the Comprehensive Environmental Response, Compensation, and Liability Act (the Superfund law) and the Emergency Planning and Community Right-to-Know Act. The following sections describe relevant provisions of these laws. The Clean Water Act (CWA, 33 U.S.C. §§1251-1387) provides one exception to policies that generally exempt agricultural activities—and specifically the livestock industry—from environmental rules. The law protects water quality by a combination of ambient water quality standards established by states, limits on effluent discharges, and permits. The regulatory structure of the CWA distinguishes between point sources (e.g., manufacturing and other industrial facilities which are regulated by discharge permits) and nonpoint sources (pollution that occurs in conjunction with surface erosion of soil by water and surface runoff of rainfall or snowmelt from diffuse areas such as farm and ranch land). Most agricultural activities are considered to be nonpoint sources, since they do not discharge wastes from pipes, outfalls, or similar conveyances. Pollution from nonpoint sources is generally governed by state water quality planning provisions of the act. However, the CWA defines large animal feeding operations that meet a specific regulatory threshold number of animals (termed concentrated animal feeding operations (or CAFO); they are a small percentage of all animal feeding operations) as point sources and treats CAFOs in a manner similar to other industrial sources of pollution. They are subject to the act's prohibition against discharging pollutants into waters of the United States without a permit. In 2003, EPA revised regulations that were first promulgated in the 1970s defining the term CAFO for purposes of permit requirements and specifying effluent limitations on pollutant discharges from regulated feedlots. The 2003 rules were challenged in federal court, and parts of the regulations were remanded to EPA for revision and clarification. As a result, EPA issued revised regulations in 2008. These regulations are intended to address the concern that animal waste, if not properly managed, can adversely impact the environment through several possible pathways, including surface runoff and erosion, direct discharges to surface waters, spills and other dry-weather discharges, leaching into soil and groundwater, and releases to air (including subsequent deposition back to land and surface waters). The primary pollutants associated with animal wastes are nutrients (particularly nitrogen and phosphorus), organic matter, solids, pathogens, and odorous/volatile compounds. Data collected for the EPA's 2004 National Water Quality Inventory identify agriculture as the leading contributor to water quality impairments in rivers and lakes and the third leading contributor to impaired lakes (after atmospheric deposition and "other"). Animal feeding operations are only a subset of the agriculture category, but states identified animal feeding operations and grazing as significant contributors to water quality impairment. The CWA CAFO rule applies to approximately 15,300 of the largest animal feeding operations that confine cattle, dairy cows, swine, sheep, chickens, laying hens, and turkeys, or less than 10% of all animal confinement facilities in the United States. The rule details requirements for permits, annual reports, and development of plans for handling manure and wastewater. The rule contains a performance standard which prohibits discharges from regulated CAFOs except in the event of wastewater or manure overflows or runoff from an exceptional 25-year, 24-hour rainfall event. Parts of the rule are intended to control land application of animal manure and wastewater. Scientists recognize that actions taken to mitigate harmful water quality impacts of managing animal waste can have implications for air quality, in complex ways that are not perfectly understood. Environmental policies do not always account for interactions between media. For example, to meet water quality goals, lagoons are commonly used to store and treat manure waste from swine and other operations. These storage systems volatilize nitrogen, thereby reducing its concentration in lagoon effluent. But the volatilized nitrogen compounds escape into the air, creating odors, contributing to fine particulates (haze), and potentially hastening global climate change. The Clean Air Act (CAA, 42 U.S.C. §§7401-7671q) provides a complex and comprehensive framework for regulating stationary and mobile sources of air pollution. The law emphasizes controlling "major sources" that emit more than threshold quantities of regulated pollutants. Air emissions from farms typically do not exceed the specified thresholds, thus they generally escape most CAA regulatory programs. However, livestock producers and other agricultural sources are not exempt from the statute, and for any whose emissions meet statutory or regulatory definitions of "major," provisions of the act could apply. Under the CAA framework, EPA designates criteria air pollutants that may reasonably be anticipated to endanger public health or welfare, and then establishes nationally uniform ambient air quality standards for those pollutants (NAAQS). EPA has identified six criteria pollutants, two of which (particulate matter and nitrogen dioxide) are directly associated with AFO emissions. In addition, AFOs and other sources emit a number of substances (VOCs and nitrogen oxide compounds) which are precursors of ozone, another criteria pollutant. The CAA also regulates hazardous air pollutants (HAP). HAPs are identified in a statutory list that can be modified by EPA regulation; EPA currently regulates 188 HAPs, including volatile organic compounds (VOC) which are emitted by livestock facilities. Methanol, also known as methyl alcohol, is a listed HAP that is emitted from cows' enteric emissions, freshly excreted manure, and decomposing feed stored at dairies. Precursors of ozone (reactive VOCs) and PM 2.5 (ammonia), both emitted by livestock facilities, are regulated air pollutants, even though they are not listed as criteria pollutants or HAPs. (See Table 2 .) The CAA threshold determination of whether a source—including a livestock or poultry operation—is subject to the requirements of the act depends on whether it is defined as "major." That definition differs based on the region in which the source is located and whether that region is attaining and maintaining national ambient air standards. The act classifies nonattainment areas based on the extent to which the NAAQS is exceeded, and it specifically creates five classes of ozone nonattainment (from least to most polluted: marginal, moderate, serious, severe, and extreme). More stringent control requirements are imposed in areas with worse pollution. Generally, a major source is a stationary source that emits, or has potential to emit, 100 tons per year or more of any pollutant. However, regulated sources of HAPs that emit more than 10 tons per year of an individual hazardous pollutant (or 25 tons per year of all HAPs combined), or sources in the most serious nonattainment areas that emit as little as 10 tons per year of VOCs or NO x, are defined as major sources and would be subject to these CAA requirements. States play an important role in carrying out CAA provisions and assuring that state air quality meets federal air quality standards. The State Implementation Plan (SIP), prepared by the state (or local) air pollution control agency, translates national ambient standards into emission limitations and other control measures that govern individual sources of air pollution; the SIP is enforceable as both state and federal law. The CAA details the basic content of SIPs: enforceable emission limitations, other control measures, monitoring requirements, and schedules for compliance. The provisions of the SIP govern individual facilities through two types of state permitting programs. First, the preconstruction permit, or New Source Review permit, applies to major new sources or major modifications of an existing source, and it describes proposed air pollution abatement systems, allowable emission rates, and other requirements. Second, pursuant to CAA Title V, most major stationary sources are required to obtain operating permits that specify each source's emission limitations and standards, compliance schedule, reporting requirements, and other conditions. Major sources that emit HAPs also must control those emissions to a level no less than the maximum achievable control technology (MACT), as determined by EPA or state permitting authorities. A state's SIP provisions must be at least as stringent as federal requirements, but beyond the core CAA framework, states have latitude in adopting requirements to achieve national ambient air quality standards. States, for example, may regulate additional categories of sources or may define major sources more stringently than do federal programs. Most agricultural operations are believed to be minor sources of air pollution, and few have been required to comply with the act's permit requirements. Some environmental advocates have argued that many large livestock facilities emit more than 100 tons per year of regulated pollutants (especially ammonia) and should be regulated as major sources under federal law. However, federal and state officials generally have placed a low priority on regulating agricultural sources, and, further, a lack of adequate air quality monitoring data hampers the ability of regulators to answer key questions. Agricultural air pollution has become more of an issue in some parts of the country as EPA implements the NAAQS for particulates and as nonattainment areas look to reduce pollutants from more sources as they strive to come into attainment. As discussed previously, emissions of ammonia and several other AFO pollutants are precursors that transform in the atmosphere to form secondary particulate matter. Aside from ammonia, other agriculture pollutants include dust that contributes to PM 10 , diesel emissions from farm equipment, and emissions from specialized activities such as crop burning. Enforcement of environmental laws requires accurate measurement of emissions to determine whether regulated pollutants are emitted in quantities that exceed specified thresholds. In 2005, EPA announced a plan called the Air Compliance Agreement intended to produce air quality monitoring data on animal agriculture emissions from a small number of farms, while at the same time protecting all participants (including farms where no monitoring takes place) through a "safe harbor" from liability under certain provisions of federal environmental laws. Some industry sectors involved in negotiating this agreement, notably pork and egg producers, strongly supported it, but other industry groups that were not involved in the discussions had concerns and reservations. State and local air quality officials and environmental groups opposed the agreement. The emissions monitoring study was conducted from 2007 to 2009. EPA released reports on the individual monitored sites in January 2011 and has been working since then to develop emissions-estimating methodologies. In calculating emissions to determine major sources, fugitive emissions are not counted; however, they do count for purposes of demonstrating attainment with NAAQS. Fugitive emissions are defined in regulation as "those emissions which could not reasonably pass through a stack, chimney, vent or other functionally equivalent opening" (40 C.F.R. §51.165[a][1][ix]). EPA has issued a number of interpretive memoranda and guidance documents discussing how fugitive emissions should be accounted for in evaluating such industries as landfills, printing, and paint manufacturing. No such guidance with respect to animal confinement systems has been issued, but some groups, who believe that agricultural air pollution should be more vigorously controlled, have in the past expressed concern that EPA might make a determination that emissions from waste lagoons and barns are fugitive, thus excluding those types of AFO emissions from applicable CAA requirements. In a letter to EPA, state and local air program administrators said that such a policy, if pursued, would create inequities in CAA application between similar operations in some sectors but not others. Since barns and lagoons are the dominant sources of emissions from the CAFO industry, such a policy would exempt most agricultural operations from many provisions of the Clean Air Act. The result would be an evisceration of states' and localities' ability to address air quality problems emanating from agricultural operations. Advocacy groups have pressed EPA on several occasions to address air pollutants emitted by livestock operations under provisions of the CAA. In 2009, the Humane Society and eight other organizations petitioned EPA under CAA Section 111(b) to list emissions from CAFOs, including hydrogen sulfide, ammonia, particulates, VOCs, and the greenhouse gases methane and NO x , as air pollutants that endanger public health and welfare. Such a listing would trigger other provisions of the law, including a requirement for EPA to issue new source performance standards for CAFOs. Listing ammonia and hydrogen sulfide as criteria pollutants would trigger a requirement to set NAAQS for those pollutants. Further, in 2011, a coalition of 20 groups led by the Environmental Integrity Project petitioned EPA under CAA Sections 108 and 109 to regulate ammonia as a criteria pollutant under the act. EPA officials were said to be reviewing both petitions at the same time that the agency was gathering and evaluating CAFO emissions data through a national monitoring study as a prerequisite for future regulatory action (discussed above). EPA was expected to make joint decisions related to these petitions in order to avoid regulatory duplication. However, in January 2015, the coalition of environmental organizations filed two lawsuits seeking to force EPA to act on the two petitions. One suit sought to have the federal court require EPA to respond to the 2011 petition and to establish NAAQS for ammonia and hydrogen sulfide as criteria air pollutants; in December 2015, the court dismissed the lawsuit, after finding that the plaintiffs had failed to give EPA the required advance notice of the case. The second suit, challenging EPA's delay in responding to the 2009 petition for rulemaking regarding regulation of CAFOs under the CAA's New Source Performance Standards provision, is still pending. In a separate but related lawsuit, several Iowa residents concerned about emissions from a hog feeding operation near an elementary school sought an order to require EPA to list AFOs as stationary sources to be regulated under the CAA and to list ammonia and hydrogen as criteria pollutants. In June 2014, a federal court dismissed the lawsuit. The court found that EPA does not have a nondiscretionary duty to list a specific pollutant as a criteria pollutant until the agency makes a policy determination on whether the pollutant is expected to endanger public health or welfare, a finding that is up to the judgment of the EPA administrator. The Supreme Court denied a petition to review the lower court's ruling in November 2015. A 2004 lawsuit brought in federal court by environmentalists argued that feedlots must be regulated under the CAA and must obtain a CAA "permit to construct" under provisions of the Idaho SIP. The company, intending to construct a large feedlot, had argued that the SIP did not require a permit for key pollutants from agricultural sources, including ammonia and hydrogen sulfide. In September 2004, the court ruled that the state's plan did not allow such exemptions, indicating that any agricultural facility in the state with sufficient emissions levels would have to obtain a permit. The case was settled early in 2005 when the parties to the lawsuit agreed to request that the Idaho Department of Environmental Quality conduct a rulemaking to establish a process for CAA permitting of dairies in the state. Industry officials say the case had limited implications, because it refers specifically to the Idaho SIP, but environmentalists involved in the case believe it could have significance nationally because of the mutual agreement by the parties on emissions factors for ammonia that trigger CAA thresholds for dairies. In response to this case, in 2006 Idaho finalized a requirement that dairies and other CAFOs obtain air quality permits if they emit 100 tons or more of ammonia per year. The rule made Idaho the first state to regulate ammonia emissions from CAFOs. Some of the interest in agriculture's impact on air quality derives from events in California and that state's progress in implementing the permit and SIP provisions of the Clean Air Act. The state's air pollution problems are diverse and, in some areas, severe. Throughout the state, emission controls have become increasingly more stringent on currently regulated sources of air pollution, such as factories and cars. State officials believe that, to meet state and federally mandated requirements to improve air quality, emissions from all air pollution sources must be reduced, whether they are large or small, industrial or agricultural. Regarding agriculture, air quality improvement efforts have focused primarily on two regions which represent California's most challenging air quality problems for ozone and particulate matter pollution. The South Coast (Los Angeles) Air Basin and the San Joaquin Valley Air Basin are designated in extreme nonattainment for the federal eight-hour ozone standard. They are the only two U.S. areas designated in extreme nonattainment for this standard. In these two areas, all sources of air pollution produce air quality impacts and have some level of significance, and virtually all emission sources, even very small ones, are regulated. Both areas have large concentrations of confined animal feeding operations; agriculture is the San Joaquin Valley Basin's most important industry and a significant source of its air emissions. Thus, agricultural sources have been a particular focus of efforts to implement the federal and state laws in both regions. For more than 30 years, California law specifically exempted existing major livestock production or equipment used in crop growing from all environmental permitting requirements. In 2002, EPA temporarily withdrew federal approval of the state's clean air program for failure to impose air pollution controls on the state's agriculture industry. The state re-assumed responsibility after the legislature enacted a measure (California SB 700) in 2003 that removed the long-standing exemption for agriculture and set timelines for existing facilities to apply for clean air permits and install control technologies. SB 700 regulates crop growers, dairies, poultry farms, cattle ranches, food-processing operations, and other agriculture-related businesses in the state. As of January 1, 2004, it made these sources subject to air quality permitting and specified emission mitigation requirements. Deadlines and requirements differ, depending on the size of facilities, level of emissions, and the attainment status of the region where the source is located. The state and its local air quality management districts (in California, the state sets overall rules and policies, and 35 local agencies have primary day-to-day responsibility) are now implementing SB 700. Under SB 700, the district rules must require facilities to obtain permits and to reduce emissions to the extent feasible. For severe and extreme ozone nonattainment areas, the law requires best available retrofit control technology (BARCT). In moderate and serious areas, regulated facilities will need to use reasonably available control technology (RACT). In federal ozone attainment areas where air quality problems are less significant, districts must adopt a rule requiring existing large confined animal facilities to reduce air contaminants to the extent feasible unless the district makes a finding that such facilities will not contribute to a violation of any state or federal standard. Regulated facilities were required to prepare emission mitigation plans and comply with them by July 1, 2008. In addition, the state board is working with local air districts, university researchers, and others to develop and evaluate research on emissions factors from livestock operations to be used by facilities that are required to obtain air permits. Affected industries are closely watching these research studies and the standards being adopted by local air districts. While California SB 700 focuses on existing agricultural sources, by lifting the long-standing exemption for such operations from the state Health & Safety Code, new and modified agriculture sources in the state also became subject to permit and regulatory requirements of the California State Implementation Plan (SIP). New or modified sources located in nonattainment areas which may emit air pollution must obtain New Source Review permits that require installation of best available control technology (BACT) and require purchase of "offsets" or "emission reduction credits" from other sources in the same nonattainment area, in a relation determined by the severity of the air pollution problem. Local district rules implement these federal and state requirements. In terms of geographic impact, every state has agricultural operations in which animals are raised in confinement, according to the U.S. Department of Agriculture. States with high livestock populations, and with significant numbers of large operations (i.e., with more than 300 animal units), include several West Coast, Southwest, and Northwest states (Washington, Oregon, California, and Arizona); the whole of the Midwest, from the Dakotas, Minnesota, and Wisconsin south through Texas; sweeping across the Southeast to the coastal states of Georgia, the Carolinas, Virginia, Maryland, and Pennsylvania; and north through New York and Vermont. The issue of evaluating and managing the health and environmental impacts of emissions from animal agriculture facilities has largely been left up to states. Air quality has not been the driving force behind state government action on AFOs, but has emerged out of long-standing concern to protect water resources. Several states have recognized a need to regulate air emissions from agricultural operations, but many states have not yet directly adopted or enacted programs affecting AFO emissions. State programs, under statutes and regulations, both implement and supplement federal CAA requirements. That is, in some cases, state programs have been adopted to ensure state compliance with requirements of the federal law and to implement SIPs, such as facility permits that apply to construction and operation of livestock operations. In other cases, states have enacted more comprehensive laws and regulations calling for air emission testing and monitoring, manure management to abate pollutant emissions, inspections, and testing. Some states have regulatory programs or ambient air standards for odor and/or certain AFO pollutants, such as hydrogen sulfide, for which no NAAQS apply. In states with significant animal production, facility management statutes often govern construction and operation of AFOs, primarily for purposes of protecting water quality, with incidental provisions for air quality. For example, facility management statutes often contain setback requirements for confinement buildings and waste impoundments that may help to reduce air emissions by avoiding or minimizing odor nuisances. States have used varied techniques to control air emissions from livestock facilities. State programs set emission limits, require use of best management practices, and impose other pre-operational and operational requirements. Hydrogen sulfide and odor emissions from AFOs have received significant attention, but there is little or no standardization of approach. For example: Minnesota requires feedlots and manure storage areas to acquire construction and operating permits and also requires air emission plans for large livestock facilities. The state has adopted an ambient air quality standard for hydrogen sulfide which applies to emissions from AFOs as well as other sources. Iowa also has adopted a health effects-based ambient air quality standard for hydrogen sulfide that will be used in a three-year AFO field study to measure levels of hydrogen sulfide, ammonia, and odor to determine if material adverse health effects exist. Missouri regulations set odor emission limitations and require large AFOs to submit odor control plans. In addition, the state's CAA permit program includes operational requirements for AFOs to prevent air pollution. Missouri's CAA contains a hydrogen sulfide emission standard that does not refer to AFOs or other agricultural operations specifically, nor does it exempt AFOs. Missouri also has an ambient acceptable level (AAL) for ammonia. In Texas, a consolidated program governs water and air quality general permits. Its requirements control the emission of odors and other air contaminants from AFOs, although it does not have a specific air emission threshold for odors. Like Missouri, Texas has a hydrogen sulfide emission standard that makes no specific reference to, or exception for, animal agriculture. Illinois has implemented a facility statute that relies in part on setback distances to control odor emissions. Like Missouri, Illinois has established a numerical "objectionable odor nuisance" standard (that is, when odor is detectable in ambient air adjacent to residential or similar structures after dilution with a specific volume of odor-free air) and has enforced the limitation against AFOs. Colorado water quality rules help to control air emissions through provisions that govern the construction and operation of facilities that treat animal wastes. A separate regulation establishes an odor emissions standard for swine feeding operations and requires that anaerobic waste impoundments be covered. North Carolina, like Colorado, has focused its regulatory efforts on odor emissions from swine operations. All AFOs must use management practices that control odors, and some swine operations must submit odor management plans, although it does not require control technology (e.g., covers) unless best management practices fail. North Carolina does not have air emission standards for H2S, ammonia, or odor. A separate survey done by the Nebraska Department of Environmental Quality found that more than half of the states have standards for hydrogen sulfide. States base standards on a variety of issues, including odor or nuisance, welfare effects, and health effects. Consequently, standards vary considerably from as low as 0.7 parts per billion (ppb) for a yearly average (New York) and 5 ppb averaged over 24 hours (Pennsylvania), to standards based on nuisance, such as Minnesota's 50 ppb not to be exceeded for one-half hour twice per year and measured at the AFO property line. Both the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, or Superfund, 42 U.S.C. §§9601-9675) and the Emergency Planning and Community Right-to-Know Act (EPCRA, 42 U.S.C. §§11001-11050) have reporting requirements that are triggered when specified quantities of certain substances are released to the environment, including ambient air. Both laws utilize information disclosure in order to increase the information available to the government and citizens about the sources and magnitude of chemical releases to the environment. At issue today is how the reporting requirements and other provisions of these laws apply to poultry and livestock operations. CERCLA authorizes programs to remediate uncontrolled or abandoned hazardous waste sites and assigns liability for the associated costs of cleanup. Section 103(a) of CERCLA requires that the person in charge of a facility (as defined in Section 101[9]) that releases a "reportable quantity" of certain hazardous substances must provide notification of the release to the National Response Center. EPCRA establishes requirements for emergency planning and notification to communities about storage and release of hazardous and toxic chemicals. Section 304(a)(1) of EPCRA requires the owner or operator of a facility (as defined in Section 329[4]) to report to state and local authorities any releases greater than the reportable quantity of substances deemed hazardous under Superfund or extremely hazardous under EPCRA. Under CERCLA, the term "release" (Section 101[22]) includes discharges of substances to water and land and emissions to the air from "spilling, leaking, pumping, pouring, emitting, emptying, discharging, injection, escaping, leaching, dumping, or disposing into the environment." Under EPCRA, the term "release" (Section 329[8]) includes emitting any hazardous chemical or extremely hazardous substance into the environment. CERCLA excludes the "normal application of fertilizer" from the definition of release (Section 101[22]), and EPCRA excludes from the definition of hazardous chemicals any substance "used in routine agricultural operations or is a fertilizer held for sale by a retailer to the ultimate customer" (Section 311[e][5]). The CERCLA definition of "hazardous substance" (Section 101[14]) triggers reporting under both laws. Among the reportable substances released by livestock facilities are hydrogen sulfide and ammonia. The reportable quantity for both of these substances is 100 pounds per day, or 18.3 tons per year. Section 109 of CERCLA and Section 325 of EPCRA authorize EPA to assess civil penalties for failure to report releases of hazardous substances that equal or exceed their reportable quantities (up to $37,500 per day under CERCLA and $37,500 per violation under EPCRA). Requirements of both can be enforced by citizens under provisions of the laws, which allow "any person" to commence a civil action against either a person who violates a legal prohibition or requirement, or against EPA for failure to perform a nondiscretionary duty or specified actions (CERCLA Section 310, EPCRA Section 326). In addition to these reporting requirements, CERCLA includes provisions authorizing federal cleanup of releases of hazardous substances, pollutants, or contaminants that may present an imminent and substantial danger to the public health or welfare (Section 104) and imposing strict liability for cleanup and damages to natural resources from releases of hazardous substances (Section 107). The applicability of these provisions to animal agricultural sources and activities has increasingly been receiving attention. EPA has enforced the CERCLA and EPCRA reporting requirements against AFO release of hazardous air pollutants in two cases. The first involved the nation's second-largest pork producer, Premium Standard Farms (PSF) and Continental Grain Company. In November 2001, EPA and the Department of Justice (DOJ) announced an agreement resolving numerous claims against PSF concerning principally the Clean Water Act, but also the Clean Air Act, CERCLA, and EPCRA. Among other actions under the settlement, PSF and Continental were to monitor air emissions for PM, VOCs, H2S, and ammonia, and if monitoring levels exceed CAA thresholds for any regulated pollutant, the companies would apply to the state of Missouri for any necessary CAA permits. The companies also agreed to fund a $300,000 supplemental environmental project (SEP) to reduce air emissions and odors from swine barns. In September 2006, DOJ announced settlement of claims against Seaboard Foods, a large pork producer with more than 200 farms in Oklahoma, Kansas, Texas, and Colorado, and PIC USA, the former owner and operator of several Oklahoma farms now operated by Seaboard. Like the earlier Premium Standard Farms case, the government had brought complaints for violations of several environmental laws, including failure to comply with the release reporting requirements of CERCLA and EPCRA. The citizen suit provisions of both laws have been used to sue poultry producers and swine operations for violations of the laws. In two cases, environmental advocates claimed that AFO operators have failed to report ammonia emissions, putting them in violation of CERCLA and EPCRA. In both cases, federal courts have supported broad interpretation of key terms defining applicability of the laws' reporting requirements. In 2005, a group of poultry producers petitioned EPA for an exemption from EPCRA and CERCLA emergency release reporting requirements, arguing that releases from poultry growing operations pose little or no risk to public health, while reporting imposes an undue burden on the regulated community and government responders. EPA issued a proposal in response to the poultry industry petition in 2007. EPA proposed to exempt releases of hazardous substances to the air (typically during digestion or decomposition) from animal waste at farms from the notification requirements of CERCLA and EPCRA. EPA explained that the rule is justified because of the resource burden to industry of complying with reporting requirements, since the agency cannot foresee a situation where a response action would be taken as a result of notification of releases of hazardous substances from animal waste at farms. The proposal drew significant public comment and response. Environmental advocates and other interested entities opposed the exemption, saying that emissions from animal wastes are not trivial or benign. Critics noted that the EPA proposal would exempt releases of ammonia, as originally requested in the industry petition, plus hydrogen sulfide and all other hazardous chemicals, such as nitrous oxide and volatile organic compounds released from animal wastes. Some argued that an exemption is premature, since EPA is moving forward with research on emissions levels, which could be undermined by a regulatory exemption. State air quality officials opposed a blanket regulatory or legislative exemption, and they recommended that if the agency considers any action, it should only be a narrow exemption, such as one based on a size threshold for farms. EPA finalized the CERCLA/EPCRA administrative reporting exemption in December 2008. The final rule exempts hazardous substance releases that are emitted to the air from animal waste at farms from the notification requirement of CERCLA. It relieves all livestock operations, not just poultry farms, from CERCLA's requirement to report hazardous substances releases to the air to federal officials. In addition, the final rule provides a partial exemption for such releases from EPCRA's requirement to report releases to state and local emergency officials. Partially responding to some public comments, the final rule continues to apply EPCRA's reporting requirement to large CAFOs (those subject to Clean Water Act permitting, see page 8 ), but exempts smaller facilities. A number of groups criticized the final rule, which environmental advocates challenged in federal court. Industry groups, including the National Pork Producers Council, also challenged the rule. In June 2010, the federal government asked to remand the 2008 final rule for EPA to reconsider and possibly modify the rule, and the court approved the government's request for a remand. At that time, EPA indicated intent to propose a new or revised rule in 2012, but, as of June 2016, it has not done so. In the meantime, the 2008 exemption rule remains in effect. Legislation in the 112 th Congress, discussed below, proposed to exclude "manure" from the definition of hazardous substance under CERCLA and remove reporting liability under CERCLA and EPCRA. In 2008, the Government Accountability Office (GAO) issued a report evaluating EPA's activities to regulate air emissions and water discharges from animal feeding operations. GAO found that EPA is unable to assess the extent to which pollution from feedlots may be impairing human health and the environment, because it lacks data on the amount of pollutants that CAFOs are releasing to the air and water. GAO recommended that EPA develop a comprehensive national inventory of CWA-permitted CAFOs and accelerate its efforts to develop protocols for measuring and quantifying air contaminants from animal feedlots. GAO noted that EPA has been criticized because its current air emissions monitoring activities are limited in scope and sample size and may not produce sufficient information to shape future regulation. Moreover, GAO questioned the basis for the CERCLA/EPCRA exemption that EPA proposed in 2007. "It is unclear how EPA made this determination when it has not yet completed its data collection effort and does not yet know the extent to which animal feeding operations are emitting these pollutants." Congressional interest in these issues has been apparent for some time. For example, in report language accompanying EPA's FY2006 appropriations, the House Appropriations Committee urged EPA to clarify the reporting requirements of the two laws. The Committee continues to be concerned that unclear regulations, conflicting court decisions, and inadequate scientific information are creating confusion about the extent to which reporting requirements in [CERCLA] and [EPCRA] cover emissions from poultry, dairy, or livestock operations. Producers want to meet their environmental obligations but need clarification from the Environmental Protection Agency on whether these laws apply to their operations. The committee believes that an expeditious resolution of this matter is warranted. Specific legislative proposals also have been discussed. In the 109 th Congress, legislation was introduced in the House and Senate that would have amended CERCLA to clarify that manure is not a hazardous substance, pollutant, or contaminant under CERCLA and that the law's notification requirements would not apply to releases of manure. At a hearing held by a House Energy and Commerce subcommittee on animal agriculture and CERCLA, agriculture industry witnesses urged Congress to provide policy direction on the issue that has resulted from recent and potential litigation. Other witnesses testified that the reporting and notification requirements of CERCLA and EPCRA provide a safety net of information, and that other environmental laws, such as the Clean Air Act, cannot function in that manner. Similar legislation has been introduced, most recently in the 112 th Congress, in bills that were intended to clarify that manure is not a "hazardous substance" or "pollutant or contaminant" under CERCLA and to remove emissions reporting liability under CERCLA and EPCRA. Supporters of these bills seek to block EPA from revising the 2008 exemption rule so as to require reporting of releases. (For additional discussion, see CRS Report RL33691, Animal Waste and Hazardous Substances: Current Laws and Legislative Issues , by [author name scrubbed].) Some Members of Congress were critical of EPA's proposal to exempt routine animal waste air releases from CERCLA and EPCRA's reporting requirements (discussed above), questioning the potential for harmful environmental and enforcement impacts of the proposal. At a 2008 hearing where GAO's report was discussed, several House Energy and Commerce subcommittee members said that they are skeptical of the EPA's authority for a blanket exemption. Others suggested that an exemption for small farms, whose emissions are unlikely to cause environmental harm, would make sense. EPA and USDA witnesses supported the proposal, saying that the air release waiver would only affect reporting meant for emergency response situations, but would not affect requirements to report emissions of hazardous substances from other farm sources, or releases of hazardous substances from manure into soil, ground water, or surface water. Agriculture is both a source of several greenhouse gases (GHGs) and a "sink" for absorbing carbon dioxide, the most common GHG, thereby partly offsetting emissions. Agricultural activities contribute directly to emissions of GHGs through a variety of processes such as enteric fermentation in domestic livestock (i.e., digestion) and manure management systems and practices. Non-livestock source categories in agriculture also emit greenhouse gases, including rice cultivation, agricultural soil management, and field burning of agricultural residues Overall, however, agriculture is a comparatively modest source of U.S. GHG emissions: it accounts for approximately 8.3% of U.S. emissions, according to EPA. Further, while agriculture's emissions are a small percentage overall, the two principal greenhouse gases emitted by this sector, methane (CH 4 ) and nitrous oxide (N 2 O), have greater potency, or ability to impact climate change by trapping heat in the atmosphere, relative to carbon dioxide (CO 2 ). Between 1990 and 2014, CH 4 emissions from all U.S. sources declined by 5.6%, and N 2 O emissions decreased by 0.7%. During that same period, CH 4 emissions from U.S. agricultural activities increased by 10.1%, while N 2 O emissions increased by 5.9%. As shown in Table 3 , agricultural activities contributed 32.5% of all CH 4 emissions and 83.2% of all N 2 O emissions in the United States in 2014. Livestock-related categories (enteric fermentation and manure management, primarily from dairy cattle and swine) were 30.9% of total U.S. CH 4 emissions, while various land management practices were the largest source of N 2 O emissions, or 78.9% of total N 2 O emissions. The Obama Administration has taken a number of actions to develop national policies and strategies to address GHGs and climate change. The 111 th Congress considered legislation in this area: comprehensive climate and energy legislation passed the House in 2009 and was reported by a Senate committee, but no comprehensive bill was enacted. Agriculture in general was a major part of these discussions, but so far the agriculture sector has been largely excluded from regulatory and legislative proposals. Two sets of actions by EPA concerning GHG emissions have drawn the attention of agricultural stakeholders. The first action occurred in July 2008. The Bush Administration published an Advance Notice of Proposed Rulemaking (ANPR) in connection with its consideration of how it should comply with Massachusetts v. EPA , in which the Supreme Court held that the Clean Air Act authorizes EPA to regulate emissions from new motor vehicles on the basis of their climate change impacts. The Court held that the Administrator must determine whether or not emissions of greenhouse gases from new motor vehicles cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare (i.e., an endangerment finding), or whether the science is too uncertain to make a reasoned decision. Responding to this ruling with the ANPR, EPA discussed a wide range of CAA authorities and programs that could potentially be used to address climate change, including the permitting provisions of Title V of the act. The ANPR did not propose or recommend the use of any particular CAA authority, or commit to specific next steps to address GHGs from any category of emission sources. Agricultural sources were not specifically referenced in any of this ANPR discussion; nevertheless, agriculture stakeholders—especially many representing livestock operations—were highly critical of the potential economic impacts on their operations and the possibility that Title V permits might be required. In the months following the ANPR, EPA officials, including Administrator Lisa Jackson, said that the agency has no plans to tax livestock or pursue other "doomsday scenarios" for new regulations. The public comment period on the ANPR ended in November 2008; no further action on it occurred. However, in December 2009, the EPA Administrator signed two findings about greenhouse gases. First, the Administrator found that the current and projected concentrations of six GHGs in the atmosphere (including CH 4 and N 2 O) threaten the public health and welfare of current and future generations. Second, the Administrator found that GHG emissions from motor vehicles contribute to the atmospheric concentrations of the six key greenhouse gases and hence to the threat of climate change. The endangerment finding does not itself impose any CAA requirements on industry or other entities or trigger regulation under the entire act. However, the endangerment finding is a prerequisite to greenhouse gas emission standards for light-duty vehicles, which EPA issued jointly with the Department of Transportation in April 2010. When the light-duty vehicle rule took effect (January 2011), other CAA requirements were triggered. In particular, stationary sources that emit any of the six GHGs covered by the endangerment finding became subject to certain permitting requirements under the Title V operating permit and New Source Review (NSR) provisions in the law. Related to the CAA requirements that are triggered by the endangerment finding and light-duty vehicle rule, on May 13, 2010, EPA issued a rule specifying thresholds for GHG emissions that define when Title V and NSR permits would be required. In the absence of the rule, called the GHG Tailoring Rule, sources that emit as little as 100 tons per year of CO 2 equivalent of GHGs would be subject to permits. In order to limit the number of facilities that would be required to obtain permits, in the Tailoring Rule EPA established a threshold of 75,000 tons per year of CO 2 equivalent of GHG emissions. EPA estimated that the rule would cover 67% of the nation's largest stationary source GHG emitters, while shielding small businesses and agriculture operations from new permitting requirements. Significantly, EPA believed that animal agriculture operations would not be subject to CAA permitting as a result of the Tailoring Rule, because of the high threshold in the rule and because the rule did not apply to so-called "fugitive emissions" from animal manure management systems. In 2012, a federal court dismissed legal challenges to EPA's tailoring rule from industry groups and some states, reaffirming the rule in its entirety. The Supreme Court agreed to review the appellate ruling. The Court's opinion in the case, issued in June 2014, partially vacated the Tailoring Rule and put limits on sources that would be required to obtain CAA permits. The Court said that EPA may not treat greenhouse gases as an air pollutant for purposes of the act's permitting requirements, but that the agency can continue to require permits with GHG emission limits based on emissions of conventional pollutants. The ruling did not alter applicability of such requirements to agricultural operations. The Court said that EPA should set a de minimis threshold for when GHGs trigger CAA regulatory review; in response, the agency has been developing a new threshold in a revised Tailoring Rule, which it expects to propose by August 2016. A second EPA action that drew agriculture's attention was a 2009 EPA proposal to require reporting of greenhouse gas emissions by certain facilities that emit GHGs and by suppliers of fossil fuels and industrial GHGs. The proposal responded to a congressional directive in the FY2008 Consolidated Appropriations Act ( P.L. 110-161 ) for EPA to develop a comprehensive national system for reporting emissions of CO 2 and other GHGs produced by major U.S. sources. Included in the categories of sources that would be subject to the rule are manure management systems that emit, in the aggregate, methane and nitrous oxide in amounts equivalent to 25,000 metric tons of CO 2 equivalent or more per year. Because of the proposed reporting threshold, EPA estimated that fewer than 50 beef cattle, dairy cattle, and swine operations would be subject to the rule; an unknown number of poultry operations also would be covered. A number of agriculture stakeholders criticized the proposal in public comments. Many noted that agriculture as a whole is responsible for only a small percentage of total GHGs and questioned why manure management systems in particular were included in the proposal, since they are responsible for approximately 1% of total U.S. GHGs (see Table 3 ). Other categories of agricultural sources, such as livestock enteric fermentation and soil management, emit larger amounts of CH 4 and N 2 O. EPA explained that the proposal did not include reporting by the other agriculture categories because, for those sources, there are no direct GHG emission measurement methods available except for expensive and complex equipment. Using emissions estimates for such sources, instead of direct measurement, would have a high degree of uncertainty and likely would burden a large number of small emitters. Some who commented on the proposal said that similar concerns—about a lack of adequate accurate measurement methods and the costly burden of compliance with only very small benefits—apply equally to reporting by manure management systems. The EPA Administrator signed the final reporting rule on September 22, 2009. As in the proposal, the final rule applies to manure management facilities with the same reporting threshold of 25,000 metric tpy of CO 2 equivalent of GHGs, but not to other agricultural sources or agricultural land uses. In response to comments about the burden of the rule, EPA removed manure sampling requirements and instead will allow facilities to use default values for estimating emissions. EPA also made certain recalculations of affected facilities and estimated that about 100 livestock facilities will be subject to the reporting rule (73 beef feedlots, 27 dairies, and 8 swine operations). The final rule identifies population threshold levels below which facilities are not required to report emissions, such as fewer than 29,300 beef cattle and fewer than 3,200 dairy cattle. Facilities subject to the rule would report annually, beginning in 2011. However, as discussed next, in EPA's FY2010 appropriations ( P.L. 111-88 ) and subsequent appropriations bills, Congress has included bill language barring EPA from using funds under that act to implement mandatory GHG reporting by manure management facilities. In December 2015, 196 Parties to the U.N. Framework Convention on Climate Change (UNFCCC) adopted the Paris Agreement, a legally binding framework for an internationally coordinated effort to address climate change. It aims to hold the rise in global average temperature by 2100 to well below 2°C above pre-industrial levels. Researchers are assessing how much mitigation will be needed by various sectors worldwide to meet the global target, including how much mitigation is feasible. Because livestock emissions are estimated to represent 14.5% of anthropogenic GHG emissions globally, it is generally acknowledged that the livestock sector plays an important role in climate change. How much of a role the sector can play in attaining the global target of the Paris Agreement is unknown for now, especially in view of projections that worldwide livestock production will increase by about 70% between 2010 and 2050 to meet growing demand, especially in developing countries. Research has identified a range of GHG mitigation options for the livestock sector. A number of approaches are believed to be promising, but no single option has "hit the sweet spot" of reducing emissions dramatically while not harming animals or dampening production of farms and ranches. Adoption of more efficient technologies and practices is key to reducing emissions. Possible technologies and practices include the use of better quality feed and feed balancing to lower enteric and manure emissions. Manure management practices can assist in recovery and recycling of nutrients and energy. Technologies such as feeding additives, vaccines that reduce the microorganisms in cows that produce methane, and genetic selection methods are believed to have potential to reduce emissions but require further development. Some believe that reducing the livestock sector's contribution to climate change, while also ensuring that nutritional security and health needs are supported, is an urgent global research and investment priority. The 111 th Congress showed interest in several aspects of issues concerning agriculture and greenhouse gases, acting mainly to exempt or relieve agriculture from potential regulation of sources' GHG emissions. First, legislation was introduced in response to EPA's 2008 ANPR, and to concerns that EPA might require CAA permits for greenhouse gas emissions from agriculture that some groups characterized as a "cow tax proposal." The legislation, S. 527 and H.R. 1426 , would have amended the Clean Air Act to mandate that no Title V permit be issued for controlling carbon dioxide, nitrogen oxide, water vapor, or methane emissions "resulting from biological processes associated with livestock production." No further action occurred on either bill. But, in the FY2010 appropriations bill for EPA ( P.L. 111-88 ), Congress included a provision similar to the prohibitory language of S. 527 and H.R. 1426 . As adopted, the measure prohibited EPA from using funds under the act to promulgate or implement any rule requiring the issuance of CAA Title V permits for GHG emissions associated with livestock production. Second, also in final action on P.L. 111-88 , Congress blocked EPA from using funds in the bill to implement any rule that would require mandatory reporting of GHG emissions from manure management operations. This bill language applies to manure management systems of all sizes, not just to those that emit more than 25,000 metric tons of CO 2 -equivalent per year, as contained in EPA's mandatory reporting rule. As noted previously, EPA's rule excludes reporting by 99% of farms with manure management systems; P.L. 111-88 excluded the other 1% of operations. Since FY2010, Congress has extended both of these prohibitions—barring EPA from developing a rule to require issuance of Title V permits for emissions associated with livestock production and barring implementation of a rule to mandate GHG emissions reporting from manure management systems—each year in the agency's appropriations bill, including for FY2016 ( P.L. 114-113 ). The 111 th Congress debated comprehensive climate change bills and in that context considered whether or how to include regulation of agricultural and other sources of GHGs in the legislation. In 2009, the House passed the American Clean Energy and Security Act ( H.R. 2454 ), legislation that would cover clean energy, energy efficiency, reducing global warming pollution, transitioning to a clean energy economy, and agriculture and forestry related offsets. The complex and controversial legislation reflected compromises on various issues, including a number of negotiated changes sought by agriculture interests. A key feature of the House-passed bill was a cap-and-trade system designed to reduce GHG emissions from covered entities. As passed, the legislation excluded any agricultural enterprise or any small business that emits less than 25,000 metric tons of CO 2 equivalent of GHG emissions per year. Animal agriculture sources were excluded from the definition of "covered entities" in H.R. 2454 , because of their de minimis impact on the climate, and thus, they would not be subject to the cap or other mandatory provisions of the bill. The House-passed bill also would have created a carbon offset provision for certain agricultural and forestry activities. Offsets (emission reductions from non-covered sources) could be purchased by covered entities and used to meet their compliance obligations. Thus, the agricultural and forestry sectors could earn income for any emission reductions that they undertake, provided that the reductions are measurable and verifiable. The legislation also would have established the offset program under USDA (rather than EPA), a key difference sought by agriculture stakeholders. Comprehensive climate change legislation was reported from the Senate Environment and Public Works Committee in 2010 ( S. 1733 , the Clean Energy Jobs and American Power Act). Regarding agriculture, this bill was similar to H.R. 2454 in that it used the same emissions threshold (25,000 metric tons of CO 2 equivalent per year) applicable to the cap-and-trade and other mandatory provisions and would exclude animal agriculture from the definition of "covered entities." Like H.R. 2454 , S. 1733 would have allowed for agriculture and forestry offsets as part of a cap-and-trade scheme. Also in the Senate, the Clean Energy Partnerships Act of 2009 ( S. 2729 ) was introduced by Senator Stabenow shortly after the Senate Environment and Public Works Committee completed work on S. 1733 . This bill (often referred to as the "Stabenow Amendment") would have expanded the agricultural and forestry carbon offset provisions in the comprehensive climate bills (e.g., S. 1733 ) and also would have allowed for certain other provisions benefitting U.S. farmers and landowners. No further action occurred, and Congress has not considered comprehensive climate change legislation since the 111 th Congress. During the time that EPA was developing the revised Clean Water Act CAFO rules that it promulgated in 2003 (discussed above), the issue of air emissions from CAFOs received some attention. The Clean Water Act requires EPA to consider non-water quality environmental impacts, such as air emissions, when it sets effluent limitations and standards. EPA recognized that certain animal waste management practices can either increase or decrease emissions of ammonia and/or hydrogen sulfide and that some regulatory options intended to minimize water discharges (such as anaerobic lagoons and waste storage ponds) have the potential to result in higher air emissions than other options, due to volatilization of ammonia in the waste. Likewise, emissions of nitrous oxide are liberated from land application of animal waste on cropland when nitrogen applied to the soil undergoes nitrification and denitrification. Some environmental groups had urged EPA to address or restrict feedlot air emissions as part of the water quality rule. In the proposed rule and the 2003 final revised rule, EPA generally evaluated air emissions impacts of the rule, but it said that insufficient data exist to fully analyze all possible compounds and the significance of air emissions from feedlot operations. In part because of this lack of information, in 2001 EPA asked the National Research Council (NRC) of the National Academy of Sciences to evaluate the current scientific knowledge base and approaches for estimating air emissions from AFOs. EPA asked the NRC to identify critical short- and long-term research needs and provide recommendations on the most promising science-based approaches for estimating and measuring emissions. USDA joined EPA in the request for the study. At the time, EPA was under a court order to revise its water quality rules, and officials hoped that the NRC report would help assure that rules aimed at improving water quality would not have negative impacts on air emissions. In an interim report released in 2002, the NRC responded to several of the EPA questions. Nitrogen emissions from production areas are substantial, the committee found, and control strategies aimed at decreasing emissions should be designed and implemented now. It recommended developing improved approaches for estimating and measuring emissions of key air pollutants from AFOs and initiating long-term coordinated research by EPA and USDA with the goal of eliminating release of undesirable air emissions. The committee said that implementation of feasible management practices that are designed to decrease emissions, such as incorporating manure into soil, should not be delayed while research on mitigation technologies proceeds. This report focused particularly on the suitability of an approach for estimating air emissions from AFOs presented in a 2001 draft EPA report. In that report, EPA attempted to develop a set of model farms, based on manure management systems typically used by large AFOs, and identify emissions factors that could be associated with each element of the model farm. In the absence of actual data from extensive monitoring, EPA hoped that emission factors could be applied to model farms to estimate annual mass emissions. An emissions factor is a representative value that attempts to relate the quantity of a pollutant released to the atmosphere with an activity associated with the release of the pollutant. The emission factor approach is based on measuring emissions from a set of defined AFOs to obtain an average emission per unit (per animal unit, or per production unit process, such as manure storage piles and lagoons, stall areas, and feed storage areas), then multiplying the emission factor by the number of units and period of time (e.g., annually). The current method of estimating cow, chicken, swine, or any other livestock animal emissions is generally expressed in terms of emissions per head, per year. Using this method, facility emissions are directly proportional to the number of animals at the facility. The NRC recognized that direct measurement of air emissions at all AFOS is not feasible. However, it found that the model farm construct described by EPA cannot be supported because of weaknesses in the data needed to implement it, which fail to consider variations in many factors (geography, climate, management approaches) that could affect annual amounts and temporal patterns of emissions from an individual AFO. Alternatively, the NRC recommended that EPA consider a more complex process-based approach to focus on activities that determine the movement of nutrients and other substances into, through, and out of each component of the farm enterprise. The NRC expanded on these recommendations in its final report, issued in 2003. Overall, it found that scientifically sound protocols for measuring air concentrations, emission rates, and fates are needed for the elements, compounds, and particulate matter associated with AFOs. Similarly, standardized methodology for odor measurement should be developed in the United States, the NRC said. The report noted that emission factor approaches should be broadened to integrate animal and crop production systems both on and off the AFO (i.e., imported feeds and exported manure) in order to represent the full environmental effects of animal production systems. Such a systems analysis should include impacts of best management practices (BMPs) aimed at mitigating AFO air emissions on other parts of the entire system. The U.S. Department of Agriculture (USDA) manages a diverse range of programs involving food, forests, rural development, agricultural trade, and conservation of natural resources. Several USDA agencies have conservation responsibilities that may involve livestock and their environmental effects. For example, the Natural Resources Conservation Service (NRCS) provides technical assistance and information, as well as financial assistance, to landowners and agricultural producers to implement conservation systems and practices, such as developing Comprehensive Nutrient Management Plans to control AFO runoff. The Agricultural Research Service (ARS) is the in-house research agency of USDA and conducts a wide range of research activities. One of ARS's national programs addresses climate change, soils, and emissions. ARS has supported projects to assess emissions from beef cattle feedlots, dairy operations, and poultry operations; to evaluate swine wastewater treatment systems; and to improve soil and water management practices in cropping and livestock systems. ARS has participated in climate change research to develop technologies and systems for reducing atmospheric greenhouse gas concentrations emissions from agricultural sources. In 2015, ARS initiated plans for research on managing emissions from livestock, including projects concerning emissions processes, pathways, and cost-effective mitigation strategies. A second USDA agency is the National Institute of Food and Agriculture (NIFA). NIFA uses extramural funding and works with government agencies and commodity and public organizations that conduct research and carry out extension and education programs to manage manure nutrients. Through its Agriculture and Food Research Initiative Air Quality program, NIFA supports research activities to develop emissions data and improve management, control, and transport of odor, gasses, and particulate matter. NIFA also provides outreach to producers on transfer of technology and best practices to reduce pollutants and greenhouse gases. USDA cooperates with EPA when issues concern both agriculture and the environment. Notably, the two collaborated on a Unified National Strategy for Animal Feeding Operations, issued in 1999, intended to minimize public health and environmental impacts of runoff from AFOs. That strategy consisted of multiple elements and was based on a national performance expectation that all AFO owners and operators would develop and implement site-specific Comprehensive Nutrient Management Plans by 2009 to protect water quality and public health. The importance of relationships between air quality and agriculture has received increased recognition at USDA in recent years. One direct result was enactment of a provision in the Federal Agriculture Improvement and Reform Act ( P.L. 104-127 ), the 1996 farm bill, requiring USDA to create an Agricultural Air Quality Task Force. One finding in Section 391 of the statute stated that USDA should lead efforts to determine accurate measures of agriculture's role in air pollution and in the development of cost-effective approaches to reduce pollution. Several provisions of the 2002 farm bill (the Farm Security and Rural Investment Act, P.L. 107-171 ) specifically addressed air quality issues in the context of USDA conservation programs. The Agricultural Air Quality Task Force is an advisor to the Secretary of Agriculture. Its chairman is the chief of the NRCS, and its members represent USDA, EPA, industry, and basic and applied science. It is charged with ensuring sound data quality and interpretation, so that policy recommendations made by federal or state agencies to address air pollution problems related to agriculture are based on accurate scientific findings, peer review, and economic feasibility. In debates over controversial and complex public policy questions, stakeholders who hold differing perspectives at times may find little common ground. Sometimes the only point of agreement is the need for more and better research to resolve key questions—and each side hopes that research findings will support its own perspectives on the issues at hand. With regard to questions about AFO emissions and the possible need to implement control strategies, there is little dispute about the need for more research. Research on a wide range of topics currently is being supported by federal agencies, a number of individual states, academic institutions, and industry, but there is no apparent coordination or unified strategy. The monitoring study that EPA initiated as part of the Air Compliance Agreement, discussed previously, was intended to answer some key questions. However, in view of criticism of the study, doubts exist about the study's utility. Some critics of the Air Compliance Agreement fault EPA for planning only to measure emissions, but not also using the monitoring study as an opportunity to research mitigation techniques, as well as address health effects of air pollutants emitted by AFOs. In its 2003 report, the National Research Council addressed these issues and recommended "substantial research efforts in both the short term and the long term." Research in the short term (four to five years), the NRC said, can significantly improve the capability of scientifically sound modeling approaches for measuring and estimating air emissions, especially for process-based modeling that the NRC recommends be developed by EPA and USDA. A long-term research program (20-30 years) that encompasses overall impacts of animal production on the environment can have substantial results in decreasing overall impacts on the environment, while sustaining production at a high level. For the long term, coordinated research is needed to determine which emissions are most harmful to the environment and human health and to develop technologies to decrease their releases into the environment. Priority research needs identified by the NRC, USDA's Agricultural Air Quality Task Force, and others fall into two broad categories: fundamental research to estimate, measure, and characterize emissions; and technology research (including technology transfer). Foremost is the need to produce scientifically sound, standardized methodology as a basis for measuring and estimating gaseous and particulate emissions and odor, from AFOs on local, regional, and national scales. The science for estimating air emissions from individual AFOs should be strengthened, along with models to understand the totality of AFO processes, including dispersion, transformation, and deposition of emissions. This information is needed in order to assess relationships between emissions, potential health indicators, and candidate regulatory and management programs. The air emissions monitoring study undertaken as part of the Air Compliance Agreement was completed in 2011, and, based on that research, EPA has begun development of emissions estimating methodologies for animal sectors. A related concern is that much more needs to be understood about community-level impacts from exposure to AFO emissions. Occupational health studies have documented adverse health effects among AFO workers, such as acute and chronic respiratory diseases, but experts agree that occupational health risks cannot be extrapolated to community health risks. Peer reviewed studies of health impacts on residents in the vicinity of livestock operations are limited. These studies suggest that AFO air emissions may constitute a public health hazard, deserving of public health precautions as well as larger, well controlled, population-based studies to more fully ascertain adverse health outcomes and their impact on community health. With regard to technology, there is a need to develop standardized measurement technologies for pollutants and odorous compounds emitted by AFOs and effective, practical, and economically feasible technologies to reduce and control odors and pollutants. Experts believe that there is a need to develop and evaluate innovative treatment processes for each of the major sources of AFO emissions, confinement buildings, manure storage areas, and land application. Research further should include programs to provide for transfer of economically viable technologies to all producers. In its 2003 report, the National Research Council observed that EPA and USDA have not devoted the necessary technical or financial resources to estimating air emissions and developing mitigation technologies, and it criticized both for failing to address this deficiency in defining high-priority research programs. The report said, "Each has pursued its regulatory and farm management programs under the assumption that the best currently available information can be used to implement its program goals." It concluded that a change in research priorities in both agencies is needed if air emissions are to be addressed with an adequate base of scientific information. There appears to be wide agreement among stakeholder groups on the need for more research on a large number of related issues, but congressional interest in supporting or funding more federal participation in research activities is unclear. Prior to the 112 th Congress, congressional attention to the issues discussed in this report had been limited, with the result that developments had proceeded largely by administrative and some judicial actions, not through legislative policymaking. As described previously, one aspect that has attracted congressional interest is questions about the applicability of CERCLA and EPCRA to livestock and poultry operations. That interest was apparent in the context of appropriations bills and in legislation in the 112 th Congress to amend CERCLA to clarify that manure is not a hazardous substance. Similar legislation has not been introduced subsequently. More broadly, Congress has shown considerable interest in the impact of federal regulation, especially by EPA, on the agriculture sector. The Senate and House Committees on Agriculture and other congressional committees have shown particular interest in EPA's actions and have conducted oversight hearings on regulatory impacts—costs and administrative burdens of compliance with environmental and other requirements—on agriculture.
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From an environmental quality standpoint, much of the public and policy interest in animal agriculture has focused on impacts on water resources, because animal waste, if not properly managed, can harm water quality through surface runoff, direct discharges, spills, and leaching into soil and groundwater. A more recent issue is the contribution of air emissions from animal feeding operations (AFOs), enterprises where animals are raised in confinement. This report provides background on the latter issue. AFOs can affect air quality through emissions of gases such as ammonia and hydrogen sulfide, particulate matter, volatile organic compounds, hazardous air pollutants, and odor. These pollutants and compounds have a number of environmental and human health effects. Agricultural operations have been treated differently from other businesses under numerous federal and state laws. Some environmental laws specifically exempt agriculture from regulatory provisions, and some are designed so that farms are not subject to most, if not all, of the regulatory impact. The primary regulatory focus on environmental impacts has occurred under the Clean Water Act. In addition, AFOs that emit large quantities of air pollutants may be subject to Clean Air Act regulation. Some livestock operations also may be regulated under the release reporting requirements of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and the Emergency Planning and Community Right-to-Know Act (EPCRA). Questions about the applicability of these laws to livestock and poultry operations have been controversial and have drawn congressional attention. Agriculture's role as both a source of and a "sink" for greenhouse gases also has been of interest in connection with addressing the global challenge of climate change. How to evaluate and manage the health and environmental impacts of emissions from animal agriculture facilities has largely been left up to states. Several states have recognized a need to regulate air emissions from agricultural operations, but many states have not yet adopted or enacted programs affecting AFO emissions. State programs, under statutes and regulations, both implement and supplemental federal CAA requirements. States have used varied techniques to control air emissions from livestock facilities, including emission limits, use of best management practices, and imposition of other pre-operational and operational requirements. Congress has shown interest in many of the issues discussed in this report and, more broadly, in the impact of federal regulation on the agriculture sector.
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The Incompatibility Clause of the U.S. Constitution states that "no Person holding any Office under the United States, shall be a Member of either House during his Continuance in Office." This provision is generally understood to ensure the separation of powers by preventing Members of Congress from serving in two government posts at one time. The prohibition on simultaneous service in multiple offices of the government prevents the individual from exercising influence of one branch while serving in the office of another. To avoid constitutional violations under the Incompatibility Clause, Members generally are required to resign their previous offices before being seated in Congress. The Incompatibility Clause often raises questions of the propriety of Members' conduct in the context of military service, particularly service in the Armed Forces Reserves, and whether service in the Reserves would disqualify the Member from simultaneously serving in Congress. The Constitution also provides that "each House shall be the judge of the elections, returns and qualifications of its own Members." In some cases, the House and Senate have exercised their authority under this provision to determine the eligibility of their Members to hold commissions in the military, including the Reserves. The central issue in determining whether a Member may simultaneously serve in the Reserves is whether a position in the Reserves constitutes an "Office under the United States." This issue has been litigated in the U.S. Supreme Court in Schlesinger v. Reservists Committee to Stop the War . The Court resolved the case on procedural grounds, finding that the Reservists Committee did not have standing to raise the matter in court, and did not address the substantive constitutional claim. Other courts have dealt with related issues, including what positions constitute offices of the United States. Although Congress has taken action in some instances of Members' service in the military and courts have resolved some related challenges related to service in the Reserves, the issue of whether a Member may serve in Congress and the Reserves simultaneously has never been clearly resolved. The U.S. Constitution provides that "each House shall be the judge of the elections, returns and qualifications of its own Members." Thus, Congress is empowered to determine whether a Member is eligible or qualified to serve in the seat for which he or she was elected. Because the Incompatibility Clause prohibits a Member from simultaneously serving in another office of the United States, Congress has the prerogative to determine if a Member's role in another governmental capacity would disqualify him or her from serving in Congress. Congress has acted specifically with respect to individual Members' simultaneous service and generally by enacting legislation that addresses the status of Reservists in the government. Both the House and Senate, pursuant to their constitutional power to judge the qualifications of their Members, have considered the eligibility of their Members to hold commissions in the military. The precedents seem to indicate that a Member of Congress may, upon entry into the Armed Forces by enlistment, commission, or otherwise, cease to be a Member of Congress, provided the House or Senate chooses to act. Congress's enforcement of the Incompatibility Clause appears to have first occurred in the seventh Congress, when Representative John Van Ness accepted an office in the militia during the recess between the first and second sessions. The House unanimously voted in support of a resolution that Van Ness had "thereby forfeited his right to a seat as a Member of this House." The unanimous vote was apparently intended to set "the important precedent ... to exclude even the shadow of Executive influence." In some cases, however, the House or Senate has not acted. Congress has not acted in any case of an individual Representative or Senator regarding simultaneous service in the Reserves. Although there appears to be no precedent regarding such circumstances, Congress has attempted, as discussed below, to clarify the status of Members serving as Reservists through legislation. Although Congress has considered the eligibility of several individual Members on active duty specifically and may continue to do so, it has also addressed the status of Reservists by general legislation. It appears that the question of the propriety of simultaneous service of an individual in the Congress and in the Reserves may now be clarified by 5 U.S.C. § 2105, which defines "employee" for purposes of Title 5 of the U.S. Code, which contains laws relating to government employment. Section 2105(d) provides that a Reserve of the armed forces who is not on active duty or who is on active duty for training is deemed not an employee or an individual holding an office of trust or profit or discharging an official function under or in connection with the United States because of his appointment, oath, or status, or any duties or functions performed or pay or allowances received in that capacity. Under this definition, it appears that a Member serving as a Reservist would likely not be acting in violation of the Incompatibility Clause. As a statute, § 2105(d) cannot define the terms of the Constitution and thus would not resolve the constitutional question, but it may be used as an indication of the sense of Congress regarding the status of Reservists. Because Congress has the power to determine the qualifications of its own Members, the limitations that it has imposed on what constitutes an employee holding an office of the United States may be significant to courts considering the constitutional limitations. The central issue in the debate over the legality of simultaneous service is the definition of an office of the United States. If an appointment in the Reserves is not deemed to be an office of the United States, the Incompatibility Clause would provide no basis to prohibit simultaneous service in Congress. Some have argued that the issue of simultaneous service is nonjusticiable, meaning that the issue is not one that courts should adjudicate. Under this argument, because the Constitution gives Congress the authority to judge the qualifications of its Members, courts should not weigh in on the propriety of simultaneous service. On the other hand, the courts are empowered to interpret the meaning of the Constitution and may assert that authority to hear Reservists' cases. Direct legal challenges to simultaneous service in Congress and the Reserves have not been resolved on the merits. When the issue came before the U.S. Supreme Court in 1973 in Schlesinger v. Reservists Committee to Stop the War , as discussed below, the Court decided the case on procedural grounds and no opinion was issued on the substantive claims under the Incompatibility Clause. Courts have heard other cases under the Incompatibility Clause that did not directly challenge simultaneous service as an officer in the Reserves, including a 2005 decision by the Court of Appeals for the Armed Forces. In that case, United States v. Lane , also discussed below, the court addressed the substantive claim of whether a Member of Congress could also serve as a judge in military court proceedings under his service as a Reservist. The U.S. Supreme Court considered a challenge to simultaneous membership in the Reserves and in Congress as a violation of the Incompatibility Clause in 1973. In Schlesinger v. Reservists Committee to Stop the War , an association of officers and enlisted members of the Reserves and several individual members of the association alleged that Members of Congress who simultaneously served in the Reserves were acting in violation of the U.S. Constitution's prohibition on "holding any Office under the United States" while also serving as a Member of Congress. Although the district court held and the U.S. Circuit Court of Appeals for the District of Columbia affirmed that "Article I, Section 6, Clause 2 of the Constitution renders a member of the Congress ineligible to hold a commission in the Armed Forces Reserve during his continuance in office," the Supreme Court reversed the decision on other grounds, finding that the committee lacked standing to raise the claim. The Court's decision has limited citizens and taxpayers from raising the issue of simultaneous service in Congress and the Reserves. The Reservists Committee asserted their claims on the basis that as citizens and taxpayers, they were injured by the threat simultaneous service created for "the possibility of undue influence by the Executive Branch, in violation of the concept of independence of Congress implicit in Art. I of the Constitution." The Court held that the alleged injury was abstract, speculative, and generalized, and therefore was not a litigable matter for the courts to decide. The government raised several arguments to support the claim that simultaneous service in Congress and the Reserves did not violate the Incompatibility Clause. First, according to the government, simultaneous service in the Reserves was not the problem intended to be addressed by the Incompatibility Clause. The "intent was to avoid the possibility of improper influences upon and corruption of members of the legislative branch that could result from the power of the executive branch to appoint members to office." Furthermore, the government argued that "the minor and infrequent contacts these Reservists have with the military authorities as a result of their membership in the Reserves pose none of the dangers of domination and corruption of the legislative branch by the executive branch that the Framers sought to guard against." To support its position, the government also cited other court cases that considered the definition of offices and officers of the United States. For example, the U.S. Supreme Court has held that an employee whose "duties were continuing and permanent, not occasional or temporary" was an officer of the United States. According to the Court, "the term [office] embraces the ideas of tenure, duration, emolument, and duties." This definition was used by the U.S. Court of Claims in a case challenging the status of a Reservist. The court held that an inactive Reservist was not also an officer of the United States. The court reasoned that "an officer of the Reserve Corps has no salary or emolument of office. He is not in time of peace, except perhaps while discharging some duty to which he may have been lawfully called ..., amenable to the Army regulations or court-martial. He has no defined duties to discharge." The issue of the constitutionality of Members of Congress simultaneously serving as Reservists was again raised in 2005 in a lawsuit involving Senator Lindsey Graham, who was an officer in the U.S. Air Force Standby Reserve at the time. The Judge Advocate General of the Air Force assigned Senator Graham to act as an appellate judge on the Air Force Court of Criminal Appeals. One of the cases assigned to Senator Graham was that of an airman convicted of a drug use violation. The airman challenged the legality of Senator Graham's service on a panel of the Court of Criminal Appeals that reviewed the appeal. When the case came before the U.S. Court of Appeals for the Armed Forces (CAAF), the court limited its decision to the issue of "whether a criminal conviction and sentence, which by statute can be sustained only by an affirmative appellate decision, may be reviewed by an appellate judge who simultaneously serves as a Member of Congress." The CAAF noted that the Supreme Court has held that "the term 'officers of the United States' includes 'all persons who can be said to hold an office under the Government.'" The Supreme Court has also indicated that the distinction between officers and non-officers depends on whether the individual exercises "significant authority pursuant to the laws of the United States." The CAAF held that under this definition, military judges are officers of the United States. The court stated that "the Incompatibility Clause—which prohibits a Member of Congress from 'holding any Office under the United States'—precludes a Member from serving as an appellate judge on a Court of Criminal Appeals—an 'office' that must be filled by an 'Officer of the United States.'" The CAAF limited its decision to whether a Member of Congress could serve as a judge in the airman's proceeding. It refused to pass judgment on whether service as a Reservist constitutes "an office of the United States for purposes of qualification to serve as a Member of Congress under the Incompatibility Clause." Thus, the court left unresolved the propriety of simultaneous service in Congress and the Reserves.
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The Incompatibility Clause of the U.S. Constitution states that "no Person holding any Office under the United States, shall be a Member of either House during his Continuance in Office." This provision is generally understood to ensure the separation of powers by preventing Members of Congress from serving in two government posts at one time. The prohibition on simultaneous service in multiple offices of the government prevents the individual from exercising influence of one branch while serving in the office of another. To avoid related constitutional violations, Members generally are required to resign their previous offices before being seated in Congress. The Incompatibility Clause often raises questions of the propriety of Members' conduct in the context of military service, particularly service in the U.S. Armed Forces Reserves, and whether service in the Reserves would disqualify the Member from simultaneously serving in Congress. The Constitution also provides that "each House shall be the judge of the elections, returns and qualifications of its own Members." In some cases, the House and Senate have exercised their authority under this provision to determine the eligibility of their Members to hold commissions in the military, including the Reserves. The central issue in determining whether a Member may simultaneously serve in the Reserves is whether a position in the Reserves constitutes an "Office under the United States." This issue has been litigated in the courts and made its way to the U.S. Supreme Court in Schlesinger v. Reservists Committee to Stop the War. The Court resolved the case on procedural grounds, finding that the Reservists Committee did not have standing to raise the matter in court, and did not address the substantive constitutional claim. Other courts have dealt with related issues, including what positions constitute offices of the United States. Although Congress has taken action in some instances of Members' service in the Reserves and courts have resolved some related challenges, the issue of whether a Member may serve in Congress and the Reserves simultaneously has never been clearly resolved. This report will analyze the legal issues related to Members of Congress serving in the Armed Forces Reserves during their congressional tenure. It will discuss previous congressional action regarding Members' simultaneous service as well as federal legislation addressing the status of Reservists. It will also analyze court decisions related to challenges to simultaneous service.
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Turnover of membership in the House and Senate necessitates closing congressional offices. The most common reason for departure is the expiration of a Member's term of office, but a congressional office may also become vacant due to resignation, death, or other reasons. The closure of a congressional office requires an outgoing Member of Congress, or congressional officials, in the case of a deceased Member, to evaluate pertinent information regarding staff; the disposal of personal and official records; and final disposition of office accounts, facilities, and equipment. Table 1 summarizes the numbers of Members who have left or will be leaving the House and Senate after the 112 th Congress, and in the prior 10 Congresses. The House and Senate have developed extensive resources to assist Members in closing their offices. These services are typically used at the end of a Congress, when a Member's term of service ends, but most services are available to an office that becomes vacant for other reasons. This report provides an overview of issues that may arise in closing a congressional office, and provides a guide to resources available through the appropriate support offices of the House and Senate. House office closing activities are supported by the Chief Administrative Officer (CAO), Clerk of the House, and House Sergeant at Arms. Resources related to closing a congressional office are available to House offices through the 113 th Congress transition website on the House intranet. When it becomes known that a Senate office will be closing, the Sergeant at Arms contacts that office to initiate closing support services. The Senate Sergeant at Arms provides office closing services through an Office Support Services Customer Support Analyst (CSA) assigned to each Senate office. A CSA helps coordinate an initial closing office planning meeting between the office and all Senate support offices, and it facilitates the provision of the following: office equipment inventory reports assistance with archiving documents information on closing out financial obligations information on benefits and entitlements available to a Senator after leaving office Payroll for staff of Members who are leaving office at the conclusion of a Congress typically terminates automatically on January 2. The employing authority, a Member in the case of a personal office that is closing, determines whether outgoing staff are eligible to receive a lump sum payment for any accrued annual leave. Other potential benefits, including retirement plans, post-employment life or health insurance benefits, and student loan repayment programs, are administered through the House Office of Human Resources, according to statute and chamber regulation. The office will continue to interact with former House employees on a wide range of post-employment matters, including wage and earning statements, employee benefits, and any forms that must be completed by former employees. In addition to staff procedures to support the closing of a Representative's office, the House provides certain post-employment services to departing staff, including a résumé referral service to House staff who desire employment with Members-elect, provided by the CAO; individual outplacement and technical assistance, as well as job search strategies and transitional techniques to separating employees of the House, provided by the House Outplacement Services Resource Center; and help for affected employees focused on designing and developing a successful job search, provided by the Office of Employee Assistance. Staffs of Senators who will leave office when their term of office officially expires at noon on January 3 of the year in which such a term ends remain on the payroll until the close of business on January 2 of the year in which the Senator's term of office expires, unless terminated sooner. The Senate Disbursing Office addresses issues related to the termination of employment of departing staff and provides information on the available options to staff regarding post-employment insurance and retirement programs and other benefits. The Senate Placement Office provides application and referral service for professionals and support staff, and it can assist outgoing Senate employees who are seeking positions in new congressional offices. The departing staff who are interested in this service must complete an application form and be interviewed by a personnel specialist. Placement office personnel then review applications and send them to offices with matching available positions. According to the Clerk of the House, the files generated by a Member's congressional office and accumulated in the course of service in the House are the personal property of the Member. The House pays for point-to-point shipping of all official records and papers for departing Members of that chamber. Official papers are generally described as those materials that may be mailed under franking regulations. Other materials, including memorabilia, photographs, and documents that do not relate to official business, must be shipped or disposed of at the outgoing Member's expense. Guidance regarding records management is available from the Office of the Clerk. Shipping of records is carried out by the House CAO. The Senate Records Management Handbook notes that neither statute nor the standing rules of the Senate define which items constitute a Senator's papers. For management purposes, the Secretary of the Senate defines Senators' papers as "all records, regardless of physical form and characteristics, that are made or received in connection with an individual's career as a United States Senator." The manual notes that, by tradition and practice, any such records are the private property of the individual Senator. The principal exclusion from Senators' papers are committee records that are defined by statute and Senate standing rules to be records of the Senate. Senate office closing guidelines specify a detailed process for the handling of a Senator's records. The National Archives and Records Administration (NARA) provides courtesy storage facilities to Members of Congress for records created in Capitol Hill offices at the Washington National Records Center (WNRC) in Suitland, MD, and at regional storage facilities around the country for records generated in state or district offices. NARA courtesy storage expires at the conclusion of a Member's term of office. WNRC can be reached at 301-778-1650. Contact information for NARA regional facilities is available at http://www.archives.gov/locations/ . The House Office of Finance requests that contact information for each closing office be provided to expedite resolution of final payments to vendors. Closing offices must settle several accounts, with units of the Secretary of the Senate and the Sergeant at Arms, as well as other government agencies. The Senate Disbursing Office is authorized to withhold from Senators' pay, reimbursements, mileage, or expense money for delinquent indebtedness to the Senate. At the conclusion of a Congress, the Architect of the Capitol has in the past advised that departing Members must vacate their Washington, DC, offices not later than noon on December 1, of the second year of a Congress. A Departing Member Service Center has provided functional workspace for departing Members and staff once their office suites are vacated. The center is typically secured by the U.S. Capitol Police and has a central administrative facility that is staffed by CAO employees. Each departing Member office is assigned a single cubicle that can accommodate the Member and one other person at any given time. Each cubicle is equipped with a telephone, networked computer, and basic supplies. Senators may remain in their personal offices in Washington, DC, until their terms of office expire. Senators leasing federal office premises or commercial space in their home states must notify the General Services Administration (GSA) or private landlord in writing at least 30 days in advance of their intention to vacate the premises. The Sergeant at Arms requires that a copy of an intent to vacate letter be provided to his office at the same time it is provided to landlords. All office space must be vacated by the close of business on January 2 of the year in which the Senator's term expires. House Support Services (HSS) staff will begin scheduling final equipment inventories for the Capitol Hill offices of departing Members shortly after the November elections. GSA is responsible for performing the final inventory for the district office locations of departing Members. All furniture and equipment (including copiers, faxes, telecommunication systems, computers, personal digital assistants, and any other equipment used to support office operations), whether used in office settings, or in the residences of Members and staff, must be accounted for in those inventories. Representatives are allowed to purchase their chairs and desks only from the Washington, DC, inventory. In district offices, succeeding Members will receive all of the equipment and furniture items of the outgoing Member. If the succeeding Member chooses not to use office items of the departing Member, those items will then become available for purchase by the departing Member. Furnishings in a departing Senator's personal and Capitol offices remain in place. Keys for Capitol offices must be returned to Sergeant at Arms Capitol Facilities. The Asset Management Section of the Sergeant at Arms conducts an inventory of all office and information technology (IT) related equipment in closing offices. Telecommunications equipment must be returned to the Senate. Outgoing Senators may purchase select office equipment and non-historical furniture used in their Capitol Hill offices. Emergency equipment, including annunciators, escape hoods, emergency supply kits (go kits), and victim rescue units, will be inventoried by the Office of Security and Emergency Preparedness (OSEP). Outgoing Senators may purchase office furnishings from only one of their state offices at a price equal to the acquisition price less depreciation. A Member of Congress may leave office prior to the expiration of his or her term, due to resignation, death, or for other reasons. On the first business day after the death, resignation, or expulsion of a Member of the House, his or her office is renamed the Office of the ___ Congressional District of State/Territory. Pursuant to House Rule II, cl.2(i)(1), staff on payroll of the congressional office when the outgoing Member departs remain employed by the House, and carry out their duties under the supervision of the Clerk of the House until a successor is elected. Senate practice regarding the closing of the office of a Senator who leaves office prior to the expiration of his or her term of office varies according to the circumstances of the departure. In addition to the expiration of the regular term of office, the Senate Handbook notes that a Senate office might be closed due to the following categories: resignation termination of the service of a Senator who is appointed and who does not stand for election, or is defeated death of a Senator Employees in the personal office of a Senator who resigns are continued on the Senate payroll at their respective salaries for up to 60 days after the Senator leaves office, unless the Senator's term of office expires sooner. Employee duties are performed under the direction of the Secretary of the Senate. An amount equal to one-tenth of the official office expense account portion of the Senator's Official Personnel and Office Expense Account is available to the Secretary of the Senate to defray those expenses directly related to closing a Senator's office. Expenses are paid from the Contingent Fund of the Senate as Miscellaneous Items. Employees in the personal office of a Senator whose appointment is terminated are continued on the Senate payroll at their respective salaries for up to 30 days after the termination of the Senator's service, or until they have become otherwise gainfully employed, whichever is earlier. The office space in Washington, DC, and in the state of an appointed Senator must be vacated on the day preceding the swearing-in of the successor, if the Senate is in session. If the Senate has adjourned sine die, an appointed Senator who will not continue to serve in the Senate must vacate office facilities the day before a successor is certified, or 30 days after a successor has been elected, whichever is earlier. Employees in the personal office of a deceased sitting Senator are continued on the Senate payroll at their respective salaries for up to 60 days after the Senator's death, unless the Senator's term of office expires sooner. The Committee on Rules and Administration may extend this period in cases where it will take longer to close a deceased Senator's office. Employee duties are performed under the direction of the Secretary of the Senate. An amount equal to one-tenth of the official office expense account portion of the Senator's Official Personnel and Office Expense Account is available to the Secretary of the Senate to defray those expenses directly related to closing a Senator's office. Expenses are paid from the Contingent Fund of the Senate as Miscellaneous Items. The Senate Financial Clerk provides information concerning allowances for the operation of the deceased Senator's office during the 60-day period.
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Turnover of membership in the House and Senate necessitates closing congressional offices. The closure of a congressional office requires an outgoing Member of Congress to evaluate pertinent information regarding his or her staff; the disposal of personal and official records; and final disposition of office accounts, facilities, and equipment. In the past several years, the House and Senate have developed extensive resources to assist Members in closing their offices. These services are most typically used at the end of a Congress, when a Member's term of service ends, but most of the services are available to an office that becomes vacant for other reasons. This report provides an overview of the issues that may arise in closing a congressional office, and provides a guide to resources available through the appropriate support offices of the House and Senate. This report, which will be updated as warranted, is designed to address questions that arise when a congressional office is closing. Another related report is CRS Report R41121, Selected Privileges and Courtesies Extended to Former Members of Congress , by [author name scrubbed].
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T he U.S. Supreme Court's highly anticipated decision in Obergefell v. Hodges recognized federal constitutional protection for same-sex marriage. Although on its face the case addressed only whether states must issue marriage licenses to same-sex couples and recognize marriages legally formed in other states, Obergefell has implicated a number of other legal rights, particularly those related to religious exercise and civil rights. Some religious doctrines include objections to same-sex marriage, leading to questions about the extent to which individuals, businesses, or religious institutions that share such objections must recognize or accommodate couples in same-sex marriages. Because federal law includes both constitutional and statutory protections for religious beliefs that may involve such conflicts, the manner in which these protections may intersect with constitutional protection of same-sex marriage can become complicated. This report will analyze a range of legal issues for which Obergefell has implications. Since states initially began recognizing same-sex marriage, one of the primary questions has been whether recognition of same-sex marriage requires individuals, who officiate at weddings or issue marriage licenses but object to same-sex marriage on religious grounds, to provide those services to same-sex couples. Another conflict has arisen over whether businesses, which are owned by individuals with religious objections to same-sex marriage, would be subject to civil rights laws that prohibit discrimination against same-sex couples. Likewise, it is unclear whether religiously affiliated social service providers who object to same-sex marriage may participate in certain federally funded programs (e.g., adoption services grants). Finally, another potential legal issue that has been raised in light of Obergefell is whether churches and other religious entities could be denied federal tax-exempt status if they act in opposition to same-sex marriage. In its landmark decision, Obergefell v. Hodges , the U.S. Supreme Court struck down state bans on same-sex marriage as unconstitutional under the Fourteenth Amendment of the U.S. Constitution. The issues presented to the Court included whether states were required to permit same-sex couples to marry in their states and whether states were required to recognize same-sex marriages formed in other states, but did not include any issue directly affecting the manner in which such marriages were formed or what legal rights such couples may have beyond the ability to marry itself. Ultimately, the Court ruled that "the State laws challenged ... in these cases are now held invalid to the extent they exclude same-sex couples from civil marriage on the same terms and conditions as opposite-sex couples." The Court characterized the protection of the Due Process Clause of the Fourteenth Amendment as one that "extend[s] to certain personal choices central to individual dignity and autonomy, including intimate choices that define personal identity and beliefs." Examining the evolving history of the institution of marriage, the Court noted a shift in societal perceptions of same-sex relationships over the past century. In particular, the Court acknowledged that it "has long held the right to marry is protected by the Constitution," and cited four principles supporting governmental recognition of marriage rights: individual autonomy; the unique nature of the institution of marriage; the safeguards that legal marriage provides for children and families; and the "keystone" role marriage plays in the nation's social order. Examination of these principles led a majority of the Court to conclude that the reasons for which marriage is a fundamental right apply equally to same-sex couples as they have to opposite-sex couples, and thus same-sex marriages must be afforded the same constitutional protection. Obergefell was decided by a 5-4 vote, with the dissenting justices expressing strong objections to the majority opinion, in part raising arguments regarding religious freedom. Even Justice Kennedy, writing for the majority, acknowledged that recognition of same-sex marriage would not be universally accepted, specifically citing religious objectors: Many who deem same-sex marriage to be wrong reach that conclusion based on decent and honorable religious or philosophical premises, and neither they nor their beliefs are disparaged here. But when that sincere, personal opposition becomes enacted law and public policy, the necessary consequence is to put the imprimatur of the State itself on an exclusion that soon demeans or stigmatizes those whose own liberty is then denied. The Court emphasized the continued First Amendment right of individuals and religious entities to engage in debate regarding expansion of the scope of couples eligible to marry, while distinguishing that the Fourteenth Amendment precluded the government from engaging in unequal treatment of these couples. The First Amendment states that "Congress shall make no law respecting the establishment of religion, or prohibiting the free exercise thereof ...," in what are known respectively as the Establishment and Free Exercise Clauses. Establishment Clause protections apply in circumstances in which a government action may be considered as sanctioning a particular religious practice or point of view. Free Exercise Clause protections generally apply if a government action is directed at interfering with voluntary religious practices of private parties. The Establishment Clause prohibits the government from taking actions that would create an official position related to a religious practice or point of view. The Supreme Court has applied a range of different tests to identify whether a particular government action would violate the Establishment Clause. Under the traditional tripartite Lemon test, a challenged government action would be upheld if it (1) has a secular purpose; (2) has a primary effect that neither advances nor inhibits religion; and (3) does not foster excessive entanglement with religion. When applying that test, the Court has required that laws cannot create a relationship between government and religious entities that would cause one to interfere with the internal affairs of the other. Other tests consider whether the government action may endorse or disapprove a particular religion, or whether the law is neutral between religions and between religion and nonreligion. Under the Free Exercise Clause, the First Amendment also provides protection against the government's interference with voluntary religious exercise. The Court historically had applied heightened scrutiny to government actions that would infringe on religious exercise, requiring the government to show a compelling interest to do so. However, in the 1990 decision Employment Division, Department of Human Resources in Oregon v. Smith , it lowered the constitutional standard to require only that the government not intentionally infringe upon religious exercise. Under the current interpretation, the Court explained that the Free Exercise Clause never "relieve[s] an individual of the obligation to comply with a valid and neutral law of general applicability." However, the Court has emphasized that Congress remains free to consider whether heightened protection would be appropriate through the legislative process. Shortly after the Court adopted the new standard, Congress responded by enacting the Religious Freedom Restoration Act (RFRA), which applies heightened scrutiny to federal government actions that may affect religious exercise. RFRA states that the "[g]overnment shall not substantially burden a person's exercise of religion even if the burden results from a rule of general applicability, except" when the burden furthers a compelling governmental interest and uses the least restrictive means to achieve that interest. Since its enactment, RFRA traditionally has been applied in cases involving alleged burdens on the religious exercise of individuals and nonprofit religious organizations. Although litigation involving RFRA has been extensive in lower courts, the Supreme Court has heard only a few cases requiring it to interpret the substantive provisions of RFRA. In the landmark 2014 case, Burwell v. Hobby Lobby Stores, Inc. , the Court interpreted the scope of applicability of RFRA's protections to include some corporations. In Hobby Lobby , the owners of closely held for-profit corporations challenged a provision of the Affordable Care Act that required employers to provide insurance coverage for certain contraceptives as a burden on their religious exercise under RFRA. The Supreme Court held that RFRA requires the government to accommodate the beliefs of such entities, meaning that RFRA now may be understood to protect individuals, nonprofit religious organizations, and closely held for-profit businesses, that is, those "owned and controlled by members of a single family." Notably, the Court acknowledged, but declined to resolve, the remaining question of whether other businesses (e.g., publicly traded companies) also may be protected. The closely divided Hobby Lobby decision sparked a vigorous debate over the future implications of neutral laws of general applicability that may affect the ability of various entities to exercise their religious beliefs. In a highly critical dissenting opinion, Justice Ginsburg questioned, for example, the extent to which the decision could be read to permit employers with religious objections to various government mandates to avoid compliance. The majority opinion addressed this concern, explaining that it was unfounded because the Hobby Lobby decision reached only the contraceptive coverage requirement at issue in the case. According to the majority, other legal mandates would be subject to a different set of interests and different arguments regarding methods of meeting those interests. However, the majority did not state definitively that other requirements would be beyond the reach of a future RFRA challenge. This response implied that other legal mandates that may be challenged under future RFRA cases would have to be assessed on a case-by-case basis, a point that has generated much debate since the decision was issued. The extent to which individuals and businesses are able to avoid compliance with various legal mandates related to same-sex marriage as a result of RFRA and Hobby Lobby is unclear. Although Hobby Lobby clearly broadened the applicability of RFRA's protections, the decision did not clearly delineate the parameters of how that protection might be used. One outstanding question that appears to be critical to the analysis of balancing legal rights in the context of religious objections to same-sex marriage is what constitutes a substantial burden under RFRA, a term that was not defined by Congress in the statute itself. It is important to note that RFRA applies only to federal government actions that may burden religious exercise. Protection against burdens imposed by state or local governments depends on state law. After the Supreme Court held that the federal RFRA did not constrain the states, many states enacted their own versions of RFRA to prevent burdens on religious exercise at the state and local level. Almost half of the states have enacted a version of RFRA, many of which follow the federal model. Some states have proposed broader protections than are available in the federal RFRA, with mixed results. In one example of broader protection enacted by a state, Indiana's RFRA explicitly applies to individuals, organizations, and a broad range of businesses (not only closely held corporations), and can be invoked not only when religious exercise has been substantially burdened but also when it "is likely to be substantially burdened." It also permits eligible persons to assert a violation of the protection provided "as a claim or defense in a judicial or administrative proceeding, regardless of whether the state or any other governmental entity is a party to the proceeding." Notably, states that have not enacted heightened statutory protections may have constitutional provisions that the state has interpreted to provide heightened protection without additional legislation. One of the ongoing debates related to same-sex marriage as it intersects with religious freedom is whether the government's recognition of marriage should be intertwined with a religious solemnization of marriage in any way. As states began recognizing same-sex marriages, questions arose related to the impact of such recognition on marriage officiants. State marriage laws generally allow religious ministers to act on behalf of the state in officiating civil marriage requirements as well as the religious ceremonial requirements. This dual role of religious officiants has raised concerns that ministers, because of their concurrent role for civil requirements, may be forced to solemnize marriages to which they object. Notably, the Court's decision in Obergefell specifically addresses the right of same-sex couples to enter " civil marriage[s] on the same terms and conditions as opposite-sex couples," and does not require or suggest that religious marriages must include all couples. Some argue that establishing distinct institutions of civil and religious marriage may resolve some of the controversy regarding the scope of marriages to be recognized. Under that model, any couple wishing to marry and qualify for associated government benefits would have a civil ceremony, and couples wishing to be married in accordance with their chosen religious faith would also have a religious ceremony. This scenario arguably would eliminate the perception that religious officiants could be forced to solemnize marriages recognized by the state that conflict with their religious beliefs. However, religious ministers may not be the only officiants with religious objections to same-sex marriages. Questions also arise regarding whether an individual working for the government and having job duties related to officiating or facilitating civil marriages could be required to do so for same-sex couples. Such individuals would not have the same constitutional protections as religious officiants, but arguably may seek other legal protection. One of the initial questions arising in the context of religious freedom and same-sex marriage was whether legal recognition of same-sex marriage would require ministers and other faith leaders to officiate marriage ceremonies that would conflict with their religious beliefs. A number of states responded to these concerns by enacting explicit protections to protect religious officials and the independence of religious institutions to determine who was eligible to marry under their doctrinal rules. Explicit statutory protection may not be necessary, though, because as a matter of federal constitutional law, religious institutions are protected from government interference in their internal matters, including religious doctrine, authority, and ministerial employment. Under long-standing First Amendment jurisprudence, courts have avoided deciding matters of religious doctrine, which almost certainly would include which marriages the religious authority would recognize and therefore solemnize. The Supreme Court has maintained an understanding that "courts should refrain from trolling through a person's or institution's religious beliefs." Furthermore, it has recognized that churches and other religious institutions have a right under the Free Exercise Clause to address their internal matters independently and without interference from government institutions. Such action by courts would entangle the legal system in an inquiry of religious authority and doctrine, suggesting the type of probing interference contemplated by the entanglement prong of the traditional Lemon test. Accordingly, the Court has barred interference in religious practices through decisions prohibiting the government from deciding disputes concerning religious authority or policies. In 1872, the Court recognized in Watson v. Jones that matters of religious doctrine should be determined within the authority of the particular church and should be separate from any secular legal interpretation. The Court's decision arose from a dispute regarding who were the proper leaders of a local Presbyterian church and consequently had control over that church's property. The dispute was litigated between competing leaders of the church, some pro-slavery and others anti-slavery, in the years following the Civil War during the ratification process of the Fourteenth Amendment, which granted equal protection to all U.S. citizens, including former slaves. The dispute within the local church reflected disagreement among the subdivisions of the Presbyterian Church of the United States regarding the issue of slavery after the war and internal divisions among a local church's leadership with respect to that doctrine. Although the case was taken to civil courts, the Court ultimately noted that the case involved a "schism in the church," seeking resolution "of which of two bodies shall be recognized as the Third or Walnut Street Presbyterian Church." Accordingly, the Court held, regarding "relations of church and state under our system of laws," that "whenever the questions of discipline, or of faith, or ecclesiastical rule, custom, or law have been decided by the highest of these church judicatories to which the matter has been carried, the legal tribunals must accept such decisions as final, and as binding on them, in their application to the case before them." The Court effectively preserved the authority of the church to recognize its proper leaders in the context of its doctrine and practice. The Court recognized in Watson that certain disputes that may involve a church or its members are not necessarily beyond the reach of civil courts, that is, criminal activity or personal disputes. However, it explained that matters comprising the church's religious practice are not subject to judicial review. The Court stated: [I]t is a very different thing where a subject-matter of a dispute, strictly and purely ecclesiastical in its character,—a matter over which the civil courts exercise no jurisdiction,—a matter which concerns theological controversy, church discipline, ecclesiastical government, or the conformity of the members of the church to the standard of morals required of them.... The Watson decision, a seminal case on the independence of churches to identify their governing authority and internal doctrinal policies, explicitly departed from English precedent, which allowed courts to examine and make decisions regarding religious matters, including "the true standard of faith in the church organization." The Court distinguished its decision from that of the English legal system, which lacked the "full, entire, and practical freedom for all forms of religious belief and practice which lies at the foundation of [American ] political principles." Thus, the Court established the principle that determinations of church doctrine and practice were to be free of government control well before it had even developed other aspects of its First Amendment jurisprudence. In 1952, noting its historic recognition of a prohibition on government interference in matters of religion, the Court reiterated its earlier understanding of "a spirit of freedom for religious organizations, an independence from secular control or manipulation—in short, power to decide for themselves, free from state interference, matters of church government as well as those of faith and doctrine." The Court accordingly granted federal constitutional protection for the independent choice of churches for self-governance "as a part of the free exercise of religion against state interference" when it held that a legislature was constitutionally barred from determining the proper religious authority of the Russian Orthodox Church. On a number of occasions, the Court has reiterated the limits of the First Amendment on government authority to decide the legitimacy of matters of church internal practices. Just as it prohibited the legislature from doing so, it has also limited courts from overstepping their constitutional authority in making civil determinations of the propriety of church actions or the validity of church beliefs. The Court has held that "because of the religious nature of [disputes related to control of church property, doctrine, and practice], civil courts should decide them according to the principles that do not interfere with the free exercise of religion in accordance with church polity and doctrine." Most recently, the Court has affirmed the constitutional right of the independence of religious institutions in matters of church doctrine, considering the extent to which religious institutions must abide by nondiscrimination laws. In 2012, it recognized that a church's constitutional right to select its ministers exempts it from compliance with statutory employment nondiscrimination laws, at least with respect to "ministerial employees." The Court noted that both the Establishment Clause and the Free Exercise Clause "bar the government from interfering with the decision of a religious group to fire one of its ministers." It explained that "[t]he Establishment Clause prevents the Government from appointing ministers, and the Free Exercise Clause prevents it from interfering with the freedom of religious groups to select their own." This protection "is not limited to the head of a religious congregation," and includes any ministerial position, though the Court has not defined the parameters of that term. Together, these cases indicate that the Constitution prevents the government from exerting control over the duties, authority, and doctrinal positions of the leadership of religious institutions. Thus, in the context of same-sex marriage, the government would not be able to require a religious institution or its ministers to accept members or perform ceremonies that are inconsistent with its faith doctrine without running afoul of the First Amendment. Civil officials who facilitate or perform civil marriage ceremonies (e.g., justices of the peace, court clerks who issue marriage licenses) would not appear to be subject to the same protections as clergy performing religious ceremonies. Civil servants, whose professional duties relate to the state recognition of marriages, may object to same-sex marriage based on their personal religious beliefs, but legal protection of their ability to refuse to perform tasks that conflict with their sincerely held religious beliefs is unclear. As government actors, civil servants are bound by the Establishment Clause's prohibition on showing preference of one religious belief over another. However, serving as a government official does not preclude government employees from protection of individual constitutional protections. Civil servants' religious objections may be protected by federal or state employment nondiscrimination provisions. Alternatively, protection may be available through specific exemptions related to their positions or to the particular job duty to which they object. Following legal recognition of same-sex marriage, first by states and later by the Supreme Court, a number of public officials objected to their role in same-sex marriages. Refusal of some clerks in Florida to issue marriage licenses to same-sex couples drew significant attention at the end of 2014 and the beginning of 2015. In August 2014, a federal judge found Florida's marriage laws, which prohibited recognition of same-sex marriages, unconstitutional under the Fourteenth Amendment. A county clerk of the court requested clarification on the scope of the decision, asking whether, as clerk, she must issue licenses to all qualified same-sex applicants. The court's answer made clear that clerks are obligated to issue marriage licenses to any qualified couple who have a constitutional right to marry, noting that public officials must follow the law, regardless of whether or not they agree with it. Also in early 2015, controversy arose when the Chief Justice of the Alabama Supreme Court ordered state probate judges not to issue or recognize same-sex marriage licenses. A federal district court had struck down the state's same-sex marriage ban and effectively validated same-sex marriage in Alabama. The Chief Justice's order asserted the state's right to defy lower federal court orders that conflict with the state constitution. The court's actions raised a number of legal questions related to federalism and states' rights that are beyond the scope of this report, but ultimately, the federal court issued an injunctive order barring state officials from refusing to issue marriage licenses to same-sex couples. Following the Supreme Court's decision in Obergefell , the Alabama Supreme Court's legal reasoning appears moot, as it claimed that decisions of lower federal courts that conflicted with state law would not be binding. As a matter of federal supremacy, states must comply with decisions of the U.S. Supreme Court. While general legal objections have not succeeded in court, some clerks have asserted their religious objections to facilitating same-sex marriage, resulting in several lawsuits pending in federal courts. Following the Obergefell decision, a county clerk in Kentucky, citing religious objections to same-sex marriages, adopted a policy refusing to issue marriage licenses to any couple. Subsequent lawsuits were filed challenging the clerk's interference with same-sex and opposite-sex couples' constitutional rights. In response, the clerk filed a related challenge, alleging that the governor had interfered with her religious exercise "by insisting that [she] issue marriage licenses to same-sex couples contrary to her conscience." After the clerk failed to comply with a federal district court's order to issue licenses, a federal judge held the clerk in contempt of court and ordered her incarceration until her deputies were able to begin reissuing marriage licenses to eligible couples. The litigation has illustrated the complexities that can be involved in the assertion of religious freedom rights among government employees. While the Kentucky example illustrates legal challenges facing government officials who attempt to implement office policies consistent with their religious objections, individual employees may have other grounds for asserting their religious objections in offices that are issuing licenses. Specifically, Title VII of the Civil Rights Act of 1964 provides federal statutory protection for employees who have religious objections to their job duties. Title VII prohibits employers, including both governmental and certain private entities, from basing employment decisions (e.g., hiring and firing) on an employee's religion. Under Title VII, religion includes "all aspects of religious observance and practice, as well as belief." The employer, in this case the government, must make reasonable accommodations for an employee's religious observance or practice unless it would pose an undue hardship on the employer's operations. Religious practices and observances generally are considered "to include moral or ethical beliefs as to what is right and wrong which are sincerely held with the strength of traditional religious views." The U.S. Supreme Court has held that Title VII's protection of religion does not require an accommodation that would cause more than minimal hardship to the employer or other employees. The Court has also held that Title VII requires employers to work with employees to find a reasonable alternative that would accommodate the employee's objection. However, Title VII does not require "an employer to choose any particular reasonable accommodation." That is, the accommodation offered to the employee need not be the most reasonable one, the one requested by the employee, or the one that imposes the least burden on the employee. Evaluation of reasonable accommodations and undue burden are generally made on a case-by-case basis, depending on the specific circumstances of each claim. Several lawsuits have been filed asserting protection under Title VII for religious objections to job duties relating to same-sex couples. These cases suggest that the traditional reasonable accommodation analysis would apply to pending decisions involving civil employees who object to job duties involving the certification of same-sex marriages. In one case that is still pending, an employee in an Indiana county clerk's office cited religious objections to condoning same-sex marriages when requesting a religious accommodation to be excused from processing related paperwork. According to the complaint in the case, two other employees in the office had offered to process the same-sex couples' applications instead under the proposed accommodation, but the requesting employee was terminated from the position. Prior to the recognition of federal constitutional protection for same-sex couples to marry, similar objections were litigated under Title VII in the context of state recognition of same-sex relationships. For example, in one case, following state enactment of legislation recognizing domestic partnerships between same-sex couples, an employee of the county clerk's office requested an accommodation under Title VII due to religious objections to work related to registration of domestic partnerships. Although the county offered to assist the employee in finding another position outside the office, it denied her request and terminated her employment. The court found that the county did not make sufficient efforts to accommodate the employee, noting that her supervisor initially permitted the employee to be excused if another employee was available to process the registrations, and later rescinded that alternative. Noting that the employee had offered to assume additional duties related to other tasks and that the office had not investigated potential alternatives for accommodation, the court rejected the county's argument that it had no option other than termination. The court's decision built on previous cases in which employees with religious objections were accommodated if they referred customers to nonobjecting employees. The clerk's office had not demonstrated the necessary burden, with the court noting that the office's distribution of work related to the registrations at issue was unevenly distributed, and that the office continued to process all applications even after the objecting employee's termination. The court reasoned that if the office could continue functioning without the employee, it could not be unduly burdened by that employee being excused from a relatively narrow portion of her duties. One potential method to address the conflict facing state officials with religious objections to same-sex marriage would be to adopt conscience protections that specifically would permit such officials to opt out of duties related to marriage. This avenue has been illustrated by state actions in Texas and North Carolina. Following the Court's decision in Obergefell , the Texas attorney general clarified that state officials, including county clerks, their employees, justices of the peace, and judges, retain legal rights to object to duties that involve performing or facilitating same-sex marriages. Emphasizing that any objection and potential accommodation must be evaluated on a case-by-case basis, the opinion cited the availability of federal and state employment nondiscrimination laws (discussed above) and RFRA as generally applicable provisions that would permit employees to assert their need for religious accommodations. Shortly before the Court issued its decision in Obergefell , North Carolina passed legislation that provided a specific statutory exemption for individuals with religious objections to same-sex marriage. Overriding a gubernatorial veto, the state authorized public officials with religious objections to recuse themselves from performing or facilitating "all lawful marriages" by providing written notification. Recusals are effective for at least six months, for which time the official may not perform or facilitate any marriage, whether for a same-sex or heterosexual couple. If all officials in a jurisdiction recuse themselves from performing marriages, the law provides that the state will make another official available to perform those duties. This approach follows those used in other scenarios involving religious objections to job duties and provides accommodations where the objecting party's refusal to participate does not preclude third parties from exercising their legal rights. Because marriage is an institution governed by the states, Congress likely would be unable to regulate the duties of state officials directly regarding marriage procedures. However, Congress nonetheless has been able to effect protection of conscientious objections in other legal matters governed by the states, and may be able to do so in the context of same-sex marriage as well. For instance, the federal government has enacted conscience protections related to abortion, linking the protection to federal funding. Under these federal conscience clauses, employees must be allowed to refuse to participate in certain reproductive procedures as a condition of the employer's receipt of certain federal funds. Thus, the conscience clauses do not provide a right of action for the employee, but instead compel the employer to accommodate the employee as a means of continuing to receive federal funding through the applicable grant program. Federal conscience clauses related to abortion have been linked to a number of potential funding programs. In one example, under the so-called Church Amendment, recipients of HHS grants for biomedical or behavioral research are prohibited from discriminating in employment or staff privileges based on the refusal of an employee to perform or assist "any lawful health service or research activity" on religious or moral grounds. Another example, known as the Weldon Amendment, prohibits federal agencies, states, and local governments that receive certain appropriated funds from discriminating among institutional or individual health care entities on the basis of a health care entity's refusal to provide, pay for, provide coverage of, or refer for abortions. Federal legislation applying similar restrictions on funding provisions that provide appropriated funds to state and local governments may be an option to ensure that those governments accommodate the potential religious objections to same-sex marriage. Notably, however, this type of protection differs from the accommodations discussed in the context of Title VII and RFRA. While Title VII specifically requires a case-by-case examination of whether an accommodation of one party would be an undue burden to another, existing conscience clauses do not require balancing of the interests of the parties in conflict. Existing examples may not be the only method of conditioning funds, though. In theory, at least, even if difficult to administer in practice, a conscience clause may be crafted to establish some degree of balancing or accommodation that is not absolute. If the existing model is followed, however, these types of protection would apply absolutely, and conceivably could mean that a civil employee's religious objections might preclude a same-sex couple's ability to exercise the constitutional right to marry, leading to separate legal challenges, as illustrated in the discussion of the Kentucky court clerk case earlier in this report. As a result of the Obergefell decision, federal, state, and local governments may not discriminate against same-sex couples seeking to marry. The decision did not recognize general Fourteenth Amendment protection based on sexual orientation, nor does it dictate the behavior of private parties. However, through civil rights legislation, federal, state or local governments may regulate the behavior of private entities that operate public accommodations (i.e., entities that provide goods and services to the general public); that provide housing, employment, or credit; or those which receive public funds. Although existing federal civil rights law does not provide express protection in these contexts based on sexual orientation, some states and local governments have enacted such protection, leading to legal challenges from individuals, organizations, and businesses with religious objections to serving same-sex couples. Entities with religious objections may seek legal protection under state religious freedom laws, whether a state RFRA or a state constitutional provision that applies the same protection, claiming that the nondiscrimination laws are a substantial burden subject to the limitations of RFRA. As discussed earlier, a number of states have enacted legislation that is substantially similar to the federal RFRA. Although some more recently enacted state RFRA laws have attempted to address these types of claims more explicitly, it is unclear how RFRA and various civil rights provisions may be reconciled. Because of the absence of civil rights protections based on sexual orientation at the federal level, these issues have been explored as a matter of state laws. A number of Supreme Court decisions have indicated that First Amendment rights are not absolute when weighed against nondiscrimination requirements. The Court considered the balance between freedom of religion under the First Amendment and racial nondiscrimination provisions in Bob Jones University v. United States . Bob Jones University—which operates according to "fundamentalist Christian religious beliefs," including a prohibition on interracial dating and marriage—had originally excluded black students and eventually developed a policy for admission of black students, but proscribed interracial dating and marriage. The lawsuit challenged the revocation of the school's tax-exempt status based on these rules (discussed in detail in a later section of this report), but the Court also considered the role of the school's First Amendment right to practice its religion freely. Acknowledging that eliminating racial discrimination in education was a fundamental public policy, the Court rejected the school's defense that its First Amendment rights permitted it to consider race regardless of statutory nondiscrimination requirements. Even though the case was decided while the Court still applied heightened protection to First Amendment religious exercise claims, it nonetheless held that the government's interest in eliminating racial discrimination outweighed the infringement on the school's religious exercise, stating: "[Not] all burdens on religion are unconstitutional.... The state may justify a limitation on religious liberty by showing that it is essential to accomplish an overriding governmental interest." The Court thus found the government's interest to be compelling, which satisfied the pre- Smith constitutional standard, and permitted enforcement of nondiscrimination protections even if they conflicted with religious exercise rights. In some cases, the Court has considered whether certain civic organizations, such as the Jaycees or Boy Scouts, could be compelled to admit members under nondiscrimination laws who they would otherwise exclude, or whether the organizations could claim First Amendment freedom of association protection. Finding that the Jaycees operated as "large and basically unselective groups," the Court upheld the application of a state public accommodations statute requiring the group to accept female members. The Court noted that the right to associate is not absolute, and must be weighed against the government's interest in regulation of discriminatory practices. Applying strict scrutiny, the Court explained that the local chapters of the Jaycees are places of public accommodations because they provide goods and services to members through their programs. The Court ultimately determined that the government had a compelling interest to offer equal access to those services, and that it had "advanced those interests through the least restrictive means." The Court reached a different outcome in a challenge to the Boy Scouts' membership policy that excluded members based on sexual orientation. The Court held that applying nondiscrimination provisions of the state public accommodations law to the Boy Scouts violated the group's First Amendment right to free association. Noting some controversy regarding whether or not the group should be subject to public accommodations provisions, the Court appeared to recognize that the Boy Scouts' policy opposing extension of membership regardless of sexual orientation was fundamental to the identity of the organization. Accordingly, the Boy Scouts' constitutional right outweighed the government's interest in compelling its compliance with nondiscrimination law. As states began legally recognizing same-sex relationships—whether as marriages, civil unions, or domestic partnerships—individuals and organizations with religious objections filed legal challenges asserting their religious freedom rights as a defense from complying with various nondiscrimination requirements that might require serving such couples. The Supreme Court has recognized the authority of the government to impose requirements on business owners with religious objections to a particular statutory mandate historically, stating the following: [w]hen followers of a particular sect enter into commercial activity as a matter of choice, the limits they accept on their own conduct as a matter of conscience and faith are not to be superimposed on the statutory schemes which are binding on others in that activity. Granting an exemption ... to an employer operates to impose the employer's religious faith on the employees. However, Hobby Lobby has illustrated that business owners do not forfeit all legal rights related to their religious exercise simply by engaging in commercial business. Cases alleging discrimination based on a couple's same-sex orientation historically have arisen in a variety of contexts, including facilities that are considered public accommodations under applicable law, as well as housing opportunities and employment benefits for same-sex couples. For example, in a 2008 case, the California Supreme Court ruled that physicians with religious objections to same-sex couples could not claim constitutional religious exemption from the state's civil rights law, which had been interpreted to prohibit sexual orientation discrimination. A same-sex couple sought assistance for fertility treatment from a medical office that employed several doctors who had religious objections to one of the procedures that might be considered for artificial insemination. The initial physician advised the couple of her objections to certain steps in the planned course of treatment, but informed them that other doctors in the practice did not share those objections and could be available to provide treatment as necessary. Because of complications during the fertility process, the course of the treatment changed and the only two doctors who ultimately would be able to assist the couple objected to serving unmarried or same-sex couples. Under state law, a business establishment and its employees are subject to liability if a person is denied "full and equal accommodations, advantages, facilities, privileges, or services." The court reasoned that the civil rights provision was a valid and neutral law of general applicability under Smith , and therefore declined to recognize an exemption under the First Amendment. The court noted that the physicians could avoid conflict with the law's requirements by limiting their practice to offer only procedures that doctors would perform for any patient, or by ensuring that a physician who did not object was available to patients seeking any given treatment. In this case, only one doctor was licensed to provide the necessary treatment and that doctor claimed religious objections to treating this particular patient. Additionally, the court concluded that even a heightened standard of review, which may be available under the state constitution, would not protect the physicians' religious objections because the state had a compelling interest in providing access to medical care, regardless of sexual orientation, and had no less restrictive means available to do so. Some of the most prominent challenges have been made in the context of business owners' religious objections to serving same-sex couples related to goods and services available for wedding celebrations. For example, in one case that received significant attention on this issue, a religious association that operated a boardwalk pavilion denied access to the facility for a same-sex civil union ceremony, although it permitted the facility to be used for other public events, including other couples' marriage ceremonies. The New Jersey Division on Civil Rights upheld an administrative ruling that the association had violated state nondiscrimination laws (which included protection based on sexual orientation) because, as a place of public accommodation, the pavilion must be made available on an equal basis to couples, regardless of sexual orientation. Challenges in other states have had similar results. A Washington court rejected religious freedom claims of a florist who declined to serve a gay couple's request for wedding arrangements. Applying heightened scrutiny under the state constitution, it recognized a compelling interest in eradicating discrimination, and held that allowing objecting businesses to refer customers to alternative businesses would undermine that purpose. A Colorado court held that a bakery could not claim exemption from the state's nondiscrimination law based on its religious objections to serving same-sex couples. Examining both federal and state constitutional protections, the court noted that the law was a neutral law of general applicability, thus satisfying the federal standard, and that state law did not require the court to apply a heightened standard of protection. While challenges applying the Smith standard typically have been decided in favor of the same-sex couple, some businesses have invoked RFRA in defense of their objections. In a case that has been cited as a likely motivating factor for some states drafting new or broader religious freedom laws, the Supreme Court of New Mexico held that a wedding photography business violated state public accommodations provisions after refusing to serve a same-sex couple, and that the business could not assert protection under the state RFRA. The business argued that it would not discriminate against individuals based on their sexual orientation, but that its religious objections should protect it from being compelled to serve individuals in contexts that would demonstrate their orientation, that is, as couples or at weddings. The Court rejected that argument, and further held that the company's First Amendment rights were not infringed. Among the issues the state supreme court considered were whether the business would qualify for protection as a "person" with free exercise rights and whether the law was neutral and generally applicable. Assuming the business could claim protection, the court held that a free exercise claim could not survive because the public accommodations law that allegedly infringed was a neutral law of general applicability. The court declined to apply the state RFRA, explaining that the statute could be violated only by actions of a government agency, which it interpreted to not include the legislature or courts. Furthermore, according to the court, the statute was applicable only to provide relief in cases in which the government was a party. Prior to the Court's decision in Hobby Lobby , it may have seemed unlikely that business owners could claim protection for their religious beliefs. However, the Hobby Lobby decision made clear that owners of secular, for-profit businesses may assert religious freedom protections under the federal RFRA. As mentioned earlier in this report, many states have enacted RFRAs similar to the federal statute, and therefore likely could also be invoked to protect such entities. Recently proposed and enacted state versions of RFRA have attempted to address concerns about potential limits to the applicability of statutory protections for religious freedom, as illustrated in the New Mexico photography case. For example, Arizona's legislature passed amendments to its RFRA to clarify that the government would not be required to be a party to a lawsuit invoking RFRA as a defense. The bill was vetoed, however, by the governor, who cited potential unintended consequences and broad opposition to the bill from the business community. Likewise, states that proposed broader language when considering enacting state RFRA legislation faced significant controversy in early 2015 because of opposition from businesses and the unclear consequences that the broader language may have. Additionally, the Court's decision in Hobby Lobby raised a number of questions regarding the extent to which RFRA protections could be used to exempt businesses from statutory nondiscrimination mandates. As mentioned in an earlier section of this report, the majority and dissenting opinions debated the potential scope of the decision's effect, with the dissent expressing concern that the decision may protect businesses that engage in discriminatory practices. However, the majority specifically responded to the concern that RFRA might permit a business to engage in racially discriminatory hiring practices, writing that the "decision today provides no such shield. The Government has a compelling interest in providing an equal opportunity to participate in the workforce without regard to race, and prohibitions on racial discrimination are precisely tailored to achieve that critical goal." It may be noted that the Court's statement did not address sexual orientation discrimination specifically, and that the decision emphasized the case-by-case basis of evaluating application of the heightened protection provided by RFRA. Thus, although the decision implies that RFRA protections would not supersede at least some civil rights protections (e.g., employment rights), it is not clear how the issue would be decided on the merits of a particular legal challenge. Concerns about religious objections to same-sex marriage have also manifested in the context of government funding programs that provide financial assistance to private entities, including organizations with religious objections to same-sex marriage. The provision of public funds to religious entities raises a number of constitutional questions, which are beyond the scope of this report, but generally such funding has been permitted under certain circumstances. Questions about the implications of Obergefell for religious service providers who object to same-sex marriages have arisen most often in the realm of adoption services, but religious social service providers receiving federal funds may have objections in other contexts as well. The crux of the question is whether entities that receive public funds to administer a particular program may refuse to serve same-sex couples who would be potential beneficiaries of that program. For the purposes of this report, the term beneficiaries, in the context of adoption programs, generally refers to parents who seek assistance to adopt a child from an adoption services provider. It is noted that the children being adopted also may be considered beneficiaries of the program. Obergefell requires states to recognize same-sex marriages, but the Court's decision did not address whether states must recognize same-sex couples as potential foster or adoptive parents. States have adopted a range of laws regulating adoption of children, including limitations based on the potential parents' sexual orientation or marital status. As states began the process of recognizing same-sex marriages in recent decades and enacting protections against discrimination based on sexual orientation, religious entities have raised objections—based on religious beliefs that do not condone same-sex relationships—regarding state requirements to consider placing children with same-sex parents. Although eligibility to adopt remains a matter of state law, the federal law or policies may impact the adoption process, particularly through Congress's authority to condition the use of federal funds. The federal government provides funds to state child welfare agencies for their use in recruitment of foster and adoptive parents, promotion of adoption and related support services, and provision of assistance for children in foster care or adopted from foster care. Although restrictions on federal assistance currently include prohibitions on state or local recipients related to the consideration of race, color, or national origin of the potential foster or adoptive parent or child, there appears to be no federal prohibition on the consideration of sexual orientation in the placement process. Following Obergefell , questions have been raised whether the recognition of a constitutional right to marry for same-sex couples consequently would require adoption services providers to consider placing children with same-sex couples who are otherwise eligible to be adoptive or foster parents. Because Obergefell did not establish a right of same-sex couples to adopt, and because federal law currently does not include any conditions requiring nondiscrimination based on sexual orientation for adoption services funding, it appears unlikely that religious entities would be required to place children with same-sex couples as a matter of federal law. However, state nondiscrimination laws or related conditions on state funds may impose such requirements. Although federal law currently does not address concerns about potential discrimination against same-sex couples seeking to adopt a child or about potential burdens imposed on religious service providers, Congress may consider legislation that would respond to either or both of those issues. Congress previously has enacted legislation that addressed both of these concerns in the context of its so-called faith-based funding rules (also commonly known as charitable choice rules). It may also rely on the conscience clause model that has been used to protect entities with religious objections to abortion that receive federal funds under certain health care programs. A significant issue related to faith-based funding that is particularly relevant to same-sex adoptions has been the balancing of rights of the religious organization and the rights of beneficiaries of the program. Over the past two decades, Congress has enacted protections for religious service providers that participate in publicly funded programs, and concurrent restrictions on discrimination against beneficiaries in publicly funded programs. In these examples of programs involving religious service providers, federal law provides both protections for the providers' religious identity and protections for the rights of the program beneficiaries who may seek services from those providers (in this case, same-sex parents seeking to adopt a child). As a general matter, faith-based providers' participation in these programs has been controversial, but the legislation authorizing participation includes a number of provisions to address potential constitutional issues. So-called faith-based funding or charitable choice legislation includes provisions that allow a religious organization receiving federal funds to "retain its independence" regarding its control over its religious exercise and beliefs. Such an organization cannot be required to change its form of internal governance or remove religious symbols from its facilities. Although the Supreme Court has not considered challenges to these provisions, the Court has permitted religious entities to receive federal funds directed for secular purposes with certain conditions in a number of other cases. Some programs include explicit protections for beneficiaries who object to the religious character of a recipient organization. The state must notify the beneficiary of an alternative provider that would be accessible to the beneficiary. Religious service providers are prohibited from discriminating against beneficiaries "on the basis of religion, a religious belief, or refusal to actively participate in a religious practice." Thus, current provisions in existing statutory programs protect both the religious identity of the organization and the religious freedom of beneficiaries. These rules apply only to the programs under which they were enacted, and do not apply to all federal funds that might be distributed to religious entities under other programs. If Congress adopted statutory nondiscrimination requirements for adoption services funding, the balance of the rights of participating religious providers and potential same-sex parents as program beneficiaries likely would be a matter of congressional discretion. It may be noted that the parameters of the ban on discrimination against beneficiaries based on religion are unclear. In other words, would such a prohibition mean that service providers cannot only serve beneficiaries who are co-religionists? Alternatively, the prohibition arguably could be interpreted more broadly to mean that service providers cannot base their decision on other factors that do not involve religious affiliation but rather other characteristics to which the provider's religious doctrine objects (i.e., sexual orientation). In other contexts, for example, under employment nondiscrimination statutes, courts have indicated that discrimination based on religion may include other forms of discrimination as long as the action relates to a religious tenet. Under this theory of interpretation, a religious organization that receives public funds may argue that extending its services to same-sex beneficiaries would infringe on its religious identity in violation of statutory religious freedom protections. In other words, the religious organization's preference for opposite-sex parents may be considered a matter of its religious doctrine which arguably could not be infringed unless the standards of protection available under RFRA were met. It is noted that this is a fairly novel and very complicated issue because it arises in the context of funding conditions, rather than direct regulation, and therefore may not be subject to the same analysis. Such a case likely would raise a similar set of issues as those discussed earlier regarding how to balance the rights of a religious organization with the civil rights of other individuals, as was litigated in Bob Jone s University. Congress may choose to consider a federal conscience clause (similar to that discussed in the context of civil officiants earlier in this report) to protect religiously affiliated agencies' objections to placing children with same-sex couples. Federal conscience clauses arguably could protect the right of religious objectors by conditioning federal funding (e.g., adoption services grants to state agencies) on nondiscrimination based on religion. This approach would ensure that funds may only be distributed to recipients (i.e., the state agencies) if the religious objections of participating service providers are accommodated. In other words, a state that forced a religious adoption agency to place children in homes with same-sex couples would consequently lose federal funds under the program. A conscience clause would incentivize inclusion of religiously affiliated adoption agencies because of the benefits of federal funding for the program. Congress may seek to balance the interest of such agencies with the interests of same-sex adoptive parents by including a requirement that agencies with objections provide alternative options for couples whom the agency cannot serve. It is important to remember that existing models of federal conscience clauses do not include a right of action for the individual, but Congress is not precluded from including one in the future. In existing examples of faith-based funding rules and conscience clauses, entities with religious objections generally have been required to notify beneficiaries or customers of an alternative provider who would not object to serving that individual. However, when considering specific rules to allow religiously affiliated adoption agencies to participate in federally funded programs, Congress may seek to ensure the availability of alternative service providers for beneficiaries that certain religiously affiliated agencies would object to serving. For example, if Congress enacts protections allowing religious providers to refuse to place children with certain couples, there may be notable impacts on the availability of services for those couples, depending on the range of alternative providers. If there are few alternatives available, exempting religiously affiliated providers may mean that some beneficiaries effectively cannot otherwise participate in the program. Given the proportion of religiously affiliated adoption agencies in a particular jurisdiction, a decision to require such agencies to make placements to which they have religious objections may have repercussions for the program as a whole. For example, Catholic Charities handles 20% of adoption and foster care services in Illinois. If Catholic Charities withdrew from providing these services because of its religious objections, the withdrawal would likely increase the workload of other agencies providing adoption and foster care services. Another potential issue, which was raised at oral argument in Obergefell and recently addressed by Internal Revenue Service (IRS) Commissioner Koskinen in testimony before Congress, is whether churches and other religious entities could be denied federal tax-exempt status if they act in opposition to same-sex marriage (e.g., a church that does not perform same-sex marriages or a religious school that refuses to provide same-sex couples with married student housing). Churches and other religious organizations, such as religious schools and religiously affiliated charities, are among the entities that qualify for tax-exempt status under Section 501(c)(3) of the Internal Revenue Code (IRC). Section 501(c)(3) entities are broadly referred to as charitable organizations. In addition to being exempt from federal income and unemployment taxes, they are eligible to receive tax-deductible charitable contributions under IRC Section 170. One qualification for Section 501(c)(3) status and Section 170 eligibility is that an organization cannot engage in activities that are illegal or violate a well-established, fundamental public policy. This is referred to as the "illegality doctrine." The doctrine is not found in the statutory language of either section. Rather, the Supreme Court has held that it is an implicit condition under both sections, stemming from the common law of charitable trusts. The possibility that the illegality doctrine could be applied to churches and other religious institutions that act in opposition to same-sex marriage is controversial. This report analyzes two legal questions that would be raised by the doctrine's application in this context. The first is whether a religious organization's First Amendment rights would be violated if it were denied Section 501(c)(3) status due to actions based on sincerely held religious beliefs. If yes, then that is the end of the matter, and the denial could not occur. If, however, the denial of tax-exempt status would not run afoul of the First Amendment, then the second question is whether such denial would be appropriate under the illegality doctrine. Answering this question requires determining whether a law or public policy exists in the same-sex marriage context that would trigger the doctrine's application and, if so, whether an organization's specific actions justify revocation under the doctrine. These questions are discussed below. The first question is whether a religious entity's First Amendment rights would be violated if it were denied Section 501(c)(3) status due to actions that were based on sincerely held religious beliefs. In the seminal 1983 case Bob Jones University v. United States, the Supreme Court held that such denial is permissible under certain circumstances. In Bob Jones , the Court upheld the IRS's determination that a private religious school could have its Section 501(c)(3) status revoked under the illegality doctrine for engaging in racially discriminatory practices. In so doing, the Court held that the revocation did not run afoul of the First Amendment's religious clauses, even assuming the school's racially discriminatory policies were based on sincerely held religious beliefs. With respect to the Free Exercise Clause, the Court explained that the government can justify a burden on religion by showing it is necessary to accomplish a compelling governmental interest that cannot be achieved by less restrictive means. The Court determined that the burden on religion in the form of revoked tax benefits was justified in light of the government's compelling interest in eradicating racial discrimination in education, and that no less restrictive means existed. The Court also rejected the school's argument that the revocation policy violated its rights under the Establishment Clause by favoring religions that did not have such racial beliefs, with the Court concluding that the policy was permissible because it was based on neutral, secular criteria. Notably, the extent to which the First Amendment analysis in Bob Jones applies in the context of churches and other houses of worship is not clear. The Court, in holding that the school's First Amendment rights were not violated, expressly stated that it was not addressing churches and other "purely religious institutions," and emphasized that the governmental interest supporting revocation was denying public support to racial discrimination in education. Thus, the Court did not address the circumstances under which the application of the illegality doctrine to a church acting on sincerely held religious beliefs would be constitutionally permissible. It does not appear that any cases since Bob Jones have clarified this issue. As such, it is not clear whether the Bob Jones analysis would support the denial of tax-exempt status under the illegality doctrine for churches and other houses of worship acting on sincerely held religious beliefs, particularly in light of the constitutional protection of noninterference in internal matters of religious institutions discussed above. In those instances in which the denial of Section 501(c)(3) status to a religious entity is permissible under the First Amendment, the next question is whether the illegality doctrine would support such denial for religious entities acting in opposition to same-sex marriage. This raises two fundamental issues: (1) whether a Section 501(c)(3) organization that acts in opposition to same-sex marriage would be in violation of a law or public policy and thus trigger the doctrine's application; and (2) if so, whether the organization's specific actions would justify the denial of tax-exempt status under the doctrine. The first issue is whether a Section 501(c)(3) organization's action in opposition to same-sex marriage would be in violation of a law or public policy and thus trigger the application of the illegality doctrine. If the entity's actions were illegal, then the doctrine would apply (although denial might not be justified in light of the organization's other activities, as discussed below). In those situations in which a law is not violated (which would appear to generally be the case in the same-sex marriage context), the Supreme Court has clearly stated that the doctrine applies only if there is "no doubt" the organization's activity "is contrary to a fundamental public policy." This raises the critical question of how to determine whether such a public policy exists. In Bob Jones, the Supreme Court held that the school's racially discriminatory practices violated a well-established, fundamental national public policy against racial discrimination in education. The Court determined that this public policy existed because all three branches of the federal government had taken clear, unmistakable action to end racial discrimination in education. As evidence, the Court pointed to its unbroken stream of cases beginning with the landmark decision in 1954 of Brown v. Board of Education ; multiple laws passed by Congress, including the Civil Rights Act of 1964; and various executive orders and presidential pronouncements. Here, it is arguably not clear that a well-established, fundamental public policy exists that would justify the denial of Section 501(c)(3) status to an organization acting in opposition to same-sex marriage. In contrast to Bob Jones , where the Court identified decades of congressional, judicial, and executive branch actions prohibiting racial discrimination in education, analogous governmental action in support of same-sex marriage is arguably minimal. For example, while the Supreme Court has issued two significant cases in the context of same-sex marriage— Obergefell , holding that states must recognize same-sex marriage, and Windsor v. United States , striking down Section 3 of the federal Defense of Marriage Act—these are recent cases, and their implications are not fully developed. Similarly, it might be argued that Congress has not taken significant legislative action in the same-sex marriage context that would be analogous to the Civil Rights Act of 1964 and other laws prohibiting racial discrimination. Thus, at this time, it is not clear the illegality doctrine would apply to Section 501(c)(3) entities acting in opposition to same-sex marriage. In July 2015, IRS Commissioner Koskinen took this position in testimony before Congress. He stated that the IRS would not attempt to revoke the tax-exempt status of religious entities that engage in activity in opposition to same-sex marriage because public policy does not currently support revocation under the illegality doctrine. The Commissioner did, however, leave open the possibility that the IRS might revisit the issue in response to future legal and policy developments. This is consistent with the Supreme Court's decision in Bob Jones , where the Court noted that public policy can change over time, and behavior that once was considered acceptable can later run afoul of the illegality doctrine. The Commissioner indicated that any future action by the IRS would only be done after sufficient public notice and opportunity to comment, and that nothing would happen during the next several years. As the Court explained in Bob Jones and the Commissioner discussed in his testimony, the IRS is not responsible for determining what constitutes public policy—that determination is left to Congress and the courts. Rather, the IRS is responsible, in its role of administering the tax laws, for determining whether a public policy exists so that denial of tax-exempt status would be appropriate under the illegality doctrine. If the agency were to find that a public policy exists sufficient to trigger the doctrine's application, its determination would be subject to review by Congress, which could address the matter through legislation (see " Implications for Congress " below), and the courts, which could assess the validity of the agency's action in any legal challenges brought by affected organizations. In light of the possibility that the public policy prong of the illegality doctrine could become relevant in the same-sex marriage context at some later date, it might be asked what led the IRS to determine the doctrine was triggered for private schools engaging in racially discriminatory practices, which then led to the Bob Jones case. It seems a court case brought by black families in Mississippi challenging the provision of tax-exempt status to discriminatory private schools in that state played a pivotal role. Prior to 1970, the IRS had allowed private schools to qualify for Section 501(c)(3) status without considering their racial admissions policies. In January 1970, a three-judge panel for the D.C. Circuit issued a preliminary injunction in the Mississippi case, prohibiting the IRS from granting tax-exempt status to the schools. Six months later, the IRS issued a news release stating it could "no longer legally justify allowing tax-exempt status to private schools which practice racial discrimination." In June 1971, the court permanently enjoined the IRS from granting tax-exempt status to any Mississippi school without a nondiscrimination policy, and the IRS responded shortly thereafter with a revenue ruling articulating a nationwide policy for denying tax-exempt status to private schools engaging in racial discrimination. To the extent that the IRS application of the public policy doctrine in this context was influenced by the Mississippi case, it might be difficult for an individual to bring a similar case in the same-sex marriage context under the Court's current standing jurisprudence. Constitutional standing requires that a party establish personal injury by allegedly unlawful conduct fairly traceable to the defendant, and that the injury is redressable in court. Beginning in 1976, the Court has applied this standard in a way that has significantly limited the ability of third parties to challenge the IRS's administration of the laws providing tax-exempt status. This may make it difficult, although not impossible, to challenge an IRS policy administering (or failing to administer) the illegality doctrine. Even if a Section 501(c)(3) organization were found to be in violation of a law or public policy, this would not mean the organization would automatically lose its tax-exempt status under the illegality doctrine. Rather, the denial would have to be justified based on the entity's actions and their interaction with the law or public policy at issue. A key question would likely be whether the organization, despite its impermissible actions, should still be granted tax-exempt status because of its other charitable activities. While this issue was not addressed by the Court in Bob Jones , the IRS subsequently explained that an organization with a charitable purpose will lose its tax-exempt status under the illegality doctrine only if it engages in "substantial" impermissible activities. It is not clear what threshold is used for determining substantiality. An important aspect of the illegality doctrine is that it is an implicit statutory condition for Section 501(c)(3) status and Section 170 eligibility. Congress could therefore choose to affect the doctrine's applicability by amending the statutes. For example, Congress could, if it so chose, prohibit the application of the doctrine; limit its application to only illegal behavior (i.e., remove the doctrine's public policy component); or codify the doctrine as developed through case law and IRS rulings. Legislation could address the doctrine's application generally or only in the same-sex marriage context. Any legislative changes would have to be consistent with the Constitution. Under current law, it does not appear that any Supreme Court case suggests an amendment to the IRC would run afoul of the Constitution; however, an issue could arise if same-sex couples or lesbian, gay, bisexual or transgender (LGBT) individuals were found to have constitutional protections that would be violated by providing tax-exempt status to discriminatory institutions. For example, in Bob Jones , the Court noted that some amicus briefs had argued that denial of Section 501(c)(3) status to racially discriminatory private schools was required by the Fifth Amendment's equal protection guarantees provided to affected black students, but the Court did not address the argument due to its holding that the denial was required under the illegality doctrine. Had the Court determined that the denial was required by the Fifth Amendment, then it appears Congress could not have amended the IRC to permit Section 501(c)(3) status to racially discriminatory schools because this would have violated the students' constitutional rights. It should also be noted that legislation outside the context of tax-exempt status could affect the application of the illegality doctrine. For example, if Congress were to pass legislation expanding the legal protections afforded to same-sex couples or LGBT individuals generally, then this action might be evidence that a public policy exists sufficient to trigger the doctrine's application. On the other hand, if Congress were to take no action or pass legislation limiting the scope of their protections, then this approach might support the determination that such a public policy does not exist at this time.
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The U.S. Supreme Court's landmark decision in Obergefell v. Hodges in June 2015 held that the Fourteenth Amendment of the U.S. Constitution required states to issue marriage licenses to same-sex couples and to recognize same-sex marriages formed in other states. The Court's decision in Obergefell does not directly address incidental claims related to religious freedom in the context of same-sex marriage. However, the case has generated a number of other questions regarding potential implications of the Court's decision, particularly with respect to the rights of individuals or entities with religious objections to same-sex marriage. Among the issues raised are the obligation of marriage officiants to perform or facilitate same-sex marriage ceremonies; civil rights protections for same-sex couples and religious objectors; potential protections for religious social service providers in federally funded programs; and the impact on tax-exempt status of religious entities that object to same-sex marriage. Questions related to the solemnization of same-sex marriages involve whether individuals who serve as marriage officiants, either in religious or civil ceremonies, would be required to solemnize marriages to which they object. Although long-standing Supreme Court jurisprudence indicates that religious officiants would be protected under the First Amendment, the protections available to civil servants whose duties include issuing state marriage licenses or officiating at civil ceremonies are not as straightforward, and may depend on a number of other factors. Expansion of constitutional protection to same-sex couples also may have implications under civil rights law and certain federally funded social service programs. Under federal and state civil rights provisions, questions have involved whether owners of public accommodations may be required to serve same-sex couples; whether health care providers may be required to provide medical treatment regardless of a patient's sexual orientation; and whether religious institutions must provide housing to same-sex couples. Generally, courts are finding that a business must provide the same services to same-sex couples as it provides to opposite-sex couples, or that the business must not offer services that it would object to offering to same-sex couples. In the context of social service programs, some religious organizations receive federal funding to provide certain social services (e.g., adoption). However, concerns have been raised regarding whether such organizations could decline to serve same-sex couples based on their religious objections to same-sex marriage. Finally, the Court's decision may affect religious entities' tax-exempt status under Section 501(c)(3) of the Internal Revenue Code. One qualification for Section 501(c)(3) status is that an organization cannot engage in activities that are illegal or violate a fundamental public policy. This is referred to as the "illegality doctrine." A question that has been raised in light of the Obergefell decision is whether religious entities that act in opposition to same-sex marriage could be in violation of the doctrine. In testimony before Congress in July 2015, the Internal Revenue Service (IRS) Commissioner stated that the IRS would not currently apply the doctrine to religious entities acting in opposition to same-sex marriage, but left open the possibility that the agency could change its position in response to future legal and policy developments. If the doctrine were to apply, one question that might arise is whether a religious entity's First Amendment rights would be violated if its tax-exempt status were revoked due to actions based on sincerely held religious beliefs. The Supreme Court has held in another context that denial of tax-exempt status of religious schools under the illegality doctrine may be permissible under the First Amendment, so long as the law or policy requiring the denial advances a compelling governmental interest that could not be served by less restrictive means and is based on neutral, secular criteria. Notably, the Court's holding did not address the doctrine's application to houses of worship, thus leaving open the possibility that they may be afforded greater protections.
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The Office of Personnel Management (OPM) has issued guidance for federal executive branch departments and agencies on various flexibilities available to facilitate HRM for emergency situations involving severe weather, natural disaster, and other circumstances multiple times since 2001. Notably, these issuances occurred following the September 11, 2001, terrorist attacks; in the aftermath of Hurricanes Katrina and Rita, which occurred back-to-back in the Gulf Coast region of the United States in late summer 2005; and as part of fulfilling OPM's responsibilities under the President's national strategy on pandemic influenza in 2006. Most recently, OPM issued guidance in a memorandum titled, "Human Resources Flexibilities for Hurricane Harvey and its Aftermath," issued on August 27, 2017. The memorandum "remind[s] agencies of the wide range of Human Resources (HR) policies and flexibilities currently available to assist Federal employees." On September 1, 2017, OPM, in consultation with the Office of Management and Budget (OMB), established an emergency leave transfer program for federal employees who were adversely affected by Hurricane Harvey. Seven days later, on September 8, 2017, as Hurricane Irma tracked toward Florida, OPM authorized departments and agencies to hire individuals under excepted service appointments and on a temporary basis for up to one year (with an extension up to one year). The individuals "will be directly involved with the recovery and relief efforts associated with Hurricane Harvey or Hurricane Irma." Subject to guidance from the OPM Director, Federal Executive Boards (FEBs) are available to assist the agency with matters related to emergency operations, such as operations under hazardous weather conditions. The FEBs were established by a presidential memorandum issued by President John F. Kennedy in November 1961, to "provide means for closer coordination of Federal activities at the regional level." Currently, FEBs operate in 28 metropolitan areas. A goal of the FEBs is "to create effective collaboration on emergency readiness and recovery, and to educate [the] Federal workforce on issues in emergency situations." Table 1 , below, provides information on selected flexibilities related to staffing, compensation, leave transfer, and telework in Title 5 of the United States Code and Title 5 of the Code of Federal Regulations . The table refers to several HR terms, which are explained as follows: Competitive s ervice positions are civil service positions in the executive branch, except positions which are specifically excepted from the competitive service by or under statute; positions to which appointments are made by nomination for confirmation by the Senate, unless the Senate otherwise directs; and positions in the Senior Executive Service (SES). Such positions require applicants to compete against one another in open competition based on job-related criteria to obtain employment. The positions are subject to the civil service laws codified at Title 5 of the United States Code and to oversight by OPM. Employees are to be selected from among the best-qualified candidates and without discrimination. Excepted s ervice positions are civil service positions which are not in the competitive service or the SES. Qualification standards and requirements for these positions are established by the individual agencies. The Title 5 rules on appointment (except for veterans' preference), pay, and classification do not apply. SES positions are classified above grade 15 of the General Schedule or in level IV or V of the Executive Schedule, or an equivalent position, and are not filled by presidential appointment by and with the advice and consent of the Senate. Members of the SES, among other duties, direct the work of an organizational unit and exercise important policymaking, policy-determining, or other executive functions. The Reemployment Priority List is the mechanism agencies use to give reemployment consideration to their current and former competitive service employees who will be, or were, separated by reduction in force or who are fully recovered from a compensable injury after more than one year.
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Federal executive branch departments and agencies have available to them various human resources management flexibilities for emergency situations involving severe weather, natural disaster, and other circumstances. At various times, the Office of Personnel Management issued guidance on these flexibilities, which supplements the basic policies governing staffing, compensation, leave sharing, and telework in Title 5 of the United States Code and Title 5 of the Code of Federal Regulations. Some examples of when issuances have occurred include following the September 11, 2001, terrorist attacks; in the aftermath of Hurricanes Katrina and Rita in 2005; in response to pandemic influenza in 2006; and in the aftermath of Hurricane Harvey in 2017.
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International trade in goods and services along with flows of financial capital affect virtually every person living in the United States. Whether one buys imported clothes, gasoline, computers, or cars; works in an industry that competes with imports; or sells products abroad, the influence of international trade on economic activity is pervasive. Although the United States is one of the three largest exporters in the world (China and Germany are the other two), U.S. sales abroad are overshadowed by the huge demand by American consumers and industry for imported products. Since 1976, the United States has incurred continual merchandise trade deficits with annual amounts increasing steadily until the plateau of years 2005 through 2008. Then in 2009 the U.S. trade deficit on goods declined roughly 39%, as U.S. imports fell much faster than exports during the recession. As the economy recovered the trade deficit began increasing again, by 28% in 2010 and 15% in 2011 ( Table 1 ). For Congress, the trade deficit and other aspects of international trade enter into public policy considerations through many portals. At the macroeconomic level, trade deficits are a concern because they affect U.S. economic growth, interest rates, labor, and the debt load of the economy. As the trade deficit rises relative to the total economy, the risk increases that the dollar will weaken, prices will rise, financial markets will be disrupted, and the economic well-being of the population will be reduced. A large trade deficit, however, naturally follows a booming economy as robust domestic demand generates purchases of both domestic and imported goods. At the strategic level, trade ties often lead to a deepening of bilateral relations with other nations that can develop into formal free trade agreements (FTAs) or political and security arrangements. Trade also can be used as a tool to accomplish strategic objectives—particularly through providing preferential trading arrangements or by imposing trade sanctions. At the microeconomic level, imports of specific products can generate trade friction and pressures from constituent interests for the government to shield U.S. producers from foreign competition, provide adjustment assistance, open foreign markets, or assist U.S. industries to become more competitive. At the household level, rising trade deficits and free trade agreements are often associated with employment, particularly concerns over a loss of jobs, a highly relevant issue for the American public. This report provides an overview of the current status, trends, and forecasts for U.S. import and export flows as well as certain trade balances. The purpose of this report is to provide current data and brief explanations for the various types of trade flows, along with a brief discussion of trends that help inform the discussion of the various policy issues mentioned above. However, an analysis of trade policy as an economic or strategic tool is beyond the scope of this report but can be found in various other CRS reports. Further detail on trade in specific commodities, with particular countries or regions, or for different time periods can be obtained from the Department of Commerce, from the U.S. International Trade Commission, or by contacting the authors of this report. For January-July 2012 merchandise exports increased 6% over the same period in 2011, imports increased 5%, and the U.S. trade deficit with the world increased, or became more negative, by 2%. These changes are lower than those from the same seven-month period in 2011, when exports increased by 18%, imports increased by 17%, and the trade deficit increased by 16%. For the year 2011, U.S. merchandise exports to the world rose 16%, U.S. merchandise imports also rose 16%, and the U.S. trade deficit rose 15%, from $645 billion in 2010 to $738 billion in 2011. Because imports are greater than exports, exports must increase at a greater percentage than imports to maintain the current trade balance. In 2011, as the U.S. economy continued to recover from the financial crisis, U.S. merchandise exports and imports finally surpassed their previous 2008 peaks. Another sign of the continued recovery was the 18% increase in the fuel deficit. Though down from 26% growth in 2010, it sharply contrasts the 48% decline in the fuel deficit in 2009. The U.S. top export commodity in 2011 changed from the historic top export of civilian aircraft, engines, and equipment, which increased 11.4% from 2010, to refined petroleum products, up 70%. The top import commodity remained crude oil and mineral fuels, up 29% in 2011, compared to an increase of 35% in 2010. The second leading U.S. import commodity was motor vehicles, up 7%. Total trade with China—the second-largest U.S. trade partner—continued to increase: U.S. exports to China rose 13%, U.S. imports from China rose 9%, and the U.S. trade deficit with China grew by 8%. In 2009, as the global financial crisis worsened and the United States and other developed countries dropped into recession, the declining U.S. trade deficit contributed positively to the growth in the U.S. economy. The U.S. recession would have been worse without the shrinking U.S. trade deficit. However, the faltering global economic conditions that caused the declining U.S. demand for imports, and hence the fall in the trade deficit, also caused a decline in demand for U.S. domestic goods and services. While U.S. imports declined in 2009, they rose in 2010 and 2011, forcing companies competing with imports to continue to face diminished demand as the domestic economy remained sluggish. These conditions create increased pressures on political forces to protect domestic industry from imports, not only in the United States, but around the world. As the world is recovering from the great recession countries are vying to capture the increase in global trade by keeping the value of their currencies low, particularly China. The global financial crisis made 2009 a very difficult and negative year for the United States and other developed countries' trade by any measurement metric. This sharp decline greatly contrasts the general trend over recent decades of large increases in U.S. and world trade. Even in real terms—movements net of price changes—trade in both goods and services fell dramatically in 2009 ( Figure 1 ). However, U.S. goods trade saw the most fluctuations. In 2009, U.S. merchandise exports to the world declined by 18%, while U.S. imports from the world declined 26% relative to 2008 values. Both flows reversed in 2010, with U.S. exports increasing by 21% and U.S. imports increasing by 23%. In 2009, the U.S. deficit in merchandise trade dropped by more than one-third, relative to 2008, to $506 billion, as the U.S. recession caused imports to decline faster than exports. As the U.S. economy began to recover in 2010, the U.S. merchandise deficit grew more negative by 28%. The deficit continued to grow in 2011 by 15%. Exports of goods of $1,497 billion in 2011 increased by $208 billion or 16% over the $1,289 billion in 2010. This places the growth in exports on track to achieve a doubling over the five-year period 2010-2015, a goal outlined in the President's National Export Initiative. Increases in major export sectors were refined petroleum products up $38 billion or 70%; civilian aircraft, engines, and equipment up $8 billion or 11%; and motor cars up $9 billion or 23%. Imports of goods of $2,236 billion increased by $302 billion or 16% over 2010. Increases in major import sectors were crude oil up $77 billion or 29%, motor cars up $8 billion or 7%, and refined petroleum products up $25 billion or 37%. The impact of the global financial crisis on U.S. goods trade and the slow recovery can be seen in both Figure 2 and Table 1 . U.S. exports and imports of goods began to decline in August 2008. This trend continued until exports of goods began to increase in May 2009 and imports began to increase in June. Monthly exports had dropped from $115 billion in August 2008 to $80 billion in April 2009. More drastically, monthly U.S. goods imports dropped from $187 billion in August 2008 to $119 billion in May 2009. Exports have generally continued increasing since the end of the recession. Imports also increased for much of that period, but have recently declined since March 2012. In 2011, total annual imports of services of $427 billion and exports of $606 billion yielded a surplus in U.S. services trade of $179 billion. The U.S. service industries, particularly financial services, tourism, shipping, and insurance, tend to compete well in international markets. U.S. services trade was also impacted by the global financial crisis but to a lesser extent than goods trade ( Table 2 ). Monthly services exports have mostly increased since the end of the recession, but fell in the last months of 2011 ( Figure 3 ). They have since recovered, remaining around $53 billion since May 2012. U.S. services imports have increased consistently since the end of the recession. Since the United States runs a surplus in trade in services and a deficit in trade in goods, the combined deficit on goods and services is lower (less negative) than the deficit on goods alone. In 2011, exports of goods and services of $2,103 billion and imports of $2,663 billion resulted in a deficit of $560 billion. Trade in goods and services has risen in importance in the U.S. economy over the past two decades. Figure 4 below shows imports and exports of goods and services, both in U.S. dollars and as a percentage of gross domestic product (GDP). By both measures trade is on the rise in the United States. In 1991 total trade was equal to about 20% of GDP and grew to more than 30% of GDP by 2011. While total trade has increased, imports have grown faster than exports, causing an increase in the trade deficit. In the most recent years it has fallen slightly, concurrent with the U.S. recession and global financial crisis. In 2011 the annual trade deficit on goods and services amounted to approximately 3.7% of U.S. GDP (U.S. GDP was $15,076 billion in 2011), up from 3.4% in 2010 but down from 4.8% in 2008, 5.1% in 2007, and 5.8% in 2006. A level of 5% for countries is considered to be cautionary by economic observers. At that level, other countries have experienced problems paying for imports and maintaining the value of their currency. Given the "safe haven" effect (investors seeking a safe investment) associated with U.S. Treasury securities, however, foreign investors continue to buy U.S. securities. As a result, U.S. interest rates have remained relatively low and the United States remains able to finance the excess of imports over exports. The U.S. trade deficit, however, does cause a weakening of the exchange value of the dollar. Overall U.S. trade deficits reflect a shortage of savings in the domestic economy and a reliance on capital imports to finance that shortfall. A savings shortfall is the analogue of excessive spending that is financed by borrowing. Households borrow for consumption; businesses borrow to invest; and the government borrows to cover its budget deficit. At the international transaction level, the savings shortfall is manifest when foreign capital flows into the United States to pay for its excess of imports (trade deficit). Whether this foreign borrowing is beneficial for the U.S. economy depends on how the imports of capital are used. If they are used to finance investments that generate a future return at a sufficiently high rate (they raise future output and productivity), then they may increase the well-being of current and future generations. However, if the imports are used only for current consumption, the net effect of the borrowing will be to shift the burden of repayment to future generations without a corresponding benefit to them. U.S. trade balances are macroeconomic variables that may or may not indicate underlying problems with the competitiveness of particular industries. The reason is that overall trade flows are determined, within the framework of institutional barriers to trade and the activities of individual industries, primarily by macroeconomic factors such as rates of growth, savings and investment behavior (including government budget deficits/surpluses), international capital flows, and exchange rates. Changes in the trade balance (defined as exports minus imports) are a component in deriving the nation's GDP. In the U.S. economy, where consumer spending and business investment are the largest components of the annual change in economic growth, changes in the trade balance generally reflect changes in these other, much larger, components of the economy. According to GDP accounting, the trade balance can be represented as contributing positively or negatively to the overall rate of growth in the economy, depending on activity in the other components in the accounts. For instance, in the late 1980s and early 1990s, when spending by consumers and businesses waned, growth in exports provided a boost to the overall rate of growth in the economy. Again in 2008, when consumer spending and business investment were weak, exports provided a comparatively large contribution to the rate of GDP growth. In 2008, exports accounted for about 9% of the rate of growth in national GDP, compared with the 5.9% contribution recorded in 1990. In 2009, as U.S. GDP declined by 3.5%, exports provided some impetus for growth, primarily due to a 30% drop in imports. The effects of exports, imports, and trade balance exert complex forces on the domestic economy. For instance, a large trade deficit naturally follows a booming economy, as increases in domestic demand lead to more purchases of imported goods. Many economists fear that the rising U.S. trade and current account deficits could lead to a large drop in the value of the U.S. dollar. The current account deficit has placed downward pressure on the dollar, although the "safe haven" effect comes into play to have the opposite effect. A weaker dollar boosts exports by making them cheaper, narrowing the U.S. trade deficit. Compared to a Federal Reserve index of major currencies weighted by importance to U.S. trade, the dollar has lost nearly one-third of its value since 2002, but has been rising in 2012 (see Figure 5 ). The dollar had fallen against the euro, yen, British pound, Australian dollar, and Canadian dollar. In fact, the U.S. dollar fell to parity with the Canadian dollar in September 2007 for the first time in 30 years, but between July and November 2008, the U.S. dollar strengthened against other currencies as the global financial crisis increased "safe haven demand" for the dollar. Since November 2009, the dollar lost some value, partly due to the Federal Reserve's lowering of interest rates. However, as the Eurozone debt crisis developed in 2010, global investors again sought the safety of U.S. Treasury securities and bid up the price of dollars. Although a weakened dollar helps to reduce U.S. trade imbalances, it also may reduce the dollar's attractiveness to foreign investors. If foreign investors stop offsetting the deficit by buying dollar-denominated assets, the value of the dollar could drop—possibly precipitously. In that case, U.S. interest rates would have to rise to attract more foreign investment; financial markets could be disrupted; and inflationary pressures could increase. As shown in Figure 6 , in terms of individual currencies, since January 2008, the dollar has been weakening with respect to the Japanese yen and Chinese renminbi but strengthening with respect to the euro and South Korean won. Currently, foreign investment in dollar assets along with purchases of securities by investors seeking a safe haven as well as from central banks of countries such as China have bolstered the value of the dollar. China's central bank has intervened in currency markets to keep its exchange rate relatively stable. A recent development in foreign country holdings of dollars and other reserve currencies is that some governments are turning toward creating sovereign wealth funds (SWFs). These are funds owned by governments that are invested in stocks, bonds, property, and other financial instruments denominated in dollars, euros, or other hard currency. For China, Japan, South Korea, Russia, and the oil-exporting nations of the Persian Gulf, the source of capital for these funds is coming from governmental holdings of foreign exchange. For China and Japan, for example, foreign exchange reserves have traditionally been invested by their respective central banks primarily in low-yielding but low-risk government bonds (i.e., U.S. Treasury securities). The purpose of sovereign wealth funds is to diversify investments and to earn a higher rate of return. For example, in September 2007, China created a sovereign wealth fund—the China Investment Corporation (CIC)—with initial capital of $200 billion. Depending on how these funds are managed and what leverage they acquire, they could affect U.S. interest rates (foreign purchases of U.S. Treasury securities tend to reduce U.S. interest rates), corporate activities (if funds buy significant voting shares of companies), and foreign access to technology and raw materials. The U.S. trade deficit provides some of the foreign exchange that goes to finance these sovereign wealth funds. How long can the United States keep running trade deficits? U.S. deficits in trade can continue for as long as foreign investors are willing to buy and hold U.S. assets, particularly government securities and other financial assets. Their willingness depends on a complicated array of factors including the perception of the United States as a safe haven for capital, relative rates of return on investments, interest rates on U.S. financial assets, actions by foreign central banks, and the savings and investment decisions of businesses, governments, and households. The policy levers that influence these factors affecting the trade deficit are held by the Federal Reserve (interest rates) as well as both Congress and the Administration (government budget deficits and trade policy), and their counterpart institutions abroad. In the 112 th Congress, legislation directed at the trade deficit has been taking several strategies. Some bills address trade barriers by particular countries, particularly China. Others are aimed at preventing manipulation of exchange rates or at imposing import duties to compensate for the arguably undervalued Chinese currency, as tracked in greater detail by other CRS reports. The merchandise (goods) trade balance is the most widely known and frequently used indicator of U.S. international economic activity. Also important is the concept of total merchandise trade, total exports plus total imports. In 2011, total merchandise trade reached $3,688 billion, a 16% increase over the 2010 value. This follows a 22% increase in 2010 (to $3,191 billion) and a 23% decrease in 2009 (to $2,616 billion). Merchandise exports in 2011 totaled $1,480 billion, while imports reached $2,208 billion (Census basis). The U.S. merchandise trade deficit fell massively from $816 billion in 2008 to $504 billion in 2009 but then increased to $635 billion in 2010 and $727 billion in 2011 ( Figure 7 ). U.S. merchandise exports decreased in 2001 and 2002 in response to the global slowdown, but then generally increased each year until 2009 ( Table 4 ). As shown in Figure 8 , the growth of imports has also been steady, although they too fell by 6.4% in 2001 before recovering in 2002. In 2003, import growth was nearly double export growth, although in 2004, export growth almost caught up with that of imports, and in 2005, the rate of increase for both dropped slightly. Growth in exports and imports slowed in 2007 with exports rising by 12.3% and imports by 5.7%. Likewise in 2008, exports grew faster than imports (12.4% versus 7.3%), but the trade deficit still increased. This is because U.S. imports are greater than U.S. exports, so exports must grow significantly faster than imports just for the deficit to remain constant. Then in 2009, with the full force of the financial crisis, exports decreased more slowly than imports (-17.9% versus -25.9%), before each took a sharp upward turn in 2010 as recovery began. In 2010 exports rose by 21%, followed by a slowing to 16% growth in 2011. U.S. imports grew 23% in 2010 followed by 15% in 2011. The current account provides a broader measure of U.S. trade because it includes services, investment income, and unilateral transfers in addition to merchandise trade ( Table 5 ). The balance on services includes travel, transportation, fees and royalties, insurance payments, and other government and private services. The balance on investment income includes income received on U.S. assets abroad minus income paid on foreign assets in the United States. Unilateral transfers are international transfers of funds for which there is no quid pro quo . These include private gifts, remittances, pension payments, and government grants (foreign aid). Data on the current account are announced several months later than those on trade in goods and services. Because the merchandise trade balance comprises the greater part of the current account, the two tend to track each other ( Figure 9 ). Unlike the merchandise trade balance, however, the services account has registered surpluses. Since Americans are such large investors in foreign economies, the United States traditionally also has a surplus in its investment income, $184 billion in 2010 and $227 billion in 2011, but the deficit in unilateral transfers (primarily dollars sent abroad by foreign workers and recent immigrants) totaled $131 billion in 2010 and $133 billion in 2011. Unilateral transfers have now reached more than triple the level of the late 1980s. Table 5 summarizes the components of the U.S. current account. In 2011, the U.S. deficit on current account rose to $466 billion from $442 billion in 2010. It was down considerably, however, from $801 billion in 2006. The 2011 deficit on current account, at 3.1% of GDP, closely followed the 2010 deficit on current account of 3.0% of GDP. These figures are well below the 5% level of caution used by the International Monetary Fund. Since the dollar is used as an international reserve currency, the United States can run trade deficits without the same downward pressure on the value of the dollar as other nations. Historically, the current account deficit fell from a then record-high $161 billion in 1987 to $79 billion in 1990, and switched to a $4 billion surplus in 1991 (primarily because of payments to fund the Gulf War by Japan and other nations). However, since a slight decline in 1995, the current account deficit increased significantly through 2006 except for a slight dip in 2001 ( Figure 9 ). The U.S. current account deficit decreased from 2007 through 2009, which largely reflected the decline in the trade deficit during the financial crisis, though due to an increase in investment income receipts from abroad the current account deficit began declining earlier than the merchandise trade deficit. The current account deficit then increased in 2010 and remained mainly flat in 2011. From 2012 to 2017 the current account deficit is forecasted to increase, mostly due to an increase in outgoing investment income payments, while the merchandise trade deficit is forecasted to remain relatively stable. According to IHS Global Insight, Inc., a leading U.S. economic forecasting firm, in 2012 the U.S. merchandise (goods) trade deficit is projected to reach about $742 billion on a balance of payments basis. It is then forecasted to decline (become less negative) in 2013 to $687 billion and then increase again in 2014 to $724 billion (see Table 6 and Figure 9 ). The current account deficit is forecasted to reach $514 billion for 2012, and like the merchandise deficit, it is forecasted to decline (become less negative) to $446 billion in 2013 and then increase to $503 billion in 2014. The overall U.S. merchandise trade balance consists of deficits or surpluses with each trading partner. Many economists view the overall figure as more significant than bilateral trade balances, since rising deficits with some nations are often offset by declining deficits or growing surpluses with others. Nonetheless, abnormally large or rapidly increasing trade deficits with particular countries are often viewed as indicators that underlying problems may exist with market access, the competitiveness of particular industries, currency misalignment, or macroeconomic adjustment. Figure 10 and Table 7 and Table 8 show U.S. trade balances with selected nations. Most of the U.S. trade deficit can be accounted for by trade with China, Mexico, Japan, Germany, Ireland, and Canada. Trade with the oil exporting countries, particularly Venezuela, Nigeria, and Saudi Arabia, also contributes to the U.S. trade deficit. U.S. trade surpluses occur in trade with Hong Kong, the Netherlands, Australia, and the United Arab Emirates. The U.S. trade deficit with China has soared over the past decade: from $32 billion in 1995 to $100 billion in 2000 and $295 billion in 2011. The negative net balance in trade with China has grown to account for about 40% of the total U.S. trade deficit. The U.S. trade deficit with China exceeded that with Japan for the first time in the year 2000 and now is almost five times as large. China claims that its trade is less imbalanced than U.S. data indicate. Chinese and U.S. trade data differ primarily because of the treatment of Hong Kong as an entrepot . Although Hong Kong reverted back to China in 1997, it is a separate customs area from mainland China, and Beijing counts Hong Kong as the destination for its exports sent there, even though the goods may be transshipped to other markets. For example, China would count a laptop computer that is assembled in Shanghai but shipped through Hong Kong before being exported to the United States as a sale to Hong Kong. By contrast, the United States and many of China's other trading partners count Chinese exports that are transshipped through Hong Kong as products from China, not Hong Kong, including goods that contain Hong Kong components or involve final packaging in Hong Kong. The United States also counts Hong Kong as the destination of U.S. products sent there, even those that are then reexported to China. However, Chinese statistics include many of such reexported goods as U.S. exports to China. So by U.S. figures, U.S. exports to China tend to be understated, while by Chinese figures, Chinese exports to the United States tend to be understated. The net result in 2011, for example, is that the trade surplus with the United States that China reported, $206 billion, was about two-thirds the U.S. deficit with China of $295 billion reported by the United States. Table 8 lists the U.S. top deficit trading partners in merchandise trade, on a Census basis, with U.S. export and U.S. import data for additional insight. In 2000, China not only overtook Japan as the top U.S. deficit trading partner, but its continuing growth in annual U.S. trade deficits since 2000 has been notable. In 2011 the U.S. trade deficit with China increased by 8%, with Japan 5%, and fell (became less negative) with Mexico by 3%. These countries were the top U.S. deficit trading partners. They were followed by Germany, Canada, Saudi Arabia, and Ireland. Total merchandise trade, exports plus imports, presents a clearer picture of countries' overall importance in U.S. trade relations than any other flow. As seen in Table 9 Canada continues to be the United States' largest total merchandise trading partner. Canada was followed by China, Mexico, Japan, Germany, the United Kingdom, South Korea, Brazil, and France. Canada was historically the largest supplier of U.S. imports, until 2007 when China's exports to the United States first surpassed those from Canada. Canada is by far the top purchaser of U.S. exports with Mexico second. In 2007 China surpassed Japan to become the third-largest U.S. export market. There is a commonly held perception that free trade agreements (FTAs) lead to larger U.S. deficits in trade. The perception seems to be generated mostly by U.S. trade with its immediate neighbors, Canada and Mexico, the U.S. partners in the North American Free Trade Agreement (NAFTA). Research indicates that the United States runs both surpluses and deficits with FTA partners. As shown in Figure 11 , in both 2010 and 2011, the United States ran trade surpluses with Australia, Singapore, Chile, Peru, Morocco, Bahrain, Jordan, and collectively with the group of countries in the U.S-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR). The United States ran deficits with NAFTA partners and Israel in both 2010 and 2011, and with Oman in 2011. Figure 11 also shows the U.S. merchandise trade balance with the three new U.S FTA partners, Colombia, Peru, and South Korea. These three FTAs, however, were not in effect in 2010 or 2011, so the trade balances should not be interpreted as a result of these agreements. U.S. FTA partners in total represented 35% of U.S. trade in 2011. Due to Canada and Mexico's great importance in overall U.S. trade, NAFTA alone accounts for over 80% of all U.S. trade with FTA partners. Total U.S. goods trade with Canada and Mexico was over $1 trillion in 2011. Table 10 lists the current account and its components—trade balances on goods, services, income, net unilateral transfers—for selected U.S. trading partners. While trade in services, flows of income from investments, and remittances home by foreign workers are considerably smaller than merchandise flows, as the U.S. economy has become more globalized and service-oriented, these components of the current account have become more important. In many cases, the bilateral current account balances are quite different from bilateral balances on merchandise trade only. For example, the U.S. surplus in services and investment income with Canada turns a $38 billion deficit on goods into a $27 billion surplus on current account. Flows of investment income vary largely by country. In 2011, the United States had a large investment income surplus with the European Union and Canada, but large investment income deficits with China and Japan. Since Japan has invested considerable amounts in securities, equities, and factories in the United States, the United States ran a deficit of $32 billion in investment income with that country in 2011. This more than offset the surplus of $18 billion in trade in services with Japan. As a result, the current account deficit with Japan of $82 billion in 2011 exceeded the bilateral merchandise trade deficit of $65 billion. Likewise with China; the U.S. deficit on investment income of $33 billion far overshadowed the U.S. surplus of $15 billion in services. The rising deficit with many countries in investment income reflects the accumulating debt of the United States relative to various countries and country groups of the world. Inflows of capital to compensate for the U.S. trade deficit and a low U.S. savings rate help to maintain the value of the dollar, but interest paid and other income that accrues to that capital is often repatriated to the home countries. That means more capital must be invested in the United States or the United States must export more to compensate for the outflows of investment income. Despite increasing debts, again, in 2011, the United States ran an overall surplus of $227 billion in investment income with the rest of the world. The U.S. surplus in services at $179 billion also continued to grow. The deficit of $133 billion in unilateral transfers reflects the many workers in the United States who remit funds back to their home countries. Table 11 shows U.S. trade in advanced technology products. This includes about 500 commodity classification codes representing products whose technology is from a recognized high technology field such as aerospace, biotechnology, optoelectronics, and information and communications, or that represent the leading technology in a field. The United States long ran a surplus in these products, but that surplus dropped sharply in 2000 and turned into a deficit in 2002. The U.S. trade balance in high technology products was last in surplus in 2001. From 2002 to 2005, the United States ran a trade deficit in high technology products which grew roughly $10 billion dollars per year. In 2006 this deficit dropped to $38 billion, but in 2007 resumed its former growth path, jumping to $61.9 billion. In 2008, the U.S. advanced technology deficit stabilized at $61 billion, in 2009 decreased to $56 billion, and in 2010 jumped to $81 billion. The 2011 deficit then grew to $100 billion. This deficit does not necessarily imply that the United States is losing the high technology race, since many of the high technology imports are from U.S. companies or U.S. corporate affiliates, particularly in information and communications and optoelectronics, who assemble the products overseas. However, this growing deficit may warrant closer policy scrutiny. Figure 12 illustrates both our current deficit in high technology products and our continuing strong exports in these diverse areas. Table 12 and Figure 13 provide data on U.S. trade in all vehicles, passenger cars, trucks, and parts with the world and major automobile producing nations for 2011. This includes cars assembled in the United States by U.S. affiliates of foreign companies (counted as U.S. exports if shipped abroad), and cars assembled abroad by foreign affiliates of U.S. companies (counted as U.S. imports if shipped into the United States). The United States incurs the largest deficits in total vehicle trade with Japan, Mexico, Germany, and South Korea. Vehicle trade is a very important segment in U.S. trade, with exports valued at $139 billion and imports valued at $256 billion in 2011. This represents an increase of 20% for U.S. exports and 13% for U.S. imports of vehicles in 2011 compared with 2010. Different trade patterns occur in different vehicle segments. In 2011 the United States had a surplus in automotive trade with several partner nations, though none of the major partners shown in Table 12 . In 2011, U.S. exports of automobiles totaled $47 billion, an increase of 24% from 2010. Major car export partners in 2011 were Canada, Germany, China, Saudi Arabia, and Mexico. Neither Japan nor South Korea imported large values of U.S. automobiles in 2011. Imports of automobiles in 2011 totaled $123 billion, a 7% increase over 2010 imports from the world. Major source countries for automobiles in 2011 were Canada, Japan, Germany, Mexico, and South Korea. The U.S. trade balance in automobiles improved from a $76 billion deficit in 2010 to a $75 billion deficit in 2011, a 1.4% deficit decrease. U.S. motor truck exports registered a record $24 billion in sales in 2011, while the United States imported $20 billion in trucks from all nations. These figures represent a 25% increase in export sales and a 24% increase in imports. The major supplier for truck imports was Mexico in 2011. The U.S. truck trade surplus in 2011 was $4.5 billion, a 34% increase in surplus from 2010. The magnitude of U.S. energy trade relative to other U.S. traded products as well as the environmental, geopolitical, and strategic implications inherent to energy products and the countries that produce them, make U.S. energy trade of continuing concern to Congress. The United States is the world's top energy importer, and at $455 billion, energy is the top U.S. import at the most general commodity level. Energy products make up such a large portion of U.S. trade, particularly imports, that the overall U.S. trade balance looks quite different when energy products are removed. Figure 14 illustrates the size and scope of the United States energy balance relative to the overall U.S. trade balance. The solid, dark blue line graphs the actual U.S. merchandise trade deficit with the world in all commodities. The lines labeled "energy" and "no-energy" split that deficit into two components—energy products and everything else. In 2011, the energy trade deficit of $324 billion represented about 45% of the overall U.S. trade deficit of $727 billion. Energy trade differs considerably by product type. For example, although the United States has an overall deficit in energy trade, it has a small trade surplus in coal. This surplus offsets the deficits in other energy products, such that the U.S. trade deficit in crude oil ($335 billion) is actually larger than the overall energy trade deficit ($324 billion). Table 13 shows U.S. exports, imports, and trade balance for the primary forms of energy. Though the energy deficit often dominates policy discussions, both energy imports and exports are important in overall U.S. trade. The major sectors in U.S. exports of energy are refined petroleum products, coal, and natural gas. U.S. exports of refined petroleum products were in fact the top overall U.S. export in 2011 (using 4-digit HTS classification), replacing civilian aircraft, engines, and parts, the top export category in 2010. Major markets for U.S. refined petroleum products are Mexico, the Netherlands, Canada, Singapore, and Chile. In 2011, refined petroleum products constituted 70% of total U.S. energy exports, while coal represented 12% and natural gas 8%. These sectors grew at 70% for refined petroleum products, 62% for coal, and 33% for natural gas. Crude oil, however, remains the major driver of U.S. energy trade. It accounted for 74% of U.S. energy imports in 2011 and at $335 billion, the U.S. trade deficit in crude oil accounted for 46% of the overall U.S. trade deficit. Crude oil import values dropped from $354 billion in 2008 to $195 billion in 2009, then rebounded to $260 billion in 2010 and $337 billion in 2011. Table 14 shows the source countries for U.S. crude oil imports. Canada surpassed Saudi Arabia as the primary crude oil supplier to the United States in 2006. Although Canada is the major single U.S. supplier, roughly half of U.S. crude oil imports continue to come from members of the Organization of the Petroleum Exporting Countries (OPEC), with Saudi Arabia, Venezuela, and Nigeria the predominant suppliers. Imports from Iraq are recovering with $17 billion in 2011. In Table 14 , U.S. crude oil imports from OPEC nations are shown in bold. Listed below are a list of resources available online for international trade statistics. The single most authoritative, comprehensive, and frequently-published trade data statistical source is the monthly "FT900." Its actual title is U.S. International Trade in Goods and Services . The FT-900 is issued monthly by the U.S. Census Bureau and the U.S. Bureau of Economic Analysis of the U.S. Department of Commerce. It provides information on U.S. trade in goods and services (balance, exports, and imports) in specific commodities and end-use categories and with selected countries. The report also provides information on trade in advanced technology, petroleum, and motor vehicle products. The report is available from the U.S. Bureau of Economic Analysis at http://www.bea.gov/newsreleases/rels.htm . Under "International" click on latest news release. Information on trade in specific commodities, with particular regions, or for different time periods also can be obtained from the U.S. International Trade Commission at http://dataweb.usitc.gov/ (registration is free but required). Historical and current U.S. exchange rate data are available from the Federal Reserve Bank of St. Louis at http://research.stlouisfed.org/fred2/ . Information on foreign country holdings of U.S. Treasury securities are available at http://www.treasury.gov/tic/ .
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The global financial crisis and the U.S. recession, during the 19 months from December 2007 through June 2009, caused the U.S. trade deficit to decrease, or lessen, from August 2008 through May 2009. Since then it has begun to increase again as recovery has commenced. The financial crisis caused U.S. imports to drop faster than U.S. exports, but that trend has reversed as U.S. demand for imports recovers. Exports of goods of $1,497 billion in 2011 increased from 2010 by $209 billion or 16%, while imports of goods of $2,236 billion in 2011 increased by $302 billion, also 16%, over 2010. Though both exports and imports increased by 16%, this led to an increase in the overall merchandise trade deficit (i.e., the trade balance became more negative) for 2011 of $93 billion or 15% over 2010. Because imports are greater than exports, exports must increase at a greater percentage than imports to maintain the current trade balance. In 2011, the trade deficit in goods reached $738 billion on a balance of payments (BoP) basis, still lower than the previous peak of $836 billion in 2006, but greater than the deficits in 2009 and 2010 of $506 billion and $645 billion. The 2011 U.S. deficit on merchandise trade (Census basis) with China was $295.4 billion, with the European Union (EU27) was $99.9 billion, with Canada was $34.5 billion, with Japan was $63.2 billion, and with Mexico was $64.5 billion. With the Asian Newly Industrialized Countries (Hong Kong, South Korea, Singapore, and Taiwan), the trade balance moved from a deficit of $5.5 billion in 2007 to surpluses increasing from $2.2 billion in 2008 to $15.4 billion in 2011. Related to the goods trade balance is the balance on the current account, which includes merchandise and services trade plus investment income and unilateral transfers. The deficit on the current account grew in 2011 to $466 billion from $442 billion in 2010. This smaller increase in the current account deficit ($24 billion), as compared to the increase in the goods trade deficit ($93 billion), reflects an increase in the U.S. surplus in both services trade and investment income. Trade deficits are a concern for Congress because they may generate trade friction and pressures for the government to do more to open foreign markets, to shield U.S. producers from foreign competition, or to assist U.S. industries to become more competitive. Overall U.S. trade deficits reflect excess spending (a shortage of savings) in the domestic economy and a reliance on capital imports to finance that shortfall. Capital inflows serve to offset the outflow of dollars used to pay for imports. Movements in the exchange rate help to balance trade. The rising trade deficit (when not matched by capital inflows) places downward pressure on the value of the dollar, which, in turn, helps to shrink the deficit by making U.S. exports cheaper and imports more expensive. However, interventions in foreign exchange markets by countries such as China and South Korea can keep the value of their currencies from rising too fast, thus keeping the dollar strong and imports cheaper. Areas to watch in 2012 in international trade include the energy and transportation sectors. In energy, unconventional oil and gas production are increasing U.S. domestic supply, reducing imports, and increasing exports. In transportation, U.S. automakers appear to be exporting well to growth markets such as China. Note: This report is current through U.S. Department of Commerce annual data revisions, published June 8, 2012, and Bureau of Economic Analysis revisions published June 14, 2012.
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Stormwater discharge systems are the pipes and sewer lines that carry rainwater or snow melt, but not domestic sanitary wastes, away from urban areas and commercial and industrial facilities. For many years the focus of the nation's water quality programs was on controlling pollutants associated with industr ial process wastewaters and municipal sewage discharges. More diffuse and episodic discharges (such as rainfall runoff from farm lands and urban runoff) and discharges believed to be relatively uncontaminated received less attention from policymakers and regulators. However, as the traditional sources of water pollution have become better controlled through laws and regulations, attention has increasingly focused on remaining problems that continue to prevent attainment of state and tribal water quality standards. Stormwater is one such source of pollution. For some time, it was generally believed that stormwater was largely clean, or uncontaminated. However, studies have demonstrated that this type of discharge—from rainfall and snow melt—carries with it large amounts of organic and toxic pollutants that can harm water quality, including oil and grease, heavy metals, pesticides, soil, and sediment. In urban areas, widespread residential and commercial development results in the removal of vegetation cover and building of impervious structures such as roads and parking lots. These activities may change natural drainage patterns in an area, causing higher runoff flows during wet weather events. Urbanization and the human alteration of landscapes and land uses that is associated with it have resulted in the degradation of conditions in downstream waterbodies. States report that stormwater discharges, including urban runoff, industrial activity, construction, and mining, are a significant source of surface water quality problems today. But control of stormwater discharges and other sources of wet weather pollution, including overflows from combined and separate sewer systems, is complicated because discharges generally are intermittent and are less amenable to "end of pipe" solutions than conventional industrial and municipal water pollution. Recognition of the water quality problems of stormwater runoff led Congress in 1987, when it last comprehensively amended the Clean Water Act (CWA), to direct EPA to implement a specific permit program for stormwater discharges from industrial sources and municipalities ( P.L. 100-4 ). Even before the 1987 amendments, the issue of how to regulate stormwater discharges had a lengthy history of regulatory proposals, delays, legal challenges, and court decisions. Still, EPA had been unable to devise a comprehensive and flexible administrative process for regulating stormwater discharges before requirements were legislated in 1987. In that legislation, Congress established a phased and tiered approach to permitting of stormwater discharges that fundamentally redesigned the CWA's approach to stormwater discharges. Congress recognized that EPA's difficulties in addressing sources of stormwater stemmed in part from the large number of sources potentially subject to regulation, so the 1987 legislation adopted a procedure that would enable the major contributors of stormwater pollutants to be addressed first, and remaining stormwater discharges in later phases. EPA initially issued regulations to implement Congress's legislative mandate in 1990, utilizing a series of phased requirements. Phase I applied to large dischargers: those associated with industrial activities, municipal separate storm sewer systems serving 100,000 people or more, and construction projects disturbing more than 5 acres. Smaller sources were slated for possible regulation under Phase II of the program (discussed below) and included cities and towns with separate storm sewer systems serving fewer than 100,000 people, commercial operations, and smaller construction projects. Stormwater requirements are one element of the comprehensive permit program, the National Pollutant Discharge Elimination System (NPDES), authorized in Section 402 of the act. Under the act, it is illegal to discharge pollutants from point sources (e.g., industrial plant pipes, sewage treatment plants, or storm sewers) into the nation's waters without an NPDES permit—permits are the fundamental compliance and enforcement mechanism of the law. EPA manages the NPDES stormwater program in four states (Idaho, Massachusetts, New Hampshire, and New Mexico), plus the District of Columbia and most U.S. territories, and has delegated that authority to the remaining 46 states and the Virgin Islands. An estimated 123,000 industrial facilities (twice the number of industrial sources subject to the base NPDES program) and 220 municipalities and counties were covered by the 1990 permit rules for Phase I of the program. The initial procedures and deadlines were complex and were made more confusing by subsequent deadline extensions. The 1987 CWA amendments directed delegated states (or EPA) to issue stormwater permits not later than four years after enactment of that legislation. This would have required permits to be issued by February 4, 1991, but this did not occur, in part because EPA's 1990 rule was issued 21 months after the statutory deadline. Regulated sources must comply with stormwater permits within three years of their issuance. Permits require dischargers, at a minimum, to implement pollution prevention plans, although remediation or additional treatment of runoff may also be required. Permits issued to municipalities require cities to develop, implement, and enforce a stormwater management program that addresses key areas such as public education, eliminating illicit connections to storm sewers, good housekeeping of municipal operations, and control of erosion and sedimentation from construction sites. Prior to implementation of the stormwater regulatory program, the universe of NPDES permittees nationwide was less than 70,000 industrial and municipal facilities. The addition of stormwater permittees greatly expanded this regulatory program. EPA estimates that the total number of stormwater permittees at any one time exceeds half a million—thus, NPDES stormwater permittees outnumber wastewater permittees more than five-fold. Industries that manufacture, process, or store raw materials and which collect and convey stormwater associated with those activities were required to apply for an NPDES permit under the Phase I program. Several industries were specifically identified in EPA's 1990 regulation: mining operations; lumber and wood products; paper and allied products; printing, chemical products, paints, varnishes, and lacquers; stone, clay, glass, and concrete; metals; petroleum bulk terminals; hazardous waste treatment facilities; salvage operations; and powerplants. Industrial facilities had several options to comply with these permit requirements. Chiefly, they could obtain either individual or group permits. Applications for individual facility permits were due to be submitted by October 1, 1992. For group permits (covering multiple facilities with similar stormwater discharges), a two-step process applied: submitting a list of facilities to be covered by September 30, 1991, and submitting more detailed information, such as sampling data on 10% of facilities in the group and a description of a stormwater management program, by October 1, 1992. EPA also provided a third option for industrial facilities, through a general permit procedure. A general permit is one that covers discharges from more than one facility, thus making the large number of stormwater permittees more manageable. Sources are only required to submit a Notice of Intent to be covered by a general permit, rather than the detailed application for an individual permit. EPA expected that general stormwater permits will make for a less costly and burdensome permitting process through less extensive testing and control requirements, as well as minimal monitoring and reporting. For most sources, general permits require preparation of a pollution prevention plan, and compliance with the plan six months later. EPA issued general permits for stormwater discharges associated with industrial and construction activities that disturb 5 acres or more, which apply in the four states where EPA is the permitting authority for the stormwater program. Using the EPA general permit as a model, most other states that have been delegated permitting responsibility use similar general permits to reduce the administrative burden of the industrial stormwater permit program. Congress addressed the deadlines for stormwater permitting of industrial facilities twice. Congress first extended aspects of the deadlines for group applications by industrial facilities ( P.L. 102-27 , Dire Emergency Supplemental Appropriations Act of 1991), and in the 1991 Surface Transportation Act ( P.L. 102-240 ), Congress clarified the deadlines applicable to industrial activities that are municipally owned or operated (such as airports or powerplants). Much of the controversy about stormwater requirements has focused on impacts on cities, not industrial sources. Municipalities with separate storm sewer systems (called MS4s) were subject to EPA's regulations under staggered deadlines based on the size of population served. In the 1990 Phase I regulations that apply to industrial activities, EPA also regulated discharges from medium-size and large cities (covering those with populations greater than 100,000 persons). The Phase I regulations are primarily application requirements that identify components that must be addressed in permit applications. The rules require large and medium MS4s to develop a stormwater management program, track and oversee industries facilities that are regulated under the stormwater program, conduct monitoring, and submit periodic reports. The regulations specified deadlines for these cities to provide regulators with information on legal authority over stormwater discharges and to provide detailed information on source identification and monitoring data. EPA identified 173 cities and parts of 47 urban counties as covered by Phase I. The 1987 CWA amendments exempted smaller cities (with populations of less than 100,000) from any stormwater permit requirements until October 1, 1992, and directed EPA to develop a suitable approach to address them under Phase II of the stormwater regulatory program. Because of problems in formulating a permitting strategy, EPA did not issue regulations by the 1992 deadline, nor did it meet the deadline in a one-year extension that Congress provided in P.L. 102-580 . In 1995, EPA convened an advisory committee of stakeholders to assist in developing rules by March 1, 1999, a deadline set in a judicial consent order in Natural Resources Defense Council v. EPA (Civ. No. 95-0634 PFL [DDC, Apr. 6, 1995]) that required EPA to clarify the scope of coverage and control mechanisms for the Phase II program. Based in part on extensive discussions with the stakeholder advisory committee and with another court-approved extension, EPA issued a final Phase II rule in 1999. EPA estimated that the rule would make approximately 3,000 more river miles safe for boating annually and protect up to 500,000 people a year from illness due to swimming in contaminated waters. The 1999 Phase II rule extended Phase I by requiring permits of two additional classes of dischargers on a nationwide basis: (1) operators of MS4s serving populations of less than 100,000 persons in urbanized areas as defined by the Bureau of the Census, and (2) operators of construction activities that disturb greater than 1 and less than 5 acres of land (larger construction sites are covered by the Phase I rules). Separate storm sewer systems such as those serving military bases, universities, large hospital or prison complexes, and highways are also included in the definition of small MS4. EPA estimated that 5,040 small cities are covered by Phase II, along with about 110,200 construction starts per year. Waivers from coverage are available both for small cities (those with fewer than 10,000 persons) and construction activities if the discharges are not causing water quality impairment. At the same time, additional small municipal systems and construction sites may be brought into the stormwater program on a case-by-case basis, if permitting authorities determine that they are significant contributors to water pollution. Under the 1999 rule, covered facilities were required to apply for NPDES permit coverage by March 2003 (most under a general rather than an individual permit) and implement stormwater management programs that include six minimum management controls that effectively reduce or prevent pollutant discharges into receiving waters, such as pollution prevention and eliminating illicit discharge connections for municipal operations. The rule also provided that municipally operated industrial activities not previously regulated were required to apply for permit coverage under the same schedule as other facilities covered by Phase II. In the final Phase II rule, EPA attempted to balance statutory requirements for a nationally applicable program with sufficient administrative flexibility to focus on significant water quality impairments. For example, EPA encouraged permitting authorities to use general rather than individual permits for the majority of covered dischargers. The agency's decision to not include construction sites smaller than 1 acre was based on the belief that regulating the smallest of such sites would overwhelm the resources of permitting authorities and might not yield corresponding water quality benefits. Further, EPA modified the previous Phase I rule to exclude industrial facilities that have "no exposure" of their activities (such as raw materials) to stormwater, thus reducing coverage by an estimated 76,000 facilities that have no industrial stormwater discharges. These efforts to provide flexibility notwithstanding, many regulated entities continued to criticize the scope of the stormwater program, saying that EPA had greatly underestimated the cost of the Phase II rules (projected to be $297 million annually for small cities and $505 million annually for construction activities). Cities of all sizes have complained about the costs and difficulties of complying with EPA's regulations, especially because there is no specific CWA grant or other type of assistance program to help pay for developing and implementing local stormwater programs. Many contend that cities already are burdened with numerous environmental compliance requirements and lack adequate resources to address stormwater controls in addition to drinking water, solid waste, wastewater treatment, and sludge disposal problems. Where cities need to construct or install technology to control stormwater discharges, the principal source of financial assistance is the CWA's state revolving fund (SRF) loan program that is administered by states. However, because SRF assistance is not restricted to meeting just stormwater project needs, competition for available funds for all types of eligible projects is intense. Many municipal and industrial dischargers covered by the Phase I and Phase II programs have reached the end of their initial permit terms (NPDES permits are issued for five-year terms). For permit renewals, the agency is implementing a streamlined reapplication process that will not require the extensive information collection that characterized the first round of permitting. Implementation of permits (i.e., translating permits into specific steps to manage stormwater runoff) is now the challenge for permitting authorities and permittees. According to a 2001 Government Accountability Office (GAO) report, local governments are primarily using best management practices (BMPs, sometimes called stormwater control measures, or SCMs) to prevent or slow stormwater from quickly reaching nearby waterbodies and degrading water quality, rather than requiring that stormwater be transported to treatment facilities. BMPs include nonstructural measures to minimize contaminants getting into stormwater (e.g., street sweeping) and structural practices such as detention ponds to separate contaminants from stormwater. GAO criticized EPA for not establishing systematic efforts or measurable goals to evaluate the effectiveness of the program in reducing stormwater pollution or to determine its costs, which local governments have portrayed as high. In the 1999 rules, EPA set a goal of beginning to evaluate implementation of Phase II of the program in 2012. In a 2007 report, GAO examined implementation of the stormwater regulatory program by municipalities. GAO found that implementation of both Phases I and II had been slow: nearly 11% of communities were not permitted as of 2006; and even in communities with permits, delays occurred due to litigation or other disputes. Thus, GAO reported that because many communities were still in the early stages of implementation at the time of the report, it was too early to determine the overall program burden. While EPA's regulations provide flexibility, which could limit program burden, increased burden could result if communities are required by states or EPA to expand stormwater management activities or meet more stringent specific permit conditions in the future. GAO found that EPA is not collecting complete and consistent cost and other data, which hampers assessment of program burden. The 1999 Phase II rules were challenged by environmental groups. The litigation resulted in a 2003 federal court ruling (Environmental Defense Center v. EPA, 344 F.3d 832 (9 th Cir. 2003)). The Phase II rules allowed permitting authorities to issue general permits for MS4 stormwater discharges and required regulated MS4s to submit a Notice of Intent (NOI) to be covered by the general permit. The court found that the Phase II rules failed to require review of NOIs and failed to make NOIs available to the public or subject to public hearings and directed EPA to revise the rules to correct these procedural shortcomings. Following the court's ruling, EPA issued guidance but did not propose revised rules. In 2014, the environmental groups sued EPA for failing to follow the court's nearly 12-year-old ruling. Under a settlement agreement with the environmental plaintiffs, EPA agreed to issue final revised rules by November 17, 2016. The agency issued revised MS4 rules on November 17. The new rule allows states to choose between two options for increasing scrutiny of the MS4s' compliance plants. It allows states and other authorities crafting general permits for small MS4s to either outline in the permit terms all compliance methods that are open to permittees, or set up a "two-step" process in which facilities that apply for coverage must add their compliance plans as enforceable permit terms, including a notice-and-comment process for each plan. According to EPA, the two-step general permit allows the permitting authority to establish some requirements in the general permit and others applicable to individual MS4s through a second proposal and public comment process. Most states reportedly were pleased that the final rule provides permitting authorities with flexibility, although a few states said that allowing states to choose the regulatory approach would be more time-intensive and expensive than the system under the previous MS4 rules. Environmentalists' responses to the new rule were mixed, with some supporting EPA's actions and saying that the revised rule would lead to tighter controls on MS4 permits, but others contending that the rule's flexibility would make oversight by the public more difficult. Prior to issuance of the final Phase II rule in 1999, Congress included language in EPA's FY2000 appropriation bill ( P.L. 106-74 ) directing the agency not to issue the final rule before submitting a detailed impact analysis to Congress. To meet a court-ordered deadline for the regulation, EPA released the report concurrently with the Phase II rule. In the 106 th Congress, legislation was introduced to exempt construction sites of less than 5 acres and certain above-ground drainage ditches from stormwater permitting requirements. At a 1999 Senate hearing, EPA witnesses opposed the bill, saying that above-ground drainage ditches and small construction sites are significant sources of water pollution and thus should be subject to stormwater management requirements. No further action occurred. In response to concerns about program impacts and costs, the 107 th Congress enacted legislation allowing states to use Section 319 grant funds, which are used for projects to manage nonpoint sources of water pollution, for projects or activities related to developing and implementing a Phase II stormwater program (§301 of P.L. 107-303 ). This authority only applied to Section 319 funds in FY2003. Legislation to extend this authority beyond FY2003 was introduced in the 108 th Congress, but was not enacted. As the March 2003 Phase II deadline approached (affecting small municipalities and construction sites), EPA proposed a two-year extension of the rule for small oil and gas exploration and production facility construction sites to allow the agency to assess the rule's economic impact on that industry. EPA had initially assumed that most oil and gas facilities would be smaller than one acre in size and thus excluded from Phase II rules, but newer data indicated that up to 30,000 new sites per year would be of sizes subject to the rule. In March 2005 EPA extended the exemption until June 2006 for further study and said it would issue a specific rule for small oil and gas construction sites by that date. The postponement did not affect other industries, construction sites, or small cities covered by the 1999 rule. Under the 1987 amendments to the CWA, the operations of facilities involved in oil and gas exploration and production generally were exempted from compliance with stormwater runoff regulations (so long as the runoff is uncontaminated by pollutants), but the construction of associated facilities was not. Omnibus energy legislation enacted in the 109 th Congress ( P.L. 109-58 , the Energy Policy Act of 2005) included a provision addressing this issue. Section 323 amends the CWA to specifically include construction activities at all oil and gas development and production sites, regardless of size (including sites larger than 5 acres, previously covered by Phase I), in the law's general statutory exemption for oil and gas facilities from stormwater rules. Its intention was to exempt from the CWA all uncontaminated stormwater discharges that occur while setting up drilling operations. Oil and gas officials, who supported the provision, said that the existing EPA stormwater rules create time-consuming permitting requirements, even though the short construction period for drilling sites carries little potential for stormwater runoff pollution. Opponents argued that the provision did not belong in the omnibus energy legislation and that there is no evidence that construction at oil and gas sites causes less pollution than other construction activities, which are regulated under EPA's stormwater program. EPA promulgated a rule to implement Section 323 in 2006. The rule was criticized by some interest groups and Members of Congress who argued that EPA had exceeded its authority by broadly defining the scope of contamination that is exempted by the rule beyond the statutory language to also include stormwater discharges contaminated solely with sediment. In May 2008, a federal court held that the rule is arbitrary and capricious, and it vacated the rule. EPA petitioned the court to rehear the case, but the request was denied—thus, the exemption is no longer in effect. At the time, EPA said that it intends to issue a revised rule that would remove the 2006 rule from the Code of Federal Regulations consistent with the court vacatur and codify the statutory exemption in P.L. 109-58 , but the agency has not proposed any revisions or announced a specific schedule for doing. Legislation to repeal Section 323 was introduced in the 109 th Congress, but no further action occurred. In the 111 th Congress, legislation to repeal the exemption passed the House (the provision was Section 728 of H.R. 3534 , the Consolidated Land, Energy, and Aquatic Resources Act), but it was not enacted. In the 114 th Congress, a bill has been introduced to repeal the oil and gas exemption enacted in P.L. 109-58 . This bill, H.R. 1460 , also would direct the Secretary of the Interior to conduct a study of stormwater runoff from oil and gas operations that may result in contamination. Similar legislation was introduced in the 113 th Congress. Congress often looks to federal agencies to lead or test new policy approaches, a fact reflected in legislation passed in 2007. Section 438 of P.L. 110-140 , the Energy Independence and Security Act (EISA), requires federal agencies to implement strict stormwater runoff requirements for development or redevelopment projects involving a federal facility in order to reduce stormwater runoff and associated pollutant loadings to water resources. The legislation requires agencies to use site planning, construction, and other strategies to maintain or restore, to the maximum extent technically feasible, the predevelopment hydrology of the property. To assist agencies in meeting these requirements, EPA issued technical guidance. The guidance provides two options for meeting the performance objective of preserving or restoring the hydrology of a site: retaining the 95 th percentile rainfall event (i.e., managing rainfall on-site for storm events whose precipitation total is less than or equal to 95% of all storm events over a given period of record), or site-specific hydrologic analysis (i.e., using site-specific analysis to determine predevelopment runoff conditions). According to the guidance, using a performance-based approach rather than prescriptive requirements is intended to give site designers maximum flexibility in selecting appropriate control practices. Issuance of the guidance also fulfilled an element of an October 2009 executive order that formally assigned to EPA the responsibility to issue the Section 438 guidance, in coordination with other agencies, and to do so by December 5, 2009. In December 2010 Congress passed legislation requiring federal agencies to pay local fees for treating and managing stormwater runoff. The legislation amends CWA Section 313, which requires federal agencies to comply with all federal, state, and local water pollution control requirements as nongovernmental entities, including the payment of reasonable service charges. The issue emerged earlier in 2010 when several federal agencies announced that they would not pay stormwater fees assessed by the District of Columbia, claiming that the fees amounted to a tax that the agencies were not required to pay, because the waiver of sovereign immunity in Section 313 applies to fees and charges, but not a tax. The legislation was intended to clarify uncertainty over whether federal agencies must pay local stormwater fees. President Obama signed the legislation in January 2011 ( P.L. 111-378 ). A continuing aspect of the issue of interest in a few locations is the scope of P.L. 111-378 and whether it requires the government to pay local stormwater fees retroactively. After the Bonneville Power Administration objected to paying retroactive stormwater fees imposed by two Washington localities following passage of the federal facility amendment, the matter ended up in federal court. The government took the position in the litigation that the legislative change amounted to a redefinition of "service charges," instead of a clarification of Congress's original intent, and would only apply prospectively. In 2012, a federal district court rejected the government's position and held that the CWA amendment was merely a clarification of the statute and thus is entitled to retroactive effect. The federal government did not appeal this ruling. A similar case in Georgia was dismissed following a settlement agreement between the parties, but the settlement did not resolve lingering questions whether stormwater charges are fees for "reasonable services provided" or taxes, an issue of concern more broadly than just regarding government facilities. In 2006 EPA requested the National Research Council of the National Academy of Sciences (NRC) to conduct a review of the existing stormwater regulatory program. The resulting report, issued in 2009, called for major changes to EPA's stormwater control program that would focus on the flow volume of stormwater runoff instead of just its pollutant load. The committee observed that— stormwater discharges would ideally be regulated through direct controls on land use, strict limits on both the quantity and quality of stormwater runoff into surface waters, and rigorous monitoring of adjacent waterbodies to ensure that they are not degraded by stormwater discharge.... Presently, however, the regulation of stormwater is hampered by its association with a statute that focuses primarily on specific pollutants and ignores the volume of discharges. The NRC report recommended that EPA adopt a watershed-based permitting system encompassing all discharges—stormwater and wastewater—that could affect waterways in a particular drainage basin, rather than individual permits that do not account for cumulative conditions from multiple sources in the same watershed. Under the proposed watershed permitting strategy, responsibility to implement watershed-based permits and control all types of municipal, industrial, and construction stormwater discharges would reside with MS4 permittees. The report criticized EPA's current approach, which leaves much discretion to regulated entities to set their own standards through stormwater management plans and to self-monitor. As a result, enforcement is difficult and variable, and information to assess the water quality benefits of the regulatory program is limited. The report also noted that adequate resources, including new levels of public funds, will likely be required to operate a more comprehensive and effective stormwater permitting program. Subsequently, EPA initiated information-gathering and public dialogue activities as a prelude to possible regulatory changes that would respond to the NRC's criticism of inconsistency in stormwater requirements nationally and embrace the report's recommendation to adequately control all sources of stormwater discharge that contribute to waterbody impairment. EPA proposed to collect data from MS4s, states, and industry entities involved in developing or redeveloping sites on the scope of the current regulatory program and management practices, as well as information on control, pollution prevention technologies, and BMPs applied to stormwater discharges from newly developed and redeveloped sites. In response to the NRC report, EPA began work to develop a rule to revise the existing stormwater regulatory program. The rule also followed a 2010 settlement agreement between EPA and environmental litigants, which called for EPA to revise existing rules "to expand the universe of regulated stormwater discharges and to control, at a minimum, stormwater discharges from newly developed and redeveloped sites." In the settlement, EPA committed to consider supplemental provisions as part of the national rule that would apply only to the Chesapeake Bay watershed, a region where municipal stormwater discharges are a significant cause of water quality impairment and are one of the only sources of pollutants with increasing loads to the Bay and its tributaries. In early 2010 EPA held a series of listening sessions across the country as part of a process seeking public comments on potential considerations for regulatory changes. The agency also sent survey questionnaires to property owners and developers, municipal sewer system authorities, state regulators, and EPA regional offices to obtain their input. Some industry groups reportedly criticized possible expansion of the current program, saying that EPA's authority to regulate stormwater does not extend to regulation of post-construction discharges. Some states also said that EPA lacks the technical knowledge to regulate stormwater across the nation, while states with comprehensive regulations, such as Florida and Maryland, demonstrate that regulation is best done at the state and local level, because of locational differences in stormwater discharges. EPA officials noted that a number of states have developed their own stormwater management programs, particularly in the Northeast, where lawsuits have pushed regulators, and also in some high-precipitation states in the Northwest. A number of commenters urged EPA to ensure that performance standards designed to reduce storm runoff be flexible so that communities can create requirements appropriate to their stormwater needs. Cost is a key issue raised by some states and municipalities concerned about the possibility of mandatory retrofit requirements that would impose a significant economic burden on cities. Some state and local government representatives—while they concerned about details of a rule—believed that a national rule would provide needed uniformity and consistency in stormwater programs across the nation. During efforts to develop a national rule, EPA explored regulatory options that would strengthen the regulatory program by establishing specific post-construction requirements for stormwater discharges from new development and redevelopment, which currently are not regulated. While MS4s are required to address stormwater discharges from new development and redevelopment in their management plans, existing rules do not include specific management practices or standards to be implemented. Other options that EPA considered included expanding the area defined as MS4s to include rapidly developing areas, devising a single set of consistent regulations for all MS4s, and requiring MS4s to address stormwater discharges in areas of existing development through retrofit practices. EPA officials said that the rule would focus on stormwater discharges from developed, or post-construction, sites, such as subdivisions, roadways, industrial facilities, and commercial buildings or shopping centers, and to seek to ensure that even after development projects are completed, runoff levels from sites are equivalent to pre-construction hydrology. The proposal, referred to as the "post-construction rule," likely would set a first-time stormwater retention performance standard to limit runoff that would otherwise enter an MS4 system. By retaining a portion of rainfall on-site, the discharge of pollutants for that volume is prevented from entering the sewer system. Requirements in the post-construction rule, once finalized, would be incorporated into MS4 permits as permits come up for renewal. The stormwater rulemaking drew some interest from Members of Congress. In 2013, Republican members of the Senate Environment and Public Works Committee urged EPA to suspend work on the rulemaking until the agency could seek meaningful input from small businesses and provide a report to Congress on the necessity for new stormwater regulations. Under the 2010 settlement with environmentalists, EPA was initially due to propose a national rule by September 2011 and complete the rule in 2014. Subsequently, the deadlines were renegotiated several times. Under the last deadline, EPA was to propose regulations by June 17, 2013, but EPA missed that deadline, and on June 18, the environmental plaintiffs notified the agency that it was in breach of the legal settlement. At that point, EPA and the plaintiffs had reached a legal impasse; EPA reportedly continued to work on the rule, while the environmental groups considered further legal action. Finalizing a rule with national application was said to be complicated by a number of analytic issues, particularly how to calculate costs and benefits of the proposal and how to incorporate flexibility, such as possibly including lengthy implementation plans for retrofit projects and allowing states with equivalent stormwater programs to regulate in lieu of EPA. In mid-March 2014, EPA announced that it would defer action on the post-construction stormwater rule and instead will provide incentives, technical assistance, and other approaches for cities to address stormwater runoff themselves. In particular, the agency said that it will leverage existing requirements to strengthen municipal stormwater permits and will continue to promote green infrastructure as an integral part of stormwater management. Although EPA discontinued development of a national stormwater rule, the agency continues to pursue some of the ideas that the rule had been expected to incorporate, such as emphasizing on-site retention of stormwater at construction sites or requiring green infrastructure, when individual MS4 permits come up for renewal. These concepts are reflected, for example, in the MS4 permit for Washington DC, issued by EPA in 2013, and EPA's 2014 proposed MS4 general permit for Massachusetts; both were crafted by EPA, which is the NPDES permitting authority in DC and Massachusetts. In the majority of states, permitting authority has been delegated to states (see page 2). In those cases, environmental groups are reportedly pursuing a permit-by-permit approach of encouraging states to strengthen the terms of new and reissued MS4 permits.
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The Environmental Protection Agency (EPA) and states implement a federally mandated program for controlling stormwater discharges from industrial facilities and municipalities. Large cities and most industry sources are subject to rules issued in 1990 (Phase I rules), and EPA issued permit rules to cover smaller cities and other industrial sources and construction sites in 1999 (Phase II rules). Because of the large number of affected sources and deadline changes that led to confusion, numerous questions have arisen about this program. Impacts and costs of the program's requirements, especially on cities, are a continuing concern. The 109th Congress enacted omnibus energy legislation (P.L. 109-58, the Energy Policy Act of 2005) that included a provision giving the oil and gas industry regulatory relief from some stormwater control requirements. In 2008, a federal court vacated an EPA rule implementing this provision. EPA intends to issue a revised rule that repeals the one that was vacated by the court and codifies the statutory exemption in P.L. 109-58, but the agency does not have a specific schedule for doing so. In the 111th Congress, the House passed a bill that included a provision that would repeal the exemption in P.L. 109-58, but the Senate took no action. Similar legislation has been introduced in the 114th Congress (H.R. 1460). Congress often looks to federal agencies to lead or test new policy approaches, a fact reflected in legislation enacted in the 110th Congress. Section 438 of the Energy Independence and Security Act (P.L. 110-140, EISA) requires federal agencies to implement strict stormwater runoff requirements for development or redevelopment projects involving a federal facility in order to reduce stormwater runoff and associated pollutant loadings. EPA has issued technical guidance for federal agencies to use in meeting these requirements. In 2009 the National Research Council issued a report calling for major changes to strengthen EPA's stormwater regulatory program, which it criticized as being inconsistent nationally and failing to adequately control all sources of stormwater discharge that contribute to waterbody impairment. In response, EPA began efforts to expand regulations and strengthen the current program with a revised rule. Agency officials said that the new rule would focus on stormwater discharges from newly developed and redeveloped, or post-construction, sites, such as subdivisions, roadways, industrial facilities, and commercial buildings or shopping centers. The rule was originally due to be proposed in 2011, but EPA missed that and several subsequent deadlines, due to analytic problems associated with developing the rule. In 2014, the agency announced that it would defer action on a national rule and instead will provide incentives, technical assistance, and other approaches for cities to address stormwater runoff themselves.
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Of all the problems facing the nuclear weapons program and nuclear weapons complex over the past several decades, few, if any, have been as vexing as pit production. A "pit" is a hollow plutonium shell that is imploded, creating an explosion that triggers the rest of the weapon. The Rocky Flats Plant (CO) manufactured pits on a large scale during the Cold War until production halted in 1989. It took until FY2007 for the United States to produce even a small quantity, 11 pits per year (ppy), for the stockpile. Yet the Department of Defense (DOD) calls for a capacity to produce 30 ppy by 2021 as an interim goal and 50 to 80 ppy by around 2030. At issue is how to reach the higher capacity. This report is intended primarily for Members and staff with a direct interest in pit issues, including Members who will be making decisions on pit projects that could total several billion dollars. Since the issues are complicated, this report contains technical and regulatory details that are needed to understand the advantages, drawbacks, and uncertainties of various options. It may also be of value for Members and staff with an interest in nuclear weapons, stockpile stewardship, and nuclear policy more broadly. This report begins with a description of plutonium, pits, and pit factory problems. It next considers several pit production options. It notes studies that could provide information to assist Congress in choosing among options, and concludes with several observations. There are several Appendixes, including a list of abbreviations. The pit issue is important because of the relationship between pit production infrastructure and national goals, as shown in Figure 1 . National goals include minimizing the risk of nuclear war and, for the longer term, "the peace and security of a world without nuclear weapons," as President Obama declared in his 2009 Prague speech. The Nuclear Posture Review sets out policy objectives, such as "preventing nuclear proliferation," "reducing the role of U.S. nuclear weapons in U.S. national security strategy," "maintaining strategic deterrence and stability at reduced nuclear force levels," "strengthening regional deterrence," and "sustaining a safe, secure, and effective nuclear arsenal." Various strategies, such as deterrence, counterproliferation, and arms control, seek to implement policy. In turn, delivery systems, such as heavy bombers and long-range ballistic missiles, are one means of implementing strategy. Nuclear weapons (a term used in this report to refer to nuclear bombs and warheads) arm delivery systems. The Nuclear Posture Review declares, "The United States will not develop new nuclear warheads." Accordingly, the United States will retain the weapons in its arsenal for the foreseeable future. Yet weapons deteriorate over time. Extending the service life of existing weapons requires replacing or modifying some components. While "life extension programs" (LEPs) for some weapons can use existing pits, DOD and the Department of Energy (DOE) state that LEPs for other weapons will require newly manufactured pits. The current infrastructure cannot produce pits at the capacity DOD requires, and many efforts stretching back to the late 1980s to produce pits have been canceled or have otherwise foundered. A concern is that if a type of nuclear weapon could no longer perform satisfactorily, an inability to make new pits in the quantities required so the weapons could be replaced could lead to that weapon type being removed from service. That, in turn, would leave missiles and bombers without those weapons, which would undermine strategies, the policies they seek to implement, and the ability to attain national goals. This section begins by discussing plutonium, pits, pit production, programs to extend the service life of nuclear weapons, and production capacity required. It next turns to current plutonium facilities and provides a brief history of unsuccessful efforts to build a facility to produce pits on a scale larger than about 10 per year. It concludes by presenting important regulatory terms. Plutonium is a radioactive metal that is 1.75 times more dense than lead. It has several undesirable characteristics, and is difficult to work with. According to Siegfried Hecker, a plutonium metallurgist and a former director of Los Alamos National Laboratory (LANL), Plutonium is an element at odds with itself—with little provocation, it can change its density by as much as 25 percent; it can be as brittle as glass or as malleable as aluminum; it expands when it solidifies; and its freshly-machined silvery surface will tarnish in minutes, producing nearly every color in the rainbow. To make matters even more complex, plutonium ages from the outside in and from the inside out. It reacts vigorously with its environment—particularly with oxygen, hydrogen, and water—thereby, degrading its properties from the surface to the interior over time. In addition, plutonium's continuous radioactive decay causes self-irradiation damage that can fundamentally change its properties over time. To make plutonium more stable, it is typically alloyed with other materials, such as gallium. Handling and safeguarding plutonium poses significant risks. Plutonium is hazardous: if minute particles are inhaled and lodge in the lungs, their radiation (in the form of alpha particles) can cause lung cancer. In addition, terrorists might be able to build an improvised nuclear device if they were to obtain enough plutonium, so facilities holding more than a small quantity of certain plutonium isotopes require extremely high security. Plutonium does not occur in nature except in trace amounts. It is manufactured by exposing uranium fuel rods to neutrons in nuclear reactors, and then using chemical processes to separate it from other elements in the fuel rods. The result is a mix of plutonium isotopes. The isotope desired for nuclear weapons is plutonium-239, which fissions readily when struck by slow or fast neutrons. Weapons-grade plutonium (WGPu) consists mainly of plutonium-239 and a small fraction of other plutonium isotopes. (Note: When an isotope of plutonium is mentioned, such as plutonium-239, it is abbreviated using its chemical symbol, e.g., Pu-239.) A pit is the trigger for detonating a thermonuclear weapon, or hydrogen bomb. It is a hollow shell of plutonium and other materials surrounded by chemical explosives. When the explosives detonate, they create an inward-moving pressure wave (an implosion wave) that compresses the plutonium enough to make it supercritical. It undergoes a runaway fission chain reaction, that is, an explosion. Various means are used to augment the explosion. This part of the weapon is called the primary stage. The weapon is designed so that energy from the primary stage explosion implodes the weapon's secondary stage, in which nuclear fission and fusion release most of the weapon's total explosive force. While some pits in older weapons were made of uranium and plutonium ("composite pits"), modern pits use only plutonium because much less of that material is required to generate a given explosive force, permitting nuclear weapons to be smaller and lighter. Reducing the size and weight of weapons was important during the Cold War to maximize the number of weapons that could be fitted on a missile and to maximize the explosive force of a weapon of given weight. All nuclear weapons in the current U.S. nuclear stockpile were designed and tested during the Cold War; all but a handful were built during that time. Because plutonium decays radioactively, there was concern that pits could deteriorate in ways that would cause them to fail. However, several studies have projected increased pit life. In 2003, pit life was thought to be 45-60 years; a 2007 study placed life for most pits at over 100 years; and a 2012 Livermore study placed the figure at 150 years. A 2013 Los Alamos study raised uncertainties on the latter claim: Since 2006, plutonium aging work has continued at a low level. That research does not indicate any [e]ffects that would preclude the possibility of pit reuse. However, additional studies that had been planned were never undertaken, leaving some aging questions unanswered for the range of plutonium alloys in the stockpile, and for the potential applications of pit reuse now under consideration. Penrose Albright, then Director of Lawrence Livermore National Laboratory, testified in 2013, And there has been a pretty concerted effort at both Los Alamos and at Livermore over the last decade or more that has been looking at plutonium aging, and we actually have samples that we keep in our laboratory—and Los Alamos does the same—that are 40, 50, 60 years old that so far show no—that support the conclusions that the last decade of study has implied, which is that these pits are good for many, many more decades to come. Longer pit life means that a stockpile of given size can be maintained with a lower pit production rate and opens the possibility of reusing retired pits. Pits must be made to exacting standards in order to function as designed. This requires precision in fabricating them and in supporting tasks. As plutonium decays, it produces other elements, such as americium. That radioactive element increases the radiation dose to workers and is an impurity to weapons-grade plutonium. Plutonium scrap, such as from old pits or from faulty castings, may pick up other impurities. Accordingly, plutonium must be purified for use in new pits. This may involve nitric acid processing, high-temperature processing, electrorefining, and other processes. Such processes result in a substantial stream of waste contaminated with radioactive material, acid, and other harmful substances. This waste must be processed and disposed of; waste processing requires a substantial infrastructure. Pits are fabricated as "hemishells" (half-pits) that are welded together. Rocky Flats Plant made pits using a wrought process, in which sheets of plutonium were run through rollers to attain the desired thickness, then punched into a die. LANL, where pits are currently made, uses a cast process, in which plutonium is melted in crucibles in a foundry, poured into a mold, and finished. The plutonium is analyzed chemically, and each hemishell is inspected through such techniques as physical measurements and x-ray imaging to ensure that there are no flaws. Given the many steps required, it typically takes three months to make a pit. Various tasks support production. Materials characterization (MC) examines bulk properties of plutonium samples, such as tensile strength, magnetic susceptibility, and surface characteristics. Such properties must be determined to be correct to assure that a pit will, for example, implode symmetrically. MC is generally used to qualify manufacturing processes and to troubleshoot production problems. As such, it does not generate a large number of samples during production, and that number is largely independent of the number of pits to be produced. Of relevance to options considered below, MC does not require a large amount of laboratory floor space. In contrast, analytical chemistry (AC) is performed across the entire manufacturing process, from metal purification through waste processing. Samples are analyzed for isotopic composition of plutonium and for the type and amount of various impurities. AC is performed on an average of 22 samples per pit. Metal samples taken directly from hemishells are typically 5 grams each. In preparing for AC, these samples are cut into smaller pieces. Most of the smaller pieces are dissolved in acid because most AC instruments do not use samples in solid form. The resulting plutonium-acid mixture is split into still smaller samples, many of which contain milligram or microgram quantities of plutonium. Each sample must be prepared in a specific way, and analyzed using specific equipment, depending on the type of analysis that it is to undergo. In addition, before plutonium ingots are used for a hemishell, their purity must be assayed. This involves taking a sample from a piece of the purified product as well as plutonium standard and reference materials for comparison. In order to provide one assay result for the plutonium, the assay process is typically run 10 times. Pit fabrication generates waste, such as the plutonium-acid samples used in AC, the MC samples, and any shavings or trimmings from finishing hemishells. Accordingly, pit production requires a way to handle the waste. It is treated two ways at Los Alamos; in some cases by extracting plutonium, and in other cases by solidifying it for burial at the Waste Isolation Pilot Plant (WIPP) (NM). While pits may last for many decades, other weapon components do not. Weapons contain organic components like explosives and adhesives that deteriorate under the influence of heat and radiation given off by plutonium; they may change characteristics over time. Some components, such as electronics, become hard to support after several decades, would be even harder to support several decades from now, and would be difficult to make compatible with new delivery systems like aircraft. Beyond that, some in the National Nuclear Security Administration (NNSA) and DOD want to increase the surety (safety, security, use control, and use denial) of weapons. (NNSA is the semiautonomous DOE agency responsible for nuclear weapons maintenance, several nuclear nonproliferation programs, and all naval nuclear propulsion work.) Accordingly, the Nuclear Weapons Council, a joint DOD-NNSA body that oversees and coordinates nuclear weapon programs, plans a life extension program (LEP) for each weapon type, including some LEPs that may combine two or more weapon types. LEPs range in scope from replacing a few components to a major overhaul that includes new pits, new electronics, and new surety features. Some dispute the need for LEPs that do more than the minimum needed to keep a weapon in service. They argue, for example, that features to further enhance surety are unnecessary given the perfect safety record of U.S. nuclear weapons and that these features add greatly to cost and may impair weapon performance. Nonetheless, LEPs are underway for the W76 warhead for the Trident II submarine-launched ballistic missile and the B61 bomb, and both Congress and the Administration support them. Additional LEPs are being planned. Some LEPs can use the original pit and replace other components, while other LEPs might reuse pits from retired weapons if that proves feasible, and still other LEPs are expected to require fabrication of new pits. U.S. policy, as stated in the Nuclear Posture Review, is specific on its preference among these choices: The United States will study options for ensuring the safety, security, and reliability of nuclear warheads on a case-by-case basis, consistent with the congressionally mandated Stockpile Management Program. The full range of LEP approaches will be considered: refurbishment of existing warheads, reuse of nuclear components from different warheads, and replacement of nuclear components. In any decision to proceed to engineering development for warhead LEPs, the United States will give strong preference to options for refurbishment or reuse. Replacement of nuclear components would be undertaken only if critical Stockpile Management Program goals could not otherwise be met, and if specifically authorized by the President and approved by Congress. The need for new "nuclear components," pits in this case, drives pit capacity requirements. However, the pit production capacity considered has varied greatly, from 10 to 450 pits per year. The Nuclear Weapons Council has decided that, to meet the likely demands of future LEPs, a production capacity of 50 to 80 ppy is needed. Andrew Weber, Assistant Secretary of Defense for Nuclear, Chemical, and Biological Defense Programs, testified in April 2013 that "there is no daylight between the Department of Energy and the Department of Defense on the need for both a near-term pit production capacity of 10 to 20 and then 30 by 2021, and then in the longer term for a pit production capacity of 50 to 80 per year." While this range of pit production drives the planning for the U.S. plutonium strategy, it is not a precise range based on a careful analysis of military requirements. When asked to explain the basis for this range, Linton Brooks, former Administrator of NNSA, and John Harvey, then Principal Deputy Assistant Secretary of Defense for Nuclear, Chemical, and Biological Defense Programs, responded: MR. HARVEY: We established that requirement back in 2008 for a capability to produce in the range of 50 to 80 per year. That evolved from a decision to basically not take the path that we originally were taking with the Modern Pit Facility, but to go and be able to exploit the existing infrastructure at Los Alamos to meet our pit operational requirements. The capability at Los Alamos was assessed to be somewhere in the range of 50 to 80 per year that they could get with the modernization program they anticipated. The Nuclear Weapons Council looked at that number. It's a capacity-based number, and said it's probably good enough. We'll have to accept some risk, but it's probably good enough. MR. BROOKS: So you can't tie it to a specific – you can't tie it to a specific deployment schedule or something. It's a judgment that is a combined judgment on yeah, you can probably do this, and yeah in the most reasonable world this will be enough. MR. MEDALIA: But there's a big difference in the facilities, between 50 and 80. Is it 80 or is it 50 to 80? MR. HARVEY: We understood that the capability to deliver, based on the anticipated modernization at Los Alamos which would include the CMRR or equivalent, coupled with the PF-4 production, appropriately reconfigured, could deliver in that range. So it was a range. I mean, it's always been cited as single shift range. By going to double shifts you could probably get the higher end of that range. MR. BROOKS: But no person now living can tell you for sure the answer to that question. I mean, you know, beware of spurious precision. … Fifty to 80 is probably as precise as the facts will allow people to be, although people will say other things. NNSA was also imprecise as to required production capacity. It stated in a 2013 report, "Preliminary plans call for pit production of potentially up to 80 pits per year starting as early as FY 2030. NNSA continues to develop options to achieve a higher production rate as part of the plutonium strategy." John Harvey subsequently added, "The level of 50-80 ppy was consistent with existing PF-4 production capacity plus the analytical chemistry capacity anticipated for the planned CMRR-NF. However, NNSA officials in 2006 believed that a capacity in the range of 125 ppy was needed to respond to anticipated requirements and provide some resilience to surprise. Thus the 50-80 ppy level, while the best that could be done, accepted significant risk in their view." It may be possible to reduce the capacity required below 80 ppy and still meet DOD's requirements. This might be done in several ways: One option under serious study is reusing retired pits in LEPs. Whether this could be done for a particular LEP depends on details of the LEP, whether there are suitable pits available, and whether such pits are available in the quantity required; decisions would have to be made on a case-by-case basis. In some LEPs, it may be possible to simply reinstall a weapon's original pit. Neither that method nor reuse of retired pits from other weapons require AC or foundry work. By producing new pits while another LEP is underway with retired or original pits, LANL could use its otherwise-unused capacity to produce pits ahead of schedule for a LEP requiring new pits. Stockpiling new pits would enable lower rates of production and of AC to produce the aggregate number of pits needed by the time they are needed, even if the maximum production rate attainable is less than 80 ppy. In addition, keeping the pit production and support line in continuous operation would be useful if not essential for maintaining processes, equipment, and worker skills, and for training new workers. On the other hand, LEPs require considerable planning and design work, and designs for new pits would have to be certified. In the near term, it might not be possible to do this work far enough in advance to permit continuous production. Since the figure of 80 ppy was based on LANL's presumed pit production capacity using PF-4 and CMRR-NF (an existing building and one that has been deferred for at least five years), not on a strategic analysis of military needs, and since the range cited is 50 to 80 ppy, a capacity of less than 80 ppy might suffice. The Union of Concerned Scientists stated regarding required pit production capacity: If pits last 150 years or more, there is no need to replace aging pits for the foreseeable future, and no rationale for expanding production capacity beyond the existing 10 to 20 annually for this purpose. Even if the NNSA finds that pits will last only 100 years and that all need to be replaced by 2089, production capacity of 50 per year would be adequate. The NNSA could replace all existing pits by 2089 if it started doing so in 2019, based on the agency's conservative assumption that the U.S. stockpile will remain at 3,500 warheads. However, the United States is likely to reduce its arsenal in coming decades. In that case, the NNSA could either wait longer to begin producing replacement pits … or reduce the annual rate of production. … Thus, even under the most conservative assumptions about pit lifetime and arsenal size, there is no need to expand pit production capacity beyond 50 per year to replace aging pits. Because both pit lifetime and the future size of the arsenal are uncertain, it makes no sense to expand production capacity until it is needed. In contrast, John Harvey argues that there is risk in not providing margin to accommodate unknowns: Required pit production capacity cannot be based solely on known LEP requirements. We must consider the possibly of surprise: either technical problems in the stockpile that arise unexpectedly or geopolitical reversals. For example, we cannot anticipate at this point a need to increase stockpile size based on renewed threats, but we should not rule out that possibility in setting our pit production needs. Some reserve production capacity is required above and beyond known LEP needs to ensure we have some ability to respond to surprise. This is entirely consistent with the President's NPR [Nuclear Posture Review] vision for a responsive nuclear infrastructure. The longer we wait on achieving needed capacity, the greater the risk we are accepting in not having responsive capabilities. It could be argued that an ability to meet the higher requirement—the most challenging case—would enable the United States to meet lower requirements and would put this nation in a better position to meet higher requirements should that be deemed necessary. Further, if 80 ppy proves unattainable, an effort to reach that goal might increase the likelihood that this nation could reach 50 ppy, the lower end of the range. On the other hand, it could be argued that it is not desirable to have a goal of 80 ppy if that is excess to needs. According to Greg Mello, Executive Director of Los Alamos Study Group, It is not clear that efforts to reach a larger pit production capacity will enable lesser pit production capacities. History shows that efforts to acquire pit production capacity above that which is clearly needed, have failed. Facilities to support a larger-than-needed pit production capacity cost more for construction and operation than smaller facilities, and are more likely to encounter political objections. So trying for 80 pits per year may decrease the probability of successfully acquiring 50 pits per year, and trying for 50 pits per year may decrease the probability of achieving 30 pits per year. It may be far better to acquire the minimum necessary pit production capacity, and include a contingency plan that can be activated should conditions warrant. Because of concern over required pit production capacity, Section 3147 of the FY2013 National Defense Authorization Act, P.L. 112-239 , directed the Secretary of Defense, in coordination with the Secretary of Energy and the Commander of the U.S. Strategic Command, to "assess the annual plutonium pit production requirement needed to sustain a safe, secure, and reliable nuclear weapon arsenal." The accompanying Joint Explanatory Statement of the Committee of Conference states that the assessment shall include "an assessment of cost and national security implications for various smaller and larger pit production rates from the current 50-80 pit requirement. The conferees note that rates including 10 to 20 pits per year, 20 to 30 pits per year, 30 to 50 pits per year, 50 to 80 pits per year, and larger should be included as part of the analysis." Note that reducing required capacity would reduce facility requirements and might permit delaying facility construction. The purpose of this report, however, is not to address contending arguments on the capacity needed, but to discuss options for acquiring the maximum capacity DOD states that it needs, 80 ppy, by 2030. Even if in 16 years it turns out that a lower capacity would suffice, it is difficult at best to know that so far in advance. The difference between 50 and 80 ppy has consequences. As discussed above, the Nuclear Weapons Council reasoned that a capacity to build 50 ppy in single-shift operations could be scaled up to produce 80 ppy in double-shift operations, that is, double-shift operations can produce 1.6 times as many pits as single-shift operations. But if the actual need is 50 ppy, then by using the same ratio, a capacity to build approximately 30 ppy in single-shift operations could be scaled up to 50 ppy by using two shifts. Deploying and operating a smaller capacity would be less costly and easier to implement. Pu-238 is an isotope of plutonium. While it is not used in pits, it figures prominently in several pit production options presented later in this report. It has very different properties and applications than Pu-239. Pu-238 has a much shorter half-life than Pu-239 (87.7 years vs. 24,110 years), so is 275 times more radioactive. Because of its intense radioactivity, it is so hot that a lump of it glows, as Figure 2 shows. This radioactivity makes it useful in applications requiring a long-lived power source. It is used to provide heat to generate electricity for deep space probes and for defense purposes. At the same time, according to Los Alamos, Pu-238 is not desirable for using in pits because it has a relatively short half-life (87.7 years) and the associated decay generates large amounts of heat in the material. Pu-238 is listed in the [DOE] Safeguards Table (DOE 474.2) as attractiveness level D (Low-Grade Materials) because its half-life and associated properties would make it extremely difficult to fabricate into a pit, handle, and may cause problems for surrounding materials [in a nuclear weapon] such as electronics, plastics, etc. Statutes, regulations, DOE orders, etc., as described in Appendix A , use many terms. While they are often technical and complicated, understanding several of them is essential for understanding facilities, presented next, and options. Selected terms are presented here; they provide a basis for discussing constraints on plutonium buildings, various ways to comply with these constraints, and how the constraints might be modified. Dose: The amount of ionizing radiation a person receives, measured in rem. Rem: This is a unit of measure of the biological effects of all types of ionizing radiation on people. One expert lists a dose of between 0 and 25 rem as having "no detectable clinical effects; small increase in risk of delayed cancer and genetic effects," a dose of 25 to 100 rem as "serious effects on average individual highly improbable," and for 100-200 rem "minimal symptoms; nausea and fatigue with possible vomiting." Note that cancer risks in exposed populations generally increase with dose and number of people exposed. Plutonium-239 equivalent: Weapons-grade plutonium (WGPu) consists mainly of Pu-239 but includes small quantities of other plutonium isotopes. Some are much more radioactive than Pu-239, and there are many other radioactive substances. It is convenient to convert all radioactive materials to a single standard for purposes of assessing the radiological hazard from a building in the event of an accident. That standard is "plutonium-239 equivalent," abbreviated as Pu-239E in this report. Because WGPu is more radioactive than pure Pu-239, 1 gram (g) of WGPu has the radioactivity of 1.49 g of Pu-239. Similarly, Pu-238 is very much more radioactive than Pu-239; 1 g of Pu-238 has the radioactivity of 275 g of Pu-239. Hazard Categories (HCs) and Radiological Facilities : Nuclear facilities are categorized in several ways. One is by the hazard they could pose in the event of a major accident. HCs are based on "the consequences of unmitigated releases of hazardous radioactive and chemical material." 10 CFR 830, "Nuclear Safety Management," Appendix A, "General Statement of Safety Basis Policy," divides these consequences into three categories; Table 1 also includes a related category. Hazard Categories are determined by the amount of Pu-239E a building is designed to hold; each category has the potential for certain consequences in the event of a major accident. 10 CFR 830, Appendix A, states that "the hazard categorization must be based on an inventory of all radioactive materials within a nuclear facility." The HC structure builds in a conservative feature: "The final categorization is based on an 'unmitigated release' of available hazardous material. For the purposes of hazard categorization, 'unmitigated' is meant to consider material quantity, form, location, dispersibility and interaction with available energy sources, but not to consider safety features (e.g., ventilation system, fire suppression, etc.) which will prevent or mitigate a release." Hazard Categories apply to the design and construction of a building, not to its operation. For example, a building intended to hold 5,000 g of Pu-239E must be designed to HC-2 standards, while a building intended to hold 1,000 g of Pu-239E must be designed to HC-3 standards, which are less stringent. Closely related, and central to some options discussed later in this report, is the category "Radiological Facility." A Radiological Facility holds less Pu-239E than an HC-3 building. It is not part of the HC system because the amount of material is so small as to pose little threat; a hospital, for example, might be a Radiological Facility. The Radiological Laboratory/Utility/ Office Building (RLUOB) figures in several options below and is discussed in " Existing Buildings at Los Alamos for Plutonium Work ." As a Radiological Facility, HC standards limit it to 38.6 g of Pu-239E, or 26 g of WGPu, far less than enough to perform the AC needed to support production of 80 ppy. Design Basis Earthquake (DBE): The DBE is used to set standards for the resilience to earthquakes that buildings in various HCs must have. LANL provided the following information: The design basis earthquake is defined as the ground motion that has an annual frequency of 4 x 10 -4 or [once in] 2,500 years. This is the ground motion that structures, systems, and components (SSCs) are designed for using national consensus codes and standards. This approach would lead to a failure probability of the SSCs for loads associated with the design basis ground motion of 1-2%. Using this approach it is also expected that at ground motion associated with an annual frequency of 1 x 10 -4 , or [once in] 10,000 years, the failure probability of the SSCs would be about 50%. Design Basis Accident (DBA): This is the accident scenario against which a nuclear facility must be designed and evaluated. Each HC building is required to be built to survive a DBA, the worst-case accident that could plausibly affect the building. Because each building will face different threats, the DBA is necessarily building-specific. For one building, the DBA might be a flood; for another, an explosion of a nearby gas main; for a third, a tornado; and for a fourth, an earthquake. For the plutonium buildings at Los Alamos, described next, the main threat is an earthquake, so the DBA involves (1) an earthquake more powerful than the DBE that (2) collapses a building and (3) starts a fire that involves all material at risk in the facility and (4) releases a certain fraction of the plutonium into the air as plutonium oxide particles. The fraction, in turn, is based on (1) the Airborne Release Fraction (ARF), the fraction of the MAR that the postulated fire could release into the air; (2) the Leak Path Factor (LPF), the fraction of ARF that actually escapes from the building into the air; some of it would be trapped, such as by the collapse of the building; and (3) the Respirable Fraction (RF), the fraction of the plutonium oxide particles released into the atmosphere that are of a size (3 microns or less) that could readily be inhaled and lodge in the lungs, where they would cause biological damage and, quite possibly, lung cancers; larger particles would fall to the ground or would be trapped in the nose. Other variables enter as well; Appendix B discusses them in detail. The frequency of the DBA is much less than the frequency of the DBE because several steps must occur for the DBE to result in the DBA. NNSA commented on this difference: There is also margin in the assumed accident frequencies (e.g., once in 5,000 years); these were based on the structural failure probabilities and did not consider other conditional probabilities, such as the conditional probability of a large fire starting and growing within the facility and progressively effecting and engaging all of the assumed material at risk; this refinement would reduce the frequency of the event from once in thousands of years to once in hundreds of thousands of years. The difference between DBE and DBA is crucial because the path from the one to the other can be interrupted at many places and in many ways in order to reduce the probability of the DBA, as discussed in " Increasing Safety ," below. Radiological Facilities like RLUOB do not have a DBA and do not have to be designed to survive a DBA because they have so little radioactive material, though, as discussed in Appendix E , RLUOB was built (but not certified) to HC-3 standards. If RLUOB were to be converted to an HC-3 building, it would need a DBA and might need structural and other upgrades to be able to survive it. Appendix D describes some of the tasks needed to convert RLUOB to HC-3. Material At Risk (MAR): DOE defines this term as "the amount of radioactive materials (in grams or curies of activity for each radionuclide) available to be acted on by a given physical stress." For purposes of this report, it is a measure of the amount of plutonium that might be dispersed in a DBA. Molten plutonium or plutonium shavings in a crucible that topples over in an earthquake, spilling plutonium onto the floor, would be MAR because a fire would create plutonium oxide particles, while plutonium in specially designed containers that are fire-resistant and rugged enough to survive a building collapse would not face this risk and thus would not be counted as MAR. Maximally-exposed Offsite Individual (MOI) and other exposure standards: An MOI is a hypothetical person located at the spot—outside the site boundary but nearest to a specific building—where a member of the public could reasonably be, such as a dwelling or a public road. The guideline set by DOE is that the MOI should receive a dose of no more than 25 rem for an exposure of 2 hours (or up to 8 hours in certain situations). "The value of 25 rem TEDE [total effective dose equivalent] is not considered an acceptable public exposure either. It is, however, generally accepted as a value indicative of no significant health effects (i.e., low risk of latent health effects and virtually no risk of prompt health effects)." To avoid "challenging" the 25-rem dose, another DOE document sets the dose at 5 rem, and sets a guideline of 100 rem TEDE for nearby ("collocated") workers. Documented Safety Analysis (DSA): Once an HC-2 or HC-3 building is built, a DSA must be prepared for it. A DSA is an agreement on how much MAR it can contain in order to stay within the dose limits for a collocated worker (for an HC-3 building) or an MOI (for an HC-2 building). The DSA MAR limit is typically less than the upper bound for an HC-3 building; for an HC-2 building, the DSA MAR limit is a specific figure because HC-2 sets no upper bound. For two HC-2 buildings at LANL, CMR and PF-4, discussed below, the agreement is between NNSA and Los Alamos National Security, LLC, the site contractor. The MAR permitted is building-specific based on hazard analysis, including accident scenarios, and on multiple measures designed to contain radioactive material in an accident. For CMR, the MAR permitted by the DSA is 9 kg of Pu-239E; for the main floor of PF-4, the comparable figure is 2,600 kg. A DOE document provides detailed standards for preparing a DSA. No DSA is required for a Radiological Facility because MAR is so small that such facilities fall outside the Hazard Category system. Security Category (SC): DOE places uranium and plutonium into SCs depending on their attractiveness level, such as to terrorists. SC I and II pertain to facilities with Special Nuclear Materials (SNM, mainly uranium highly enriched in the isotope 235 and plutonium) in quantities or forms that would pose a severe threat if seized by terrorists. The highest level, SC-I, includes assembled weapons and 2 kg or more of plutonium ingots. SC I and II require armed guards, a special security fence, and similar measures. SC-IV requires much less security. It includes less than 200 g of metallic plutonium and less than 3 kg of solutions of less than 25 g of plutonium per liter. Table C-1 shows amounts of plutonium in various hazard and security categories. Safety Class, Safety Significant: 10 CFR 830.3 defines safety class structures, systems, and components (SSCs) as SSCs, "including portions of process systems, whose preventive and mitigative function is necessary to limit radioactive hazardous material exposure to the public, as determined from the safety analyses." In contrast, safety significant SSCs "are not designated as safety class structures, systems, and components, but whose preventive or mitigative function is a major contributor to defense in depth and/or worker safety as determined from safety analyses." LANL added this explanation: "Safety-class systems must operate in conditions that otherwise would result in an unacceptable risk (dose) to the public. Relative to the public, safety-significant systems support safety-class systems with additional protections that might help in an accident, but are not counted upon to do so." The nuclear weapons complex (the "Complex") consists of eight sites that maintain U.S. nuclear weapons; during the Cold War, the Complex designed, developed, tested, and manufactured these weapons. The Department of Energy (DOE) and its predecessor agencies used to own and set policy for the Complex. Beginning in 2000, the National Nuclear Security Administration (NNSA), a semiautonomous agency within DOE, took over these functions. Contractors operate Complex sites at the direction of NNSA. One of these sites, Los Alamos National Laboratory (LANL), has three buildings relevant to pits: This building was designed beginning in the late 1940s; most of it was completed by 1952, with another part completed in the early 1960s. It was used mainly for plutonium R&D, and at present provides AC and some MC to support pit production and all other plutonium missions in PF-4. CMR is showing signs of age. In 2009, a congressional commission found that it and a uranium processing building at the Y-12 National Security Complex are "genuinely decrepit and are maintained in a safe and secure manner only at high cost." In 2010, the staff of the Defense Nuclear Facilities Safety Board (DNFSB), which monitors safety and health issues at the nuclear weapons complex, "questioned CMR's ability to detect promptly ventilation system failure, a particularly important function given the system's age and lack of local alarms to notify facility workers." In a 2010 report to Congress, DNFSB stated that CMR and Y-12 uranium processing facilities "are structurally unsound and are unsuitable for protracted use." CMR suffers from another problem. As Los Alamos is on several seismic faults, earthquakes pose the greatest threat to CMR. It is not seismically robust. Its design, in the late 1940s, gave little consideration to seismic loads. Further, when it was constructed, there was a steel shortage due to a steel strike and the Korean War. To save on steel, each concrete beam in CMR is reinforced with only two steel reinforcing rods, which are of different diameters, while the concrete floor between the beams is 2 to 4 inches thick, reinforced with chicken wire. A Los Alamos seismic expert calculates that, for CMR, "the annual probability of failure [i.e., building collapse, is] somewhere between 1 in 370 years and 1 in 333 years." This means that for ground motion that might be associated with an earthquake that may occur approximately every 250 years, there is a 50% probability of collapse. This expert also calculates that the probability that CMR would survive a Design Basis Earthquake, in this case one occurring once in 2,500 years, is less than 0.2%. Another calculation using these data is that CMR has a 1 in 36 chance of collapsing in 10 years. DNFSB arrived at a similar calculation: Seismic fragility of building: There is a 1 in 55 chance of seismic collapse during a 10-year timeframe, which would result in release of nuclear material and injury/death of facility workers. The Board is concerned that prolonged operations in the existing CMR facility pose a serious safety risk to workers. In late 2010, the NNSA limited material-at-risk in the facility to reduce the public dose consequence following an earthquake to a value below the Evaluation Guideline of 25 rem. PF-4 is the nation's main building for plutonium work. It manufactures pits and supports many other plutonium projects. It produces Pu-238 heat sources for deep space probes and defense purposes. It houses the Advanced Recovery and Integrated Extraction System (ARIES), which converts the plutonium in pits into plutonium oxide for use in mixed oxide nuclear reactor fuel. It is the venue for pit surveillance, in which pits from deployed weapons are returned to Los Alamos for detailed inspection to search for actual or potential problems. It used to recover americium, a decay product of plutonium, for use in smoke detectors and industrial gauges, and is reestablishing that capability. It conducts plutonium R&D. DNFSB expressed concern about PF-4's vulnerability to an earthquake: PF-4 was designed and constructed in the 1970s and lacks the structural ductility and redundancy required by today's building codes and standards. In 2007, a DOE-required periodic reanalysis of the seismic threat present at the Los Alamos site was completed. It indicated a greater than fourfold increase in the predicted earthquake ground motion. Total facility collapse is now considered a credible event. … In response to this increased seismic threat, LANL undertook a series of actions to improve the safety posture of PF-4. Design of this building was completed in 2006. The building was completed in FY2010, office operations began in October 2011, and laboratory operations are expected to start in 2014. As a Radiological Facility, it is permitted to hold 26 grams (g) of WGPu. It has 19,500 square feet (sf) of laboratory space, as compared to 22,500 sf of lab space planned for the Chemistry and Metallurgy Research Replacement Nuclear Facility (CMRR-NF), a building planned but not built, as described in " A Sisyphean History: Failed Efforts to Construct a Building to Restore Pit Production ," below. RLUOB (pronounced "rulob") was intended to conduct unclassified R&D on plutonium and some AC in support of pit production; the latter amount was to be very small because CMRR-NF was intended for that purpose. Nonetheless, the design of RLUOB is suitable for AC because it uses open hoods instead of gloveboxes as in PF-4; hoods are more efficient for most AC because it is much easier to work with small samples in them, but they require a powerful ventilation system, which RLUOB has, as shown in Figure 6 . Indeed, a LANL report stated that "RLUOB has effectively perfect alignment with analytical chemistry activities." While RLUOB was intended to be a Radiological Facility, it was constructed to a much higher standard than was required: RLUOB was built as a "radiological-plus" or robust radiological facility. The engineering controls associated with worker radiation protection are on par with those inside of PF-4 and well in excess of those in the 1950s-era CMR Building. Additionally, the RLUOB uses modern HEPA filtration, which protects the environment from a release of contamination, and contains a state-of-the-art operations center for managing facility operations including ventilation. In an overarching sense, the RLUOB was built with a focus on the Nuclear Quality Assurance (NQA)-1 standard, which technically is only required for hazard category 3 facilities, but was constructed as such to provide lessons-learned to aid in constructing the CMRR-NF. However, despite its inherent robustness, the RLUOB does not meet the standards established for either a hazard category 2 or 3 nuclear facility because it was by design intended to work in conjunction with a hazard category 2 nuclear facility (the CMRR-NF). RLUOB was designed to withstand the design basis earthquake (DBE), in this case an earthquake anticipated to strike RLUOB once in 2,500 years. The force of the DBE was based on seismic calculations made in 1995. Accordingly, it is more resilient to earthquakes than PF-4 was as originally built, since PF-4 was designed to an earlier, less energetic DBE. (Upgrades have increased PF-4's resiliency.) As detailed in Appendix E , Los Alamos estimates that "collapsing RLUOB would take an earthquake with 4 to 12 times more force than an earthquake that would collapse CMR." However, the current DBE is more energetic than the 1995 DBE; it is unclear what measures, if any, would be needed to strengthen RLUOB to withstand the current DBE. Beginning in 1952, the United States made pits on a large scale at the Rocky Flats Plant (CO), sometimes over 1,000 ppy. Operations there halted in 1989 as a result of an FBI raid investigating safety and environmental violations. At that point, Rocky Flats was producing pits for the W88 warhead to be carried by Trident II submarine-launched ballistic missiles, but W88 production was not complete. DOE initially considered restarting operations at Rocky Flats, but ultimately decided not to. The United States has not had the capacity to make more than about 10 ppy since 1989. The history of efforts to restore pit production capacity on a larger scale is voluminous. The key takeaways from the brief summary that follows are: (1) many projects have been proposed over the years; (2) none has been successfully completed; and (3) key parameters, such as cost, schedule, proposed facility site, and capacity, have changed from one proposal to the next. As the Cold War was winding down, Congress, in Section 3132 of the National Defense Authorization Act for FY1988 and 1989 ( P.L. 100-180 , December 4, 1987), directed the President to conduct a study on nuclear weapons complex modernization and to "formulate a plan … to modernize the nuclear weapons complex by achieving the necessary size and capacity determined under the study." The report was submitted in January 1989, but as Secretary of Energy James Watkins noted in January 1991, dramatic world changes forced further reassessments of the future Nuclear Weapons Complex." A DOE report resulting from the reassessments "presents a plan to achieve a reconfigured complex, called Complex-21. Complex-21 would be smaller, less diverse, and less expensive to operate than the Complex of today. Complex-21 would be able to safely and reliably support nuclear deterrent stockpile objectives set forth by the President and funded by the Congress. In addition to a No Action alternative, the study proposed two Reconfiguration alternatives. One would downsize existing sites and modernize them in place. "As an exception to the existing site theme, the functions of the Rocky Flats Plant (RFP) would be relocated." The second, "maximum consolidation," would relocate RFP and at least one other NMP&M [Nuclear Materials Production and Manufacturing] facility to a common location. The Pantex Plant and the Oak Ridge Y-12 Plant are candidates for collocation with the Rocky Flats functions, either singly or together. … The probable outcome of this option would be an integrated site which could consolidate much of the NMP&M elements at a single site. As part of this effort, DOE would develop a Programmatic Environmental Impact Statement "to analyze the consequences of alternative configurations for the Complex," with completion of that statement expected in early FY1994. "Complex-21 should be fully operational early in the 21 st century and will sustain the nation's nuclear deterrent until the middle of that century." What emerged was a two-pronged approach to restore pit production. After conducting an environmental impact statement (EIS) process, DOE issued a Record of Decision (ROD) on Stockpile Stewardship and Management in December 1996 that included reestablishing pit production capability at PF-4 while raising the prospect of a larger-capacity facility. Los Alamos would build a small number of pits for W88s so DOE could replace W88 pits destroyed in an ongoing surveillance program that monitored their condition. Producing these pits, and certifying them as "war reserve," that is, meeting standards for use in the nuclear stockpile, took many years; PF-4 produced its first war reserve W88 pits, 11 of them, in 2007. This small capacity would also serve as a pilot plant for developing production techniques for a larger plant. Since the total number of additional W88 pits required was small, about 30, there was no need for PF-4 to achieve high manufacturing rates. Producing these pits and certifying them as war reserve without nuclear testing was a major early challenge for the stockpile stewardship program. The second prong was to build a facility able to produce large numbers of pits. This was the Modern Pit Facility (MPF). NNSA approved Critical Decision 0 (mission need) for MPF in FY2002. The capacity of MPF was left to be decided, for reasons a National Environmental Policy Act (NEPA) document of May 2003 noted: Classified studies have examined capacity requirements that would result from a wide range of enduring stockpile sizes and compositions, pit lifetimes, emergency production needs (referred to as "contingency" requirements), and facility full-production start dates. Although the precise future capacity requirements are not known with certainty, enough clarity has been obtained through these ongoing classified studies that the NNSA has identified a range of pit production capacity requirements (125-450 ppy) that form the basis of the capacity evaluations in this EIS. The EIS evaluates the impacts of a MPF designed to produce three capacities: 125 ppy, 250 ppy, and 450 ppy. A pit lifetime range of 45-60 years is assumed. Congress initially supported MPF, but became increasingly concerned with the lack of study of alternatives, a lack of clarity on the production capacity required, and uncertainty on pit aging and pit life. Finally, Congress eliminated funds for MPF in the FY2006 budget cycle. Another effort to reconfigure the nuclear weapons complex began in 2004, when the House Appropriations Committee sought to have DOE link the nuclear weapons stockpile with the nuclear weapons complex that would support it: During the fiscal year 2005 budget hearings, the Committee pressed the Secretary on the need for a systematic review of requirements for the weapons complex over the next twenty-five years, and the Secretary committed to conducting such a review. The Secretary's report should assess the implications of the President's decisions on the size and composition of the stockpile, the cost and operational impacts of the new Design Basis Threat, and the personnel, facilities, and budgetary resources required to support the smaller stockpile. The report should evaluate opportunities for the consolidation of special nuclear materials, facilities, and operations across the complex to minimize security requirements and the environmental impact of continuing operations. The Secretary of Energy Advisory Board (SEAB) formed the Nuclear Weapons Complex Infrastructure Task Force to carry out this study. The task force issued its report in July 2005. It recommended immediate design of a Reliable Replacement Warhead (RRW). RRW was a concept in which Cold War aspects of nuclear weapon design, notably maximizing the explosive yield of the weapon per unit weight (the "yield-to-weight ratio"), would be traded off for design features more suitable to the post-Cold War world, such as ease of manufacture, enhanced confidence without nuclear testing, reduced use of hazardous materials, and enhanced surety features. The task force envisioned RRW as a "family of weapons," with RRWs ultimately making up most if not all of the future stockpile. The task force also recommended a Consolidated Nuclear Production Center (CNPC), "a modern set of production facilities with 21 st century cutting-edge nuclear component production, manufacturing, and assembly technologies, all at one location … When operational, the CNPC will produce and dismantle all RRW weapons." CNPC would have an SNM manufacturing facility, part of which would support plutonium operations. "All of the functions currently identified in the proposed Modern Pit Facility (MPF) will be located in this building" except for plutonium R&D. CNPC would not manufacture non-nuclear components. Regarding capacity, the report stated: A classified Supplement analyzes the issue of timing for the CNPC for a stockpile of 2200 active and 1000 reserve [weapons] and the expected pit manufacturing capacity of the future Complex. The conclusion is that if the NNSA is required to: 1) protect a pit lifetime of 45 years, 2) support the above stockpile numbers, and 3) demonstrate production rates of 125 production pits to the stockpile per year, the CNPC must be functional by 2014. If one accepts the uncertainty of pit lifetime of 60 years, the CNPC can be delayed to 2034. In either case TA-55 is assumed to be producing 50 production pits to the stockpile per year. The FY2007 National Defense Authorization Act, P.L. 109-364 , directed the Secretary of Energy to develop a plan for transforming the nuclear weapons complex to provide a responsive infrastructure by 2030, and to submit this plan to Congress. The report was submitted in October 2006. The goal was to implement U.S. policy on strategic deterrence as called for in the 2001 Nuclear Posture Review, which recognized the need to transform U.S. nuclear forces from deterring the U.S.S.R. to responding to emerging threats. Regarding the stockpile, NNSA envisioned a smaller stockpile that, by 2030, would be composed mainly if not entirely of RRWs. While the nuclear weapons complex of 2030, "Complex 2030," would continue to have eight sites, quantities of SNM requiring high levels of security would be "only present at production and testing sites." As to labs, in Complex 2030 "No laboratory operations require Category I/II SNM levels of security. Laboratory facilities are not used for nuclear production missions." Unlike the SEAB report, Complex 2030 would not have a Consolidated Nuclear Production Complex but would have "full operations of a consolidated plutonium center at an existing Category I/II SNM site in the early 2020s." Further, "By 2022, LANL will not operate facilities containing CAT I/II quantities of SNM. The location and operator of the consolidated plutonium center will be determined following completion of appropriate National Environmental Policy Act (NEPA) reviews." NNSA would "Plan, construct, and startup a consolidated plutonium center for long-term R&D, surveillance, and manufacturing operations. Plan the consolidated plutonium center for a baseline capacity of 125 units [i.e., pits] per year net to the stockpile by 2022." NNSA would "Upgrade LANL plutonium facilities at Technical Area 55 to support an interim production rate of 30 to 50 RRW war reserve pits per year net to the stockpile by 2012." Regarding another building, NNSA would "Complete and operate the Chemistry and Metallurgy Research Replacement (CMRR) as a CAT I/II facility up to 2022 (use as a CAT III/IV facility and focal point and for material science thereafter) to support plutonium operations at LANL, closure of existing LANL Chemistry and Metallurgy Research (CMR) facility, and the removal of CAT I/II quantities of plutonium from LLNL [Lawrence Livermore National Laboratory]." Importantly, the plan for Complex 21 shifted capacity from a range of 125 to 450 ppy examined in the MPF EIS to a baseline of 125 ppy. While nuclear weapons production was at issue, so was R&D on SNM, with a focus at LANL on plutonium. The CMR building had significant problems due to aging and design. As described in a Government Accountability Office report of 2013, DOE's and NNSA's plans for replacing the CMR have changed over the past several decades. In 1983, DOE first decided that the CMR was outdated and began making plans to replace it. Over the next nearly 2 decades, several large replacement projects were proposed, but none progressed beyond conceptual stages. … NNSA has taken a number of steps to develop the CMRR nuclear facility or some facility to replace the CMR, but its plans have continued to change over time. One such project was the Special Nuclear Materials Research and Development Laboratory Replacement Project at LANL. It would have replaced CMR, and would have included a laboratory and facilities for laboratory support, offices, utilities, and waste pretreatment. According to a LANL document of 1990, funding was $10 million for FY1988 and $22 million for FY1989. Anticipated milestones included completion of preliminary design in January 1990, completion of an EIS in 1991, site work start in mid-1991, and construction completed in the fall of 1994. This project did not happen. Instead, it eventually morphed into the Chemistry and Metallurgy Research Replacement (CMRR) project. In 2002, NNSA reached Critical Decision 0, approve mission need, for the project. In 2003, NNSA completed an environmental impact statement on the project, and in 2004 NNSA issued a Record of Decision (ROD) on it. The preferred option in the ROD included two buildings. The Chemistry and Metallurgy Research Replacement Nuclear Facility (CMRR-NF) was to be a laboratory building that would have provided support, such as AC, for pit production. A separate building, RLUOB, would have provided offices, utilities for both buildings, and laboratory space for R&D. Because the amount of plutonium RLUOB would have held under then-current regulations was so small, at most 6 grams of WGPu, it was expected to do only a small amount of AC to support weapons production work. In 2005, "NNSA authorized the preliminary design (Critical Decision 1 or CD-1) for the CMRR project." In 2008, NNSA issued an ROD to keep plutonium manufacturing and R&D at Los Alamos and to build CMRR-NF there to support these tasks. RLUOB was completed in FY2010, but CMRR-NF was still in preliminary design at that time. Congress initially approved the project, but concerns grew as the cost escalated and the schedule slipped. Concurrently, the need to replace CMR became more urgent. Michael Anastasio, then Director of LANL, testified that CMR "is at the end of its useful life," that CMRR "is critical to sustaining the nation's nuclear deterrent" and to other missions, and that "to successfully deliver this project, it will be important to have certainty in funding and consistency of requirements throughout the project." Also, as noted earlier, CMR was "decrepit" and not seismically robust. In an effort to secure Senate approval of the New START Treaty, the Administration issued a report in November 2010 stating that it "is committed to fully fund the construction of the Uranium Processing Facility (UPF) and the Chemistry and Metallurgy Research Replacement (CMRR)" and set out a 10-year funding profile for both facilities. The New START resolution of ratification included provisions related to the nuclear weapons complex in general and to CMRR and UPF in particular. The Administration requested the amount indicated in its November 2010 report in the FY2012 budget. However, in the FY2013 request, the Administration eliminated funding for CMRR-NF and "deferred" it "for at least five years" on grounds that the CMRR facility, UPF, and a life extension project for the B61 bomb were unaffordable concurrently and that there were alternative ways of accomplishing the tasks that CMRR-NF was to perform. However, Section 3114 of the FY2013 National Defense Authorization Act ( P.L. 112-239 ) directed the Secretary of Energy to "construct at Los Alamos National Laboratory, New Mexico, a building to replace the functions of the existing Chemistry and Metallurgy Research Building at Los Alamos National Laboratory associated with Department of Energy Hazard Category 2 special nuclear material operations." This provision also barred any funds to be spent on a plutonium strategy for NNSA "that does not include achieving full operational capability of the replacement project by December 31, 2026." However, Congress appropriated no funds for CMRR-NF for FY2013. For FY2014, the Administration requested no funds for CMRR-NF, and Congress authorized and appropriated no funds for it. However, Section 3117 of the FY2014 National Defense Authorization Act ( H.R. 3304 , P.L. 113-66 ) included an exception to the plutonium strategy provision just noted. It authorized NNSA to spend funds on a modular building strategy, that is, "constructing a series of modular structures, each of which is fully useable, to complement the function of the plutonium facility (PF–4) at Los Alamos National Laboratory, New Mexico, in accordance with all applicable safety and security standards of the Department of Energy." Option 12 describes the modular strategy. As a further illustration of difficulties in building facilities to handle plutonium, this section presents two facilities that were built, found to be unusable, and demolished. Nuclear Materials Storage Facility (NMSF): This building was built at LANL. According to the DOE FY1984 budget request, "This project provides for the construction of a repository for long and intermediate storage of large quantities of source and special nuclear materials. It will be designed to meet security, safety, and safeguards requirements for the storage and handling of nuclear materials. The new 29,100-square-foot building will contain a vault area of approximately 13,000 square feet." A 1997 report by the DOE Inspector General was scathing: We found that the NMSF, which was originally completed in 1987, was so poorly designed and constructed that it was never usable and that DOE officials were proposing to renovate the entire facility. Departmental and contractor officials discovered numerous design, construction and operational deficiencies after the facility was occupied in February 1987. These deficiencies included: (1) the inability to control and balance the heating, ventilation and air conditioning (HVAC) system to maintain acceptable negative pressures within the facility; (2) the inability to dissipate the heat generated by radioactive decay of the materials to be stored; (3) the inability to limit personnel radiation exposures to "as low as reasonably achievable;" (4) a peeling of the "Placite" decontamination epoxy coating throughout the facility; and (5) the inability to open and secure the Safe Secure Trailer (SST) doors due to the inadequate width of the garage once the SSTs were parked in the garage. Because of these and other deficiencies, "This structure was never used for storage of nuclear materials, and a decision was made in 2006 to demolish the structure." Demolition was completed by the end of FY2008. Building 371: A press report tells the story of a plutonium project at Rocky Flats: One striking example of a construction project that turned out to be a failure was a $225 million plutonium processing building at the Rocky Flats Plant near Golden, Colo. The processing plant, Building 371, was started in 1973, completed in 1981 and operated for a month in 1982 before being shut because the new processing technology did not work. The Energy Department has estimated that it will cost nearly $400 million and take eight years to make the equipment in the building work. "The fact of the matter is that Building 371 is a fiasco," said Joseph F. Salgado, the Deputy Secretary of Energy. "It's a horror story. It's unacceptable." Building 371 was intended to replace another, much older processing plant, Building 771. … The Energy Department shut Building 771 on Oct. 8 after three employees were exposed to plutonium dust, which can be extremely dangerous if it is inhaled. The closing of Building 771 was, [sic] the nation's sole source of reprocessed plutonium, which is used in triggers for thermonuclear bombs. The closing has brought most of the plant's operations at the Rocky Flats Plant to a halt. The building was never put into operation. Instead, the buildings at Rocky Flats Plant, including Building 371, were torn down and the site was decontaminated. For many years, Congress has been concerned with cost growth and schedule delays in nuclear weapons complex programs for facilities and weapons. One way to help resolve this problem may be to have a thorough airing of alternatives before decisions are made. Most recently, in its work on the FY2014 budget, Congress pressed NNSA to analyze alternatives: The Senate Armed Services Committee noted that "NNSA spent about 10 years and more than $350 million on the design of the CMRR Nuclear Facility" before it was deferred and a larger amount on another project that was canceled. The committee stated that "these decisions raise serious questions about how well NNSA scrutinizes the analyses of alternatives prior to submitting them for review and approval." Accordingly, it directed GAO to study, among other things, NNSA's process for analyzing alternatives. The House Armed Services Committee, in its report on H.R. 1960 , the FY2014 defense authorization bill, stated that Section 3113 would "require the Secretary of Energy, acting through the [NNSA] Administrator, to request an independent review of each guidance issued for the analysis of alternatives for each nuclear weapon system undergoing life extension and each new nuclear facility of the nuclear security enterprise as well as the results of such analysis of alternatives. The Secretary of Energy, acting through the Administrator, would be required to submit the results of any such analysis to the Nuclear Weapons Council and the congressional defense committees." Section 3113 also "would express the sense of Congress that Congress encourages the Administrator and the Nuclear Weapons Council to follow the results of the analysis of alternatives of a life extension program or a defense nuclear facility construction project when selecting a final option." This provision was included in H.R. 1960 as passed by the House. Section 3112 of the FY2014 National Defense Authorization Act ( H.R. 3304 , P.L. 113-66 ) contained related language. Section 311 of H.R. 2609 , the FY2014 energy and water development appropriations bill as passed by the House, directs the Secretary of Energy to submit "a report which provides an analysis of alternatives for each major warhead refurbishment program that reaches [a certain stage]." The Senate Appropriations Committee expressed its concern "about NNSA's ability to assess alternatives, which may significantly reduce cost, at the preliminary planning stages of a project." It referred to the deferral of CMRR-NF and the cancellation of another project, each incurring planning costs of hundreds of millions of dollars, and noted, "The Committee believes this wasteful spending could have been avoided had NNSA better assessed alternatives." Accordingly, it directed NNSA to submit a plan on how NNSA "will strengthen its ability to assess alternatives." Section 312 of the FY2014 Consolidated Appropriations Act ( H.R. 3547 , P.L. 113-76 ) requires the Secretary of Energy to submit to Congress an analysis of alternatives for the B61-12 LEP and certain other major warhead refurbishment programs. Over the past several decades, many projects, including some in the nuclear weapons complex, have been delayed or stopped by lawsuits brought by nongovernmental organizations under the National Environmental Policy Act (NEPA) of 1969, P.L. 91-140, as amended. These lawsuits typically involve procedural issues of compliance with NEPA in preparing an environmental impact statement (EIS). For example, plaintiffs might charge that an agency filed an inadequate EIS or did not consider all reasonable alternatives adequately. Secretary of Energy Steven Chu stressed the importance for DOE of complying with NEPA: Compliance with the National Environmental Policy Act (NEPA) is a pre-requisite to successful implementation of DOE programs and projects. Moreover, the NEPA process is a valuable planning tool and provides an opportunity to improve the quality of DOE's decisions and build public trust. Hence, timely attention to NEPA compliance is critical to accomplishing our missions. … I cannot overstate the importance of integrating the NEPA compliance process with program and project management and of applying best management practices to NEPA compliance in DOE," and pointed to the DOE NEPA Order as a "[tool] available to help improve the efficiency of its NEPA compliance efforts. Several options discussed below involve increasing the amount of plutonium in RLUOB beyond that permitted for a Radiological Facility so it could perform the AC needed to support production of 80 ppy. Section 102 of NEPA would seem to require an EIS for those options because the increase could raise the risk to the "human environment" in a major accident. Section 102 directs all federal agencies to (C) include in every recommendation or report on proposals for legislation and other major Federal actions significantly affecting the quality of the human environment, a detailed statement by the responsible official on— (i) the environmental impact of the proposed action, (ii) any adverse environmental effects which cannot be avoided should the proposal be implemented, (iii) alternatives to the proposed action, (iv) the relationship between local short-term uses of man's environment and the maintenance and enhancement of long-term productivity, and (v) any irreversible and irretrievable commitments of resources which would be involved in the proposed action should it be implemented. In 2008, NNSA prepared a broad ("site-wide") EIS for LANL that included the plutonium program there. Given the state of flux of the plutonium program, NNSA has not prepared an EIS on it since then, though in 2011 it prepared a Supplemental EIS narrowly focused on the CMRR-NF component of the CMRR project. However, Greg Mello, Executive Director of Los Alamos Study Group, a nongovernmental organization, argues that "an EIS must precede NNSA's choice between post-CMRR-NF plutonium sustainment alternatives." He prepared the following analysis in August 2013 for this report. Since the study group has filed four NEPA lawsuits against Los Alamos construction projects over the past two decades, this analysis merits particular attention. The main elements of the NEPA landscape are (1) a statute that elevates environmental values to a major purpose of governance, establishes a procedural approach to integrating those values in decisions, and creates a Council on Environmental Quality (CEQ) to oversee this process; (2) CEQ regulations that are binding on agencies; (3) agency regulations, harmonious with CEQ's but tailored to each agency; (4) CEQ guidance that lacks the force of law but is frequently cited by courts; and (5) a body of case law, based on thousands of cases, that creates a sort of NEPA "common law"—some universally binding, some binding in some federal districts, and some influential for such reasons as lucidity. Early NEPA case law established some basic parameters of implementation, such as that citizens could sue agencies to enforce NEPA compliance. Over time, a body of NEPA law has developed that is relatively settled for most basic legal issues but contested in other areas, especially where decisions depend on particular facts. DOE requires an EIS and a Record of Decision (ROD) as early steps for all major projects that may have significant impacts. In the case of CMRR-NF, a careful EIS that really compared alternatives realistically would have noticed the earthquake-amplifying stratum of volcanic ash beneath the site and incorporated the latest seismic information, problems that later bedeviled the project. The underlying weaknesses in purpose and need could have been vetted as well, and hundreds of millions of dollars in design costs and many years of delay in acquiring safer plutonium capabilities could have been avoided. Sound EISs and formal RODs would strengthen DOE's project management. I believe that an EIS must precede NNSA's choice between post-CMRR-NF plutonium sustainment alternatives. An EIS requires objective environmental analysis of all reasonable alternatives prior to actions that irreversibly commit federal resources or bias the agency toward an alternative, with an initial business-case analysis used to establish which alternatives are reasonable. Because NNSA has proposed alternatives to CMRR-NF that are major federal actions that could have significant effects on the human environment, and since NNSA has no EIS that analyzes the impact of these alternatives, NNSA must initiate an EIS to do so. Some proposed CMRR-NF alternatives encompass multiple states and sites and may cost billions of dollars. All alternatives will have significant environmental impacts over much of this century. The relative environmental benignity of upgrading RLUOB to an HC-3 facility might tilt the scales toward that choice but is not a reason not to do an EIS. Upgrading RLUOB may not be the whole of the post-CMRR-NF redirection in plutonium programs. Other nuclear weapons complex sites are under consideration for involvement, including [Lawrence Livermore National Laboratory, Nevada National Security Site, Waste Isolation Pilot Plant], and perhaps [Savannah River Site]. LANL is also considering building "modular" plutonium facilities and is actively briefing this option to Congress. An EIS is definitely required for choices of this magnitude. None of these alternatives, let alone "all reasonable alternatives" as the law requires, have been weighed and their impacts compared in any EIS. Furthermore, NEPA's regulations and case law are clear that an agency cannot analyze one project's alternatives and build something quite different, or take one action today and significantly add to that action later, or do so contemporaneously with separate but connected projects. Congress has been anxious to see a formal plan for plutonium sustainment; the formality of NEPA process would help provide that plan while also serving as a barrier to "scope creep" and associated cost escalation. It cannot be overemphasized that NEPA's analysis of alternatives serves public purposes beyond environmental ones. As John Immele, former director of LANL's nuclear weapons program, wrote in late 1999 regarding the NEPA process, "A ... lesson from the weapons program of the early and mid 1990s as well as the fissile materials disposition program is the necessity for and (surprising) success of publicly vetting our strategies through environmental impact statements." A thorough EIS analysis of plutonium program alternatives would be a way of complying with NEPA, would be responsive to congressional desires to have NNSA analyze alternatives, would reduce the likelihood that lawsuits filed to challenge the alternative chosen would succeed, and would thus reduce the likelihood that such lawsuits would be filed. Many options are possible. Ideally, all would meet multiple, and sometimes conflicting, goals, such as: Support production of 80 ppy. Support all other necessary plutonium work, however "necessary" is defined. Examples might include ARIES, producing plutonium-238 sources, conducting plutonium R&D, and processing liquid waste containing plutonium in order to reduce its volume for shipment to WIPP. Reduce safety and security risks (building collapse in an earthquake or other disaster, dose to workers and the public resulting from an accident, terrorist attack leading to detonation of a nuclear device, etc.) to an acceptably low level. Maximize cost-effectiveness and ensure affordability. Complete the project on a schedule that supports needed work. Halt program operations in CMR in approximately 2019. Provide a planning margin for the facility to meet, in the future, new or expanded missions or more stringent regulatory requirements. Maximize useful life of the facility or facilities. Comply with all existing regulations. Clearly, the more requirements that are levied on a project, the harder it is to comply with them all. In this case, none of the options presented here could meet all these goals simultaneously, and in some cases there is little or no data to evaluate how well an option would meet its goals. Thus Congress is faced with a choice among imperfect options. The following list includes a broad spectrum of options. The list is presented as a progression, with a logical connection from one option to the next. Each connection is shown in italics. As a start, consider options using existing buildings at Los Alamos, home to the only U.S. pit manufacturing capability . Since RLUOB is permitted to hold only a few grams of plutonium and CMR is at considerable seismic risk and due to be closed out, why not … PF-4 has enough lab space, about 60,000 sf, to produce about 10 ppy with RLUOB supporting some low-MAR AC. LANL estimates that PF-4 could be used to manufacture 30 ppy without having to move out any ongoing programs. Attaining this higher capacity would require several actions including reconfiguring existing space and "invest[ing] in new equipment (acquire/install) to increase capacity to 30 pits per year." As a hedge against inadequate plutonium processing capacity, NNSA's Plutonium Metal Processing subprogram would process plutonium alloy from pits returned from Pantex so as to create an inventory of metal for pits before it is needed; doing so "helps ease constraints on Analytical Chemistry (AC) capacity and reduce out-year risk to achieve capacity targets." Both of these activities serve to increase pit-manufacturing capacity without requiring additional laboratory space. Furthermore, NNSA's plutonium strategy is considering ways to make better use of space in PF-4 and RLUOB to support the transition of AC and MC capabilities from CMR. Some space would be made available for this transition by reclaiming or "repurposing" rooms in PF-4 that are no longer in use (e.g., because the projects they housed have been completed), and some would come from reconfiguration, that is, rearranging equipment to increase efficiency. The former would add net space for AC/MC; the latter would not. AC equipment also would be added in RLUOB. In total, these actions would affect 8,000 sf in PF-4. A Los Alamos study considered using a facility at Livermore (see Option 7) and RLUOB for AC but did not consider having PF-4 perform all the AC work itself. In part this is because AC is space-intensive and PF-4 would not have sufficient space for production of 30 ppy plus the AC needed to support that capacity. AC would pose this problem because PF-4 is not configured for a large amount of AC. While some AC operations that use gram quantities of plutonium can be performed in gloveboxes, most AC operations use tiny samples, such as milligram or microgram quantities of plutonium dissolved in acid and placed in very small containers. Manipulating them is much easier in open-front hoods using thin gloves; it would be much harder to manipulate these samples with the multiple layers of gloves required for PF-4 glovebox work. However, hoods require a powerful ventilation system to create negative pressure in the hoods (so no fumes or plutonium escape), and multiple large HEPA filters. Gloveboxes require much less ventilation capacity since any air that flows into them does so through small leaks. PF-4, which is mostly outfitted with gloveboxes, does not have sufficient air handling capacity to support the hoods needed for 30 ppy. It would be difficult to replace gloveboxes with open-front hoods in PF-4 because the PF-4 ventilation system was not configured for the large airflow that hoods require. Upgrading PF-4 ventilation to support the large number of hoods needed to provide high AC capacity would at best be extremely costly. Indeed, the ventilation system to support open-front hoods is so bulky, as shown in Figure 6 , that it might not be possible to retrofit it into PF-4 at any cost. By extension, even if all of PF-4 were devoted to pit manufacture and supporting tasks, it appears highly improbable that PF-4, by itself, could do all the work needed to produce 80 ppy. There would also be the issue of where to house the tasks that would be moved out. Given those problems, why not … Another option is to resume work on CMRR-NF. That building, after all, was not canceled—it was merely "deferred" for "at least five years." Los Alamos estimates that if construction were to begin in FY2018, the building would be completed in 2029, with the five-year delay adding another two years to construction time due to the need to assemble crews, let contracts, etc. Even so, this completion date would be in time for CMRR-NF to contribute to reaching the goal of producing 80 pits per year by 2030. CMRR-NF would provide HC-2 space for AC and MC in support of weapons production. While it is not at all certain that the facility will be built, it could be built if Congress chose to provide funding for it. This option faces many difficulties. The conditions that led the Administration to defer CMRR-NF in FY2013 remain in place, and in some cases have arguably become more salient since then. In deferring CMRR-NF, the Administration argued that building UPF and CMRR-NF and beginning the B61-12 LEP simultaneously would be unaffordable, and that available options would enable the nuclear weapons complex to perform the tasks of CMRR-NF. The cost of UPF has increased and its schedule has slipped, possibly necessitating a scaled-back version of UPF. This adds weight to the Administration's judgment about the affordability of CMRR-NF, UPF, and the B61-12 LEP if done simultaneously. Section 3114 of the National Defense Authorization Act for FY2013, P.L. 112-239 , required the Secretary of Energy to construct, at Los Alamos, "a building to replace the functions of the existing Chemistry and Metallurgy Research Building at Los Alamos National Laboratory associated with Department of Energy Hazard Category 2 special nuclear material operations." However, NNSA requested no funds for CMRR-NF in FY2013 or FY2014, and Congress appropriated no funds for it in those years. As detailed in P.L. 113-66 , FY2014 National Defense Authorization Act, Section 3117, "Authorization of Modular Building Strategy as an Alternative to the Replacement Project for the Chemistry and Metallurgy Research Building, Los Alamos National Laboratory, New Mexico," Congress is willing to consider modules (see Option 12) as an alternative to CMRR-NF. (Note that modules would perform high-MAR work while CMRR-NF would have performed mainly AC, which involves much less MAR.) A modified RLUOB that could "perform the functions of the existing Chemistry and Metallurgy Research Building," as discussed under Options 8-10, would meet most of the functionality requirement of Section 3114 of P.L. 112-239 , though not the requirement for a new building. (It would not provide vault space, as CMRR-NF would have, but it appears that the PF-4 vault will suffice, as discussed in " Options 6-12 Overview: Matching Plutonium Tasks to Buildings .") By the time construction could resume on CMRR-NF, other options, such as those the Administration was considering, would presumably be well developed, reducing the added value of CMRR-NF. Congress expressed concern over the escalating cost and delays of CMRR-NF, going so far as to impose cost and schedule caps on the project in Section 3114; would Congress be confident that NNSA could bring CMRR-NF online on schedule and on budget? But even building CMRR-NF would not address the fact that PF-4 would be over 50 years old when CMRR-NF came online, leaving aging and seismic issues unresolved. It may be possible to resolve them with another option … A new building could combine the functions of PF-4 and CMRR-NF. The argument for this option is that PF-4 will be 50 years old in 2028, about when CMRR-NF could be completed. Combining the two buildings into one would presumably cost less than building two separate buildings and would avoid the need to transfer material between buildings, increasing efficiency. A new building would incorporate the most advanced techniques to minimize seismic risk. This option encounters many difficulties. The building would be larger and more complex than either of the two smaller buildings, and complexity in a major nuclear construction project could be expected to drive up costs and stretch out the schedule. Whereas CMRR-NF design work is nearly completed, the new building would have to be designed from scratch, adding time and cost. Also at issue is the need for this facility. NNSA's TA-55 Reinvestment Project (TRP) plans to extend PF-4's life to approximately 2039, so combining the two buildings would forgo a decade of PF-4 useful life. TRP cannot be halted on the chance that the new building would be built: given the immense difficulties that earlier large facilities have encountered, there is no assurance that the new building would be built. Some key nuclear facilities, notably Building 9212 and CMR, have service lives of over 60 years. RLUOB, too, should have at least a 50-year life, that is, to 2059, since it was built to much higher standards than CMR or Building 9212. Upgrades could presumably extend its life. If RLUOB and PF-4 together can do the necessary plutonium work for at least another quarter-century, it would seem premature to even start planning a replacement facility now. Despite advances in design and construction that reduce seismic risk, this building would still be at some risk from an earthquake if sited at Los Alamos . A simple way to avoid this risk is to … Constructing this building at a nuclear weapons complex site other than LANL with low seismic risk, such as Pantex, would solve seismic issues regarding LANL, although the Virginia earthquake of 2011 raises doubts about the seismicity of any site. The difficulty lies in the tradeoff. LANL has a large human and facility infrastructure for plutonium work; much of that would have to be built from scratch at Pantex Plant (TX), the nuclear weapons complex site that performs final assembly and initial disassembly of nuclear weapons, taking considerable time and involving considerable expense. Savannah River Site has a plutonium waste infrastructure, but not the equipment or personnel for weapons manufacture. Its seismicity is in the same range as that of Los Alamos. Further, while the regulatory issues of dealing with plutonium buildings are well known for LANL, they would have to be examined in detail at another site. Siting, permitting, and preparing an EIS would be time-consuming. In addition, this option would not resolve problems with design, construction, and cost of the building itself. If building a new building at another site has problems, what about using another existing building at LANL … CMR currently performs some AC for pit production in PF-4, as well as nuclear forensics. Given that these are the only two facilities at Los Alamos contributing to pit production, and that it will be many years before a new one could be built, CMR is being maintained at a minimal level in order to keep it operational until approximately 2019, at which point NNSA plans to halt plutonium work there. One option would go beyond currently planned maintenance and upgrades so as to keep it in operation longer. Just as PF-4 is being upgraded on an ongoing basis to reduce the risks of building collapse and fire, keeping it in operation until 2039, more substantial upgrades to CMR might in theory keep it in service well beyond 2019. So doing would provide AC and other capability until a new building could be built. This option has many problems and uncertainties. As noted, a congressional commission called CMR "genuinely decrepit" and a DNFSB study found it to be "structurally unsound." Multiple wings of the building have been stripped to bare walls and floors to reduce nuclear material and prepare for decommissioning. A manager at Los Alamos indicated that CMR was built to the standards of the 1950s and there is a "vast mismatch" between the safety requirements of then and now. This individual pointed to problems with heating, electrical, and ventilation systems, and stated that refurbishing the ductwork would be "cost-prohibitive." A tour of the building in September 2013 by the author revealed drains that had been concreted shut, gloveboxes with plastic bags instead of drain connections, gloveboxes with little to no anchoring to the floor, patches to pipes to keep them in operation, and water leaks in the ceiling. Laboratory staff stated that utility panels behind walls were contaminated with radioactive material and that corrosion in some piping had greatly reduced the inside diameter. Since NNSA plans to halt CMR operations in approximately 2019, there have been no studies of how to extend its service life well beyond that time, or what it would cost to do so. However, the fatal flaw in this option is that CMR lacks seismic robustness. Given these problems, it appears that retrofitting CMR to provide adequate utility and seismic robustness may not be possible at any reasonable cost. Despite these problems, if no other facility is ready to do the work of CMR by 2019, there would appear to be no other option than keeping CMR operational beyond that date, which would entail additional costs, inefficiencies, and the risk of keeping workers in a seismically fragile structure. Given problems with some obvious options, are other options available? A logical construct matching tasks to buildings may help … As Table 2 shows, plutonium work may be divided into tasks requiring low or high security, and tasks involving lower- or higher-hazard quantities of MAR. This overview discusses each cell. High SC/High HC: Most work on pits, whether fabricating them using foundries, performing such supporting tasks as sample prep and some MC, or destroying them using ARIES, involves large amounts of WGPu in a form that could be immediately usable by terrorists. As such, this work requires high security and high MAR. PF-4 is HC-2/SC-I, and has the necessary equipment and supporting infrastructure for pit work. PF-4 is the only building in the nuclear weapons complex with this combination of attributes. Therefore, the most efficient use of PF-4 is for tasks requiring high MAR and high security. As a corollary, pit production capacity and efficiency can be increased by moving tasks that do not require high MAR and high security out of PF-4. Low SC/High HC: Producing 80 ppy would require casting more hemishells, increasing MAR substantially. While LANL has not done a detailed analysis, this added MAR could raise PF-4 above the limit allowed by the Documented Safety Analysis unless countervailing steps are taken. One approach, discussed in Option 12, would be to build a new module at LANL to hold the pit foundry. A second approach, discussed in Options 6 and 12, is to move Pu-238 work out of PF-4 to a module at LANL or to another site. Pu-238 is an ideal "candidate" to be moved out of PF-4. It is 275 times as radioactive as Pu-239, and even though it is a small fraction of plutonium by weight in PF-4, it accounts for 40% of its MAR allowance. It is in a low security category because it would be unattractive to terrorists. Moving Pu-238 out of PF-4 would also free up 8,000 sf of floor space, which could be made available for pit work. Low SC/Low HC: Casting hemishells for 80 ppy would also require increasing floor space dedicated to that task. AC is floor-space intensive. At the same time, it involves low MAR; indeed, the MAR is so low, and the form of the material (typically tiny samples of plutonium dissolved in acid) of so little value for use in a nuclear weapon if captured by terrorists, that much less security is required than PF-4 provides. The same holds for MC using samples of several grams of metallic plutonium. Accordingly, AC and some MC can be performed in SC-III/IV buildings. Thus, floor space could be made available in PF-4 by performing AC and some MC elsewhere. Manufacturing 10 ppy in PF-4 would have required 2,400 sf of floor space for AC in PF-4, plus about 7,000 sf for AC in RLUOB. The amount in PF-4, 2,400 sf, is a small fraction of that building's space, but since AC for 80 ppy would require considerably more floor space and ventilation capacity, the key value of conducting AC elsewhere would be in keeping additional AC from moving into PF-4. Options for moving AC out of PF-4 are discussed in Options 7-11. Moving the PF-4 gas gun (see Figure 12 ) out of that building and into a building for AC would release 1,200 sf of floor space, and a small amount of MAR, from PF-4. In sum, moving (and keeping) AC and some MC out of PF-4 would free up space but little MAR, while moving Pu-238 out of PF-4 would free up substantial space and MAR. In combination, these measures would free up much space and MAR in PF-4, making it more likely that it could produce 80 ppy and conduct other plutonium work. High SC/Low HC: This is a null set; no plutonium tasks require high security for low MAR. A note on vault storage space: A vault for storing plutonium is an integral part of pit production. It acts as a buffer to hold plutonium because one production task may not dovetail precisely with another. For example, pit production requires a place to hold plutonium metal that has been qualified for use in pits until it is needed, to hold hemishells until they can be joined into completed pits, and to hold completed pits until they are shipped to Pantex for incorporation into weapons. A vault is also needed to store pits from weapons that have been returned from deployment sites for surveillance. PF-4 is the only building at Los Alamos with a vault qualified to hold the large quantity of plutonium that such tasks require. When CMRR-NF was being designed in the early 2000s, SNM vault space at PF-4 and other sites was mostly filled and the final disposition of material from other sites was unknown. Accordingly, NNSA decided to add vault space to CMRR-NF. RLUOB could not have a vault because it was designed as a Radiological Facility. At issue is whether there is enough vault space in PF-4 to support production of 80 ppy. Over many years, the PF-4 vault has accumulated much material that is no longer needed for programmatic operations. Some, in excess to current or foreseeable needs, can be de-acquisitioned and shipped to the Waste Isolation Pilot Plant for permanent disposal, to Savannah River Site for other disposition, or to Y-12 for uranium items. Plutonium that might be needed for future operations could be stored elsewhere, such as Pantex Plant, which stores thousands of pits, or the Device Assembly Facility at the Nevada National Security Site, an HC-2/SC-I facility that has space available for storage of plutonium, or the K Reactor at Savannah River Site, which is currently used to store plutonium. Thus there are many ways to reduce the amount of material stored in the PF-4 vault, and NNSA accelerated vault cleanout as a mitigation effort associated with the deferral of CMRR-NF. Cleaning out the vault at PF-4 will make more room available for plutonium needed for production. LANL has not studied whether cleanout would provide enough space to support production of 80 ppy, but it appears likely that an effort focused on this goal and coordinated with other sites could do so. Since additional PF-4 vault space could readily be made available and it is not known how much would be needed to support production of 80 ppy, this report does not discuss increasing available vault space as a separate option. As a first step in moving through the options presented in Table 2 , perhaps NNSA could … Pu-238 accounts for 40% of the MAR allowance at PF-4. Increasing pit production to 80 pits per year (ppy) would increase MAR, and the increased pit foundry work, combined with Pu-238 work and other work, could exceed the MAR limit permitted for PF-4. One option would be to move Pu-238 work out of PF-4, whether to a module connected to PF-4 or to another site. While LANL is DOE's center of excellence for plutonium, Pu-238 work is readily separable from Pu-239 work because the two isotopes have very different properties and applications. Pu-239 is used in weapons and might be used as mixed oxide fuel (a mixture of oxides of Pu-239 and uranium isotopes) for nuclear power reactors, while kilogram quantities of Pu-238 are used to generate heat for conversion to electric power for defense and space missions. In a report of May 2013, DOE examined several options for processing Pu-238 for fabrication of radioisotope power systems. One was to upgrade the existing line in PF-4; however, this would not address the possibility of reducing Pu-238 MAR in order to release MAR for weapons work. The report also considered performing Pu-238 work at Idaho National Laboratory (INL) or Savannah River Site (SRS). It did not address the LANL proposal to build modules connected to PF-4, one of which might perform Pu-238 work. INL currently conducts operations with clad heat sources of Pu-238. It operates the Space and Security Power Systems Facility, which further encapsulates the Pu-238 heat sources produced by LANL, mates them to the power systems that convert their heat to electric power, tests the resulting system, and delivers them to users. INL states that all current LANL Pu-238 operations could be transferred to INL, such as recovery, purification, and source fabrication, and that INL would have a capacity of processing 5 kg per year. The option to bring Pu-238 source fabrication to INL would use an existing building, CPP-1634, that was built in 1993 as an HC-2 building and was since downgraded. It would have to be upgraded back to HC-2 in order to handle 5 kg of Pu-238 per year. INL would also build an addition to CPP-1634 that would more than double its size. The upgrade would require modifying the safety analysis report and upgrading the building's safety systems (such as ventilation) and equipment (such as gloveboxes) to be consistent with the hazards and operations proposed. Pu-238 in quantities of up to 16 kg is SC-III because it is unattractive for use in making a nuclear weapon. CPP-1634 would have more security than is needed to meet SC-III requirements because it would be within the INL security perimeter. The DOE report noted several advantages of establishing this capability at INL, including a new design that minimizes down time and maintenance cost, and process improvements that minimize operational costs and worker exposure and improve product quality. Also, locating the program in a facility owned by DOE's Nuclear Energy program, which is responsible for plutonium-238, would allow "more control and lower operational costs as compared to operating within TA-55 that seems to have large overhead costs resulting in high operational costs." Drawbacks include "inexperience with Pu-238 processing operations," "loss of co-location and leveraging with related NNSA program," risk due to uncertainty in safety requirements because "no new Pu-238 processing facility has been constructed in many years," and "risk of moving Pu-238 operations away from DOE's plutonium operations center of excellence," that is, LANL. There is also an SRS option. From the mid-1960s to early 1980s, SRS produced Pu-238 in its reactors by bombarding neptunium-237 target tubes with neutrons. It then dissolved the target tubes, separated and purified Pu-238 in H Canyon, turned the Pu-238 into plutonium oxide in HB-Line, pressed that material into heat sources, and clad them in iridium in the 235-F facility. In 1983, the last neptunium-237 targets were irradiated and in 1985-1986, Pu-238 operations were moved to LANL. Subsequently, the last SRS reactor was shut down in 1993. Work is underway to develop the capability to produce Pu-238 at Oak Ridge National Laboratory (TN). SRS has two buildings that could be used for Pu-238. Its H Canyon is a large, highly shielded concrete structure, approximately 1,000 feet long by 120 feet wide by 75 feet high, that began operations in 1955. It was built to process irradiated targets and fuel rods from SRS reactors for various nuclear materials. These targets and fuel rods had very high levels of radioactivity, so they required processing in a facility that was heavily shielded and remotely operated. As such, it is off limits to personnel, and all material is processed by moving it through pipes or handling it with a remotely operated crane. It is the only remaining U.S. facility that is heavily shielded and remotely operated and that can chemically process large quantities of radioactive material, such as spent fuel rods. It is currently operational, processing irradiated fuel stored in an underwater pool at SRS. SRS also has the HB-Line, which is built atop H Canyon to provide a work space with heavily shielded gloveboxes for work on Pu-238. It became operational in the late 1980s. It is currently operating, but its Pu-238 lines would have to be restarted, which could take three or four years. A third building at SRS that was used in the Pu-238 program, Building 235-F, contained a process line that fabricated heat sources from Pu-238 oxide. However, the facility has not been operated since 1984 and is not part of the current proposal due to high levels of contamination. In the SRS plan, Pu-238 could arrive at the plant as irradiated target tubes of neptunium-237 from a DOE reactor, as unpurified Pu-238 oxide from Russia, or as scrap Pu-238 oxide. These oxides would be dissolved in nitric acid in the HB-Line. This solution would be transferred through pipes to H Canyon, where it would be purified by removing other chemical elements. The purified Pu-238 solution would be transferred back to HB-Line, where plutonium would be precipitated out of solution and then turned into plutonium oxide, a solid. In an option in the SRS plan, a new Plutonium Testing and Processing Facility (PTPF), consisting of prefabricated hot cells (capable of handling highly radioactive material) and gloveboxes, would be installed in H Canyon. This facility would press plutonium oxide into pellets, which would be fabricated into heat sources, clad in iridium, and sent to INL, where they would be mated with power generating equipment and then delivered to end users. The DOE report noted several advantages and disadvantages of this option. H Canyon and HB-Line can process a wide quantity range of Pu-238, from 1 to over 30 kg per year. These facilities are built to high safety standards. Infrastructure requirements are well understood, such as environment, safety, and health, material control and accountability, and waste management; there is also an AC capability. On the other hand, the length of time that missions will support H Canyon is not clear because "its mission length is defined by a campaign by campaign basis." Operations there are planned until 2018-2020, with operations beyond that time uncertain. Further, required production "[does] not necessitate a large throughput capacity. Thus, revitalization of the facilities may not be justified." And without a long-term mission, there is no clear advantage to building PTPF. At issue: There is value to the weapons program in removing Pu-238 from PF-4. Would processing Pu-238 be a long-term mission that would justify, and that might contribute funding to, PTPF? The DOE report compared cost and schedule estimates for these two options, as follows. For the INL option, $12 million for technology development taking three years, and $110 million to $260 million for general-purpose heat source fabrication capability, taking five years. For the SRS option, $28 million to $45 million for plutonium purification revitalization, taking 3½ to 4½ years, and $125 million to $170 million for PTPF, taking four to five years. Combining these figures, the INL option would cost $122 million to $272 million and take eight years, and the SRS option would cost $153 million to $215 million and take 7½ to 9½ years. It must be emphasized that these estimates are preliminary and are not based on extensive analysis. DNFSB commented that "H-Canyon is exhibiting degradation of systems and structures that if not addressed, could challenge safe operations and pose a risk to facility workers. … DOE completed repairs to address some of the identified deficiencies … There are some safety-related repairs that have not yet been completed." Having addressed Pu-238, this report now turns to options to address analytic al chemistry … Lawrence Livermore National Laboratory (LLNL) has a large building, Building 332, that is part of its "Superblock" complex. Building 332 was built for plutonium work. One wing ("Increment 1") was built in 1961; another wing ("Increment 3") was built in 1975. Increments 1 and 3 are laboratory buildings; Increment 2 is the control room, without laboratory space. Building 332 was a Hazard Category 2/Security Category I facility, like PF-4, so it was used to handle hundreds of kilograms of plutonium. Its ventilation systems (including fans and HEPA filters) and electrical systems have been updated in the past decade. Even though Livermore is in a seismically active area, Building 332 was designed to take into account seismicity, and an analysis showed that it does not require an upgrade to make it more seismically robust. Its gloveboxes (new and retrofitted) are reinforced so as not to fall over in an earthquake. Building 332 remains an HC-2 building, but its plutonium quantity is limited by its Security Category. It was SC-I. To reduce vulnerability and security costs, NNSA consolidated SNM to fewer facilities at fewer sites. As part of that plan, LLNL removed all SC-I/II quantities of SNM from the lab, a task completed in September 2012. Building 332 is now SC-III, which limits it, as a first approximation, to 400 g of plutonium metal and 16,000 g of plutonium in solution. Plutonium in solution poses much less risk—is less attractive to terrorists—than metallic plutonium, which is why much more plutonium is allowed in solution than in metal form. Building 332 has ample space for AC work. It has 24,000 total sf of laboratory space, as compared to 19,500 sf for RLUOB and 22,500 sf in the CMRR-NF design. Some space is being used to fabricate plutonium samples for experiments that subject plutonium to impact (such as from a gas gun projectile) and for material processing studies. LLNL is currently using 5,000 sf for AC and MC, and could make another 6,000 sf available. Building 332 has a substantial excess of air handling capacity, which would support the use of open-front hoods. LLNL believes that Building 332 has sufficient air handling capacity to support AC for 80 ppy. Once analyzed, samples would be processed as waste. For final disposition, waste is shipped to WIPP. Since WIPP does not accept liquids, liquid waste is solidified by mixing it with cement. LANL and LLNL differ in how they would handle waste. LANL has the capability to recover plutonium from liquid samples and to process the waste stream, solidifying it for shipment to WIPP. LANL uses AC to support these operations. LANL also uses AC to send liquid waste to LANL's Radioactive Liquid Waste Treatment Facility because that facility places requirements (such as the amount of mercury) in the waste it accepts for treatment. LLNL does not have these capabilities, and would not perform AC on material (liquids and solids) to be disposed of as waste. However, the liquid waste generated by the AC for 80 ppy would be very much less than the waste that LANL generates for various other missions, so LLNL holds that simply cementing the liquid waste would be a satisfactory way to prepare its liquid waste for shipping. There are several potential drawbacks. All DOE sites that handle plutonium have their own AC operations rather than shipping samples to another site because AC is a basic capability required for many purposes in addition to pit manufacturing, such as measuring quantity of material for material control and accountability, recovering plutonium from waste streams, and for various types of pit work including development of processes for fabrication, qualification of processes, and certification. At issue is whether LLNL would have the needed capacity to support AC for 80 ppy while performing AC for other missions. Having LLNL perform the AC could add schedule risk to any LLNL program that needed AC. While commercial carriers have shipped plutonium for some years, there might be public concern about shipping many hundreds of samples per year. As a related point, while LLNL could stay within MAR limits if plutonium shipments arrived weekly, a LANL engineer observed, "I have been associated with pit manufacturing for several decades and it hasn't ever reached steady state yet. The notion of standardized delivery dates is inconceivable to me. The manufacturing process is too fragile and is constantly interrupted leading to feast or famine sample delivery." Further, it takes five days to dissolve a certain type of plutonium samples (plutonium oxide fired at very high temperature). Might these problems result in exceeding MAR limits? Performing all AC work in support of pit production would bring more plutonium work to LLNL. This would have the advantage of distributing plutonium expertise more widely in the nuclear weapons complex. LLNL currently has only four chemists doing AC on plutonium. This option would require adding staff and equipment, strengthening LLNL's capability, which could prove useful for peer review of plutonium issues as well as for AC. On the other hand, LANL is the center of excellence for plutonium in the nuclear weapons complex, and this option would dilute LANL's plutonium capability. According to a LANL staff member, If all DOE sites were making steel, there would be ample opportunities to consolidate AC using commercial vendors. With plutonium, AC is too inherent to processing for one site to be completely reliant on off-site AC measurement. Manufacturing war reserve pits demands the highest quality level and the broadest suite of analytical techniques. Since LANL has the country's main plutonium facility, it would need substantial in-house AC capability, and there is inherent capacity in the capability. The logistics of a split-capability mission (manufacturing at LANL, AC elsewhere) does not seem amenable to a smoothly operating enterprise. That said, LANL's 2012 "60-day study" acknowledged that LLNL could perform some AC when LANL needed additional capacity. Savannah River Site (SRS) offers another option. It has been involved with plutonium for many decades. It had five large reactors for producing plutonium, the first of which began operations in 1953. In total, these reactors produced 36 metric tons of plutonium, most of which was WGPu, with the largest annual amount, 2.1 metric tons, produced in 1964. All the plutonium produced had to be characterized, which required AC. Because SRS supplied plutonium to Rocky Flats Plant, SRS needed an industrial-scale AC capability to characterize the plutonium for the weapons program and to perform AC for other tasks, such as for Pu-238. Part of this capacity is currently unused, but SRS retains the infrastructure and equipment. While SRS no longer produces plutonium—an SRS reactor last produced plutonium in 1988—SRS continues to conduct a great deal of plutonium AC. It has repurposed its K Reactor, which used to produce plutonium, to store tons of plutonium from across the nuclear weapons complex and elsewhere. For example, plutonium from Rocky Flats and the Hanford Reservation (which used to produce plutonium) was moved to the K Reactor, as was plutonium de-inventoried from LLNL in order to move Superblock to Security Category III, plutonium oxide produced from retired pits by ARIES at PF-4, and plutonium from foreign sources. More is being added on an ongoing basis. All this plutonium requires AC in order to characterize the isotopic composition and impurities of plutonium stored in drums at K Reactor. For example, AC would detect chlorides and fluorides in the plutonium mixture that would corrode storage drums. AC is also used for characterizing plutonium produced at HB-Line for use in mixed oxide (MOX, a blend of plutonium oxide and uranium oxide) fuel for nuclear reactors. As with many industrial operations, SRS nuclear materials processing facilities operate 24/7, so SRS conducts AC 24/7 because some processing operations require a short turnaround time for AC, and personnel must be available at all times in case of problems. SRS currently uses F/H Laboratory (the laboratory that supported H area, where H Canyon and HB-Line are located, and F area, which also has a canyon and a B-line) for AC. F/H Laboratory (see Figure 10 ) is large, 80,000 sf as compared to 60,000 sf for PF-4 and 19,500 sf for RLUOB. Also at SRS is Building 773-A, which is larger than F/H Laboratory. Since both labs were sized for a time when the United States produced many thousands of nuclear weapons, they have between them a great deal of excess capacity in terms of hoods and gloveboxes for AC. SRS believes that F/H Laboratory, with Building 773-A for redundancy or a spike in workload, could handle the AC for 80 ppy, though they would need some new instruments and SRS would have to hire perhaps 20 technicians and several analytical chemists. Both labs have a very large ventilation capacity. For example, F/H Laboratory is equipped with six large fans, but SRS calculated that two of them could be shut down and the others would still provide sufficient ventilation capacity. SRS could perform the AC and Pu-238 missions concurrently, as they would use different facilities—H Canyon and HB-Line for Pu-238, and F/H Laboratory, Building 773-A, or both for AC. SRS has worked closely with LANL on AC. SRS is part of LANL's quality assurance program. LANL sends SRS metal samples once a year for SRS to perform AC on as part of the Plutonium Metal Standards Exchange. In that program, multiple sites, including the United Kingdom's Atomic Weapons Establishment, exchange plutonium samples and perform AC on them as a check on each other's AC capabilities. LANL, through its accreditation program, has also qualified SRS to perform the AC for plutonium to supply the MOX plant. The drawbacks of conducting all AC for 80 ppy at SRS are similar to those discussed for LLNL, though LANL would not be opposed to conducting some AC at another site if it needed extra capacity to handle a spike in workload, or on a routine basis if production increased to 80 ppy. Many plans proposed over the past two decades for plutonium work have sought to consolidate that work at a single site . If it is deemed desirable to do as much plutonium work as possible at LANL, what about a deeper look at other LANL options, starting with an existing building … Under this option, PF-4 would produce pits and would do sample preparation, waste disposal, and MC, while RLUOB would conduct AC on 26 g of WGPu, the most allowed by the Hazard Category material limit for a Radiological Facility. While RLUOB is ideally suited for AC, this option suffers from one significant flaw: 26 g of WGPu is nowhere near enough to do the AC to support 80 ppy, and PF-4 does not have the space to do most of the AC, all of the MC, all of the pit fabrication, other pit work, and work on other plutonium projects. While RLUOB as is could not conduct the AC/MC needed under current regulat ions, would it be possible to … Recently developed Los Alamos plans for PF-4 include upgrading wings of the building for Pu-238 operations, pit disassembly, pit fabrication, and other programs. Of particular importance are the upgrades to the pit fabrication wing of the building. These upgrades will remove currently unused gloveboxes from the manufacturing space, consolidate laboratory space, and improve the equipment layout to enhance process flow. These steps would increase PF-4's pit production capacity. CMR, RLUOB, or both would conduct some AC necessary to support pit manufacture. Space consolidation offers an opportunity to repurpose space to add equipment to achieve capacities of up to 80 ppy for several, but not all, flowsheet operations. (A "flowsheet" is a sequence of operations that must be followed precisely to make a pit.) The capacity of other operations could be boosted in other ways, such as by adding shifts. The challenge is determining what actions are needed to ensure that every operation in the flowsheet could handle up to 80 pits per year because there is not enough space in PF-4 to scale all operations, including support operations like AC, up to a capacity of 80 ppy. LANL has not analyzed space-fit issues for producing 80 ppy. But based on comparison to past analyses, it seems likely that achieving a capacity of 80 ppy in PF-4 is possible if LANL could fully use the laboratory space in RLUOB. The usefulness of that space, 19,500 square feet, is currently limited by a requirement that RLUOB can hold only 26 g of WGPu, the volume of two nickels. (See Figure 11 .) Increasing that limit to 1,000 g would provide enough MAR in RLUOB for the AC to support production of 80 ppy, as well as some MC. It is not clear that RLUOB has sufficient floor space to do that much work. However, as discussed in Appendix F , it seems likely that RLUOB with a MAR of 1,000 g WGPu, plus space made available in PF-4 through reconfiguration (8,000 sf) or by moving out Pu-238 (a separate 8,000 sf), plus improving pit fabrication operations (such as by using multiple shifts or improving efficiency of equipment or processes), would provide enough space and free up enough MAR to produce 80 ppy and to perform the AC needed to support that level of production. To hold 1,000 g WGPu while complying with regulations, RLUOB would have to be converted to an HC-3 building. There are several advantages. So doing would support LANL's ability to perform the pit work that DOD requires. It would permit LANL to move AC equipment from CMR, enabling that building to halt plutonium operations. It would permit LANL to free up floor space in PF-4 by moving out equipment for AC and for some MC (see Figure 12 ), and to make operations more efficient, such as by moving out a large MC instrument now placed in the middle of an AC room. A drawback is that it would take a substantial effort to convert RLUOB to HC-3. As a Radiological Facility, RLUOB is not subjected to federal, state, local, and laboratory requirements for an HC-3 building. To comply with these requirements, many tasks would have to be conducted; Appendix D lists about 100 of them. Many, such as preparing an environmental assessment and perhaps an EIS, developing safety design reports, developing engineering functions and requirements documents, developing an updated fire hazards analysis, and developing a final material control and accountability plan, would require much time and effort; others would require less effort. But the work would not stop with preparing these documents because many would lead to physical modifications to RLUOB. For example, an engineering task listed in Appendix D —"Develop design and analysis for seismic upgrades as required. RLUOB safety Structure, System and Components (SSCs) are not currently required to be operational following a seismic event per [NNSA's Los Alamos Field Office] direction"—could easily lead to seismic upgrades to RLUOB unless a decision were made to accept the risk in light of cost-benefit considerations. LANL has not estimated the cost or schedule to complete these tasks, and the upgrade could prove to be expensive. However, given the historical record of cost growth, schedule delays, cancellations, and deferrals in constructing new plutonium facilities, upgrading RLUOB to HC-3 would probably be a quicker and less costly way to obtain the needed capacity than building a new building. Regulations limit the quantity of WGPu that RLUOB can hold to the volume of two nickels . What would happen if that limit were not applied to RLUOB ? Many regulations impose burdens on the nuclear weapons complex, including plutonium facilities, that to some analysts may seem disconnected from end goals, such as reducing dose in the event of an accident to a level below a specified threshold. Two quotes are instructive; many more could be added. SEAB stated in 2005, The DOE has burdened the Complex with rules and regulations that focus on process rather than mission safety. Cost/benefit analysis and risk informed decisions are absent, resulting in a risk-averse posture at all management levels. And an NNSA report of 2006 stated that the complex of that time had A culture that sometimes seeks to eliminate all risks at an unsustainable cost no matter how small the probability of occurrence and to substitute oversight recommendations for responsible line decisions. Hazard Category regulations limiting the amount of plutonium in a building are intended to limit the dose to emergency responders, collocated workers and the general public. However, a calculation in Appendix B shows that if RLUOB held 1,010 g of WGPu and a Design Basis Accident occurred in which the building collapsed, the dose for a collocated worker (CW) and a maximally-exposed offsite individual (MOI) would be far less than the guideline set forth in DOE regulations. Specifically, the dose to a CW would be 10.41 rem, vs. a guideline of 100 rem, and the dose to an MOI would be 0.49 rem, vs. a guideline of 5 to 25 rem. And as discussed under " Increasing Safety ," the probability and consequences of a DBA can be reduced in many ways. Accordingly, Option 10 focuses on how RLUOB might be used for AC/MC in support of pit production if Congress were to waive the limit of 38.6 g Pu-239E (26 g WGPu) for RLUOB. While the option has not been studied, it appears, as noted under Option 9, that a MAR limit of 1,000 g WGPu would be enough for RLUOB to perform the AC needed to support 80 ppy, as well as some MC tasks, though more floor space might be needed. Appendix F shows the space breakout for AC under several plans. CMRR-NF would have had about 22,500 sf of lab space. Of that, 9,750 sf would have been used for AC. Another 6,750 sf in RLUOB would have been used for AC. The current plan, with the 26 g WGPu limit, is to use 10,500 sf in RLUOB and 5,600 sf in PF-4 for AC. However, most AC work is less efficient if done in PF-4 than in RLUOB because PF-4 uses gloveboxes and because PF-4, which is SC-I, requires particularly rigorous security measures. If RLUOB could hold 1,000 g WGPu, 15,000 sf could be used for AC, 3,500 sf for MC, with the remaining 1,000 sf available for support activities. PF-4 could use 2,400 sf for sample preparation, which uses a large amount of plutonium and is done in a small lab room already set up for this purpose in PF-4. Option 10 may merit further study because, if it proves feasible, it would offer advantages that address concerns Congress has raised for many years. Option 7 (AC at LLNL or SRS) would offer some of these advantages as well. 1. Option 10 would reduce cancellation risk. The history of pit production efforts includes cases where decisions by Congress or the Administration have halted a major plutonium building after planning had started but before construction had begun. Conducting pit production support tasks in a building that already exists would reduce this risk. 2. Option 10 would greatly reduce the risk of a plutonium building being built, found unsuitable, and torn down. As described in " Two Other Failed Attempts ," this situation occurred with Building 371 at Rocky Flats Plant and the Nuclear Material Storage Facility at LANL. 3. Using RLUOB would reduce the risk of large cost growth. Congress is concerned about NNSA's record of cost growth in its nuclear facility construction projects, which may be why Congress, in the FY2013 National Defense Authorization Act, P.L. 112-239 , Section 3114, capped spending for UPF and CMRR-NF, and why Section 3112 of P.L. 113-66 , FY2014 National Defense Authorization Act, established a Director for Cost Estimating and Program Evaluation in NNSA. RLUOB has much lab space, and procuring added equipment would not add to the marginal cost if such equipment would be procured for another nuclear facility. Converting more space in RLUOB, strengthening it, or making other changes to reduce risk and increase efficiency would probably not cost as much as a new facility. 4. Equipping RLUOB for AC and some MC would be the fastest way to augment capacity. RLUOB has an infrastructure to support work on small samples, some lab space is already equipped, and empty lab space could be equipped. The capacity should be available before it is needed, providing time to work out process kinks. In contrast, adding equipment to PF-4 would be difficult, costly, and time-consuming because changes to PF-4, an HC-2 building, must comply with many requirements and workers must undergo security checks, and space may not be available. Minimizing the risk of delay is also of value because delay typically increases cost and could disrupt the schedule for weapons work. 5. Section 3114 of the FY2013 National Defense Authorization Act, P.L. 112-239 , requires the Secretary of Energy to construct a building to replace the functions of CMR at a cost not to exceed $3.7 billion. If RLUOB could replace the functions of CMR while avoiding the need to build CMRR-NF, it would save the cost of the latter facility, which NNSA estimated at between $3.7 billion and $5.9 billion in its FY2012 budget request. The savings could be higher. A five-year deferral, NNSA estimates, would add two years to the time to complete CMRR-NF, and delay typically adds cost. CMRR-NF might be canceled in favor of a modular strategy, which Section 3117 of the FY2014 National Defense Authorization Act authorizes. The two modules referenced in Section 3117 would presumably be less costly than CMRR-NF, especially as they would be between 3,000 sf and 5,000 sf, vs. 22,500 sf for CMRR-NF. However, modules would be HC-2 and at least SC-II. As such, the cost of two modules could reach the billions of dollars. 6. Using RLUOB would avoid or minimize design and construction risks, such as design errors. These risks are different than cost and schedule risks, though they may lead to such risks. A case in point from 2013 occurred with UPF. According to the Senate Appropriations Committee, "Most recently, a space fit issue that required raising the roof of the building by 13 feet to fit critical equipment resulted in more than $500,000,000 in additional costs to U.S. taxpayers." 7. As Appendix E shows, RLUOB is much more seismically resilient than CMR. Option 10 could permit NNSA to halt work in CMR by 2019. It might even permit halting this work before then, reducing the time in which CMR poses a safety hazard to its workers and the public. If no other facility is in place by 2019 for AC and some MC, it might be necessary to extend CMR's service life beyond then. However, there is no assurance that that could be done, which would make it harder to meet the 2021 pit production goal. As a cautionary example, the redesign of UPF might push completion of that facility past the date when Building 9212 can no longer be kept in service. 8. Option 10 could make 1,200 sf of lab space available in PF-4 by enabling the gas gun (see Figure 12 ) to be moved out. The target is typically 20-25 g of WGPu. With a MAR limit of 26 g WGPu for RLUOB, the target would take up so much MAR that much other plutonium work in RLUOB would have to be stop and the material containerized when a gas gun experiment was in progress. A MAR limit of 1,000 g of WGPu would avoid that problem. 9. Option 10 would increase efficiency in other ways. For example, PF-4 houses a highly sensitive spectrometer that had to be placed near an outside wall to minimize vibrations. The only suitable space available was in the middle of a room filled with gloveboxes. Moving it to RLUOB would remove clutter from the room. At the same time, it would be easier to use the instrument in a laboratory room outfitted to accommodate it. 10. NNSA anticipates that upgrades will enable PF-4 to remain in service until 2039. Based on experience with other plutonium buildings, RLUOB, which was completed in 2009, should have at least a 50-year service life. If PF-4 and RLUOB can remain in service for another quarter-century, Congress may be able to defer decisions on other plutonium facilities for at least a decade, and defer substantial expenditures on such facilities longer than that. 11. Even if NNSA ultimately moves high-MAR activities from PF-4 to modules, as discussed in Option 12, it would still be desirable if not necessary to use RLUOB for AC to support production of 80 ppy because RLUOB, unlike PF-4 or the modules, is well suited for low-MAR work that uses a substantial amount of floor space. Thus upgrading RLUOB would likely be a component of the module plan, in which case any difficulties attendant upon upgrading RLUOB would be present under the module plan. 12. Placing the pit program on a fiscally and politically sustainable path soon would avoid years of uncertainty for the entire plutonium program, providing a long-term foundation for the rest of the program. That would help NNSA plan that program, other facilities, disposition of excess nuclear material, and budgets. 13. Upgrading existing buildings, rather than building new buildings or transporting material to other sites as part of pit production, should minimize environmental impact. As a result, compliance with NEPA should be simpler and an EIS prepared to comply with the spirit as well as the letter of that law should be less vulnerable to a successful legal challenge. At the same time, there are several concerns about this option. 1. RLUOB might collapse in an earthquake. The building was designed to have a 50% chance of surviving the 1995 design basis earthquake (DBE), but the 2009 DBE is more powerful. The lowest two floors of RLUOB (basement, utilities; and first floor, laboratory) are built of thick reinforced concrete, and the second floor (lowest office floor) has thick concrete columns; all are seismically robust. The upper two office floors are designed to the structural requirements of an emergency response building, like a hospital or fire station. While the upper two floors are less robust than the lower floors, they are much sturdier than a standard office building, and its seismic robustness could be increased through several methods discussed in " Increasing Safety ." (The "utility" component of RLUOB is the Central Utility Building, separated from RLUOB by about a foot.) It appears that detailed analysis would be needed to determine the seismic performance of RLUOB as is, whether a collapse of the office would breach the laboratory ceiling, what reinforcements would be suitable, how effective they would be, and what they would cost. 2. Non-governmental organizations and members of the public might be concerned about any efforts to relax standards pertaining to nuclear facilities. Safety and other standards exist for a reason; would relaxing them add risk, and if so, by how much? Some might oppose introducing more than 26 g of WGPu into RLUOB on grounds that so doing could pose a direct threat to the surrounding area in the event of an earthquake that collapsed the building. 3. Relaxing standards for one building could set a precedent for so doing for other nuclear weapons buildings or other projects more generally. 4. Some might fear that this project could open the way for other plutonium projects at Los Alamos. As discussed in Option 12, the laboratory is considering a modular option, with a tunnel built to connect PF-4 and RLUOB and reinforced-concrete underground rooms or "modules" built off the tunnel for high-MAR plutonium operations. In this view, using trucks to transport samples between PF-4 and RLUOB would forestall or delay the modular option. Others might favor the tunnel in part because it would facilitate the modular option. 5. Some may fear that NNSA might not do an adequate EIS. One of the tests for a Categorical Exclusion in DOE regulations (10 CFR 1021.410) is (3) The proposal has not been segmented to meet the definition of a categorical exclusion. Segmentation can occur when a proposal is broken down into small parts in order to avoid the appearance of significance of the total action. The scope of a proposal must include the consideration of connected and cumulative actions, that is, the proposal is not connected to other actions with potentially significant impacts (40 CFR 1508.25(a)(1)), is not related to other actions with individually insignificant but cumulatively significant impacts (40 CFR 1508.27(b)(7)), and is not precluded by 40 CFR 1506.1 or § 1021.211 of this part concerning limitations on actions during EIS preparation. Similarly, CEQ regulations (40 CFR 1508.7) define "cumulative impact" as follows: "Cumulative impact" is the impact on the environment which results from the incremental impact of the action when added to other past, present, and reasonably foreseeable future actions regardless of what agency (federal or non-federal) or person undertakes such other actions. Cumulative impacts can result from individually minor but collectively significant actions taking place over a period of time. An EIS does not meet regulatory requirements if it avoids considering all reasonable alternatives, or if only a segment of a proposed action is analyzed, or if the cumulative impacts of multiple actions are not taken into account. "Up-equipping" RLUOB (adding equipment so it can handle more AC/MC to support pit production), building a tunnel to connect RLUOB and PF-4, building one module, building a second module, and building additional modules could easily be segmented. While the modules would be HC-2, and thus significant by themselves, up-equipping RLUOB and building a tunnel to connect it to PF-4 might be seen as "small" actions that would not appear significant. But the cumulative impact of those small actions plus modules would be much larger than just an up-equipped RLUOB plus a tunnel. Further, since there is a possibility of building modules given that the FY2014 National Defense Authorization Act authorized NNSA to spend funds on a modular building strategy, once certain conditions have been met, the EIS would need to analyze the impact of that alternative, including the entire suite of projects involved (such as the tunnel), before committing to any of them. 6. RLUOB, as currently planned, would dedicate a substantial amount of laboratory space to unclassified research on plutonium. This research could explore such areas as basic properties, nuclear forensics, nuclear power plants, and Pu-238. The space would be open to individuals without clearances. Providing space for postdoctoral fellows to conduct plutonium research would benefit LANL by attracting potential recruits to the lab, and discoveries made by these individuals or foreign nationals could benefit the weapons program. If RLUOB is permitted to have 1,000 g of WGPu in order to support the weapons program, most if not all of the unclassified laboratory space would be converted to classified space. Since the laboratory space at RLUOB could perform AC and some MC work, but questions remain about seismic robustness in light of the possible collapse of the office floors, would it be possible to … A concern with RLUOB, even with regulatory relief, is that the office component could collapse in an earthquake and breach the ceiling of the laboratory, releasing plutonium. A simple way to avoid that problem would be to build an "RLB," or Radiological Laboratory Building. Construction of RLUOB was completed in FY2010. The FY2012 NNSA budget request shows the total project cost of the facility as $164.0 million, including the office floors and the Central Utility Building (CUB), and another $199.4 million for installing equipment. An RLB built as a copy of the laboratory space in RLUOB should cost considerably less (when adjusted for inflation) than RLUOB because the office structure would be eliminated, the plans for the lab space already exist, and lessons learned from RLUOB could be applied to facilitate construction. The CUB was intended to provide utilities to CMRR-NF, a larger building than RLUOB, as well as to RLUOB; CUB should thus have the capacity to support most of RLB's needs. If RLB were built as a copy of the basement and laboratory floor of RLUOB, it would need regulatory relief in order to hold enough plutonium to do the AC/MC work needed to support 80 ppy. Regulatory relief would be unnecessary if RLB were to be built as an HC-3 building. However, meeting HC-3 standards would result in a substantial cost increase for paperwork, studies, and testing to certify the same equipment (fans, filters, fire suppression equipment, etc.) because the standards would be much higher. Another issue for RLB is that that structure would probably be sited in the location previously planned for CMRR-NF. In that case, building it there could preclude modules. Some would see that as a plus, others as a minus. If regulatory relief for RLB were not forthcoming, or if an HC-3 RLB proved too costly for a building holding 1 kg of WGPu, or if RLB plus PF-4 did not provide enough space or MAR for all the pit work that would be needed to produce 80 ppy, another approach would be to … Los Alamos's preferred approach to the plutonium strategy is a three-part plan: maximize use of RLUOB, repurpose space in PF-4, and build modules linked to PF-4. This section discusses the modules and their pros and cons. In concept, the modules would be like "RLB" in that they would be seismically reinforced laboratory-only space. There would be key differences: the modules would be completely buried instead of mostly aboveground, would be designed and built as HC-2, would do high-MAR work instead of AC/MC, and each would be for a single purpose. PF-4 is built as modules under one roof. They all utilize the infrastructure and supporting systems of PF-4, such as shipping, receiving, waste management, nondestructive assay, entry control, and security, but are designed so plutonium accidentally released in one room would be contained within that room. The LANL approach envisions building a tunnel from PF-4 to RLUOB with modules connected to the tunnel. The first modules would be for tasks involving large amounts of MAR: Pu-238 processing, a pit foundry, or processing plutonium dissolved in acid. Moving these tasks out of PF-4 would remove about 70% of the MAR in PF-4. So doing would make more MAR available for other tasks involving MAR while staying within the limit prescribed for PF-4. A key lesson learned from seismic simulation studies of PF-4 and RLUOB is that the larger the dimensions of the structure, the greater the seismic loads imparted to equipment anchored to the floor. As currently envisioned, modules, at 3,000 to 5,000 square feet, would be smaller than RLUOB (19,500 sf) and PF-4 (60,000 sf). They would be lower in height and narrower than those buildings and made of thick concrete heavily reinforced with rebar. They would be constructed in the 3-acre excavated area between RLUOB and PF-4 that was dug out for CMRR-NF (see Figure 4 ) and then buried with a special concrete that matches the density of the rock (called tuff) on which the modules would sit. By matching the density of the tuff, a seismic wave would pass through the concrete more smoothly, reducing its impact on the modules. Surrounding the structure with concrete would reinforce the walls. A buried structure has the added advantages of minimizing concerns regarding securely transporting plutonium between the modules, PF-4, and RLUOB, and avoiding such natural phenomena as fires and high winds. Los Alamos recognizes that the "big box" approach—building a single large building like PF-4 or CMRR-NF—no longer appears politically and fiscally sustainable over the decades required to plan and build such a facility. As Senator Lamar Alexander said, "if the NNSA does not find a more effective [way] to deal with design of these large multi-billion dollar facilities that NNSA builds it's going to lose congressional support for those facilities." Part of the problem is that a big box design is typically too ambitious and too cautious at the same time. It is too ambitious because when there is an opportunity to build a plutonium facility only once in 25 or 50 years, there is a tendency for the design to include everything that might possibly be needed over the building's life. It is too cautious because it must comply with a vast and growing body of regulations, often of increasing specificity. Meeting goals and requirements simultaneously is difficult, a difficulty compounded because uncertainties concerning goals and requirements increase the further out projections are made. Accordingly, in this view, a new approach is needed. Los Alamos argues that modular construction offers numerous advantages. Since modules would be much smaller than large buildings, they could be built faster and at lower cost. Since each module would house a single operation, safety planning could be specific to each module instead of, as at present, accommodating the highest-risk type and quantity of material. Modules could be built as needed, rather than having to incorporate in a single building all the functions that it might need to perform at some point during its service life. The modular approach, it is argued, would permit a steady level of funding rather than the large spikes of funding involved with construction of a large building like CMRR-NF, making the funding profile more predictable for Congress and the Administration. Design and construction of each module would benefit from lessons learned from previous modules, reducing cost. Reducing MAR in PF-4 would extend that building's service life if future regulations were to reduce its permitted MAR, as was the case with CMR. While the modular building strategy is, at this point, only a concept, it is gathering steam. Preliminary design work, cost estimates, and schedule estimates are underway and, as noted, the FY2014 National Defense Authorization Act authorizes this strategy. Nonetheless, several questions bear on its desirability: Is it needed? Could PF-4 plus RLUOB with regulatory relief produce 80 ppy and perform other plutonium tasks without the modules at acceptable risk levels? Would moving Pu-238 work to INL or SRS obviate the need for modules? Pu-238 accounts for 40% of MAR permitted for PF-4, and 8,000 sf of lab space. Would moving it out free enough MAR and space for PF-4, especially in conjunction with RLUOB, to do the added pit work needed to reach 80 ppy? Is there a need to move 70% of the MAR out of PF-4? Is it needed now? Future requirements for plutonium work might require added space. But NNSA projects that the TA-55 Reinvestment Project will extend the service life of PF-4 to 2039, for a total of 61 years, a projection not contingent on building modules. If RLUOB has a 50-year service life, it could remain operational until 2059. Can a decision on modules be delayed? While modules might save money by drawing on PF-4 infrastructure, they would be HC-2 buildings. As such, they would need their own ventilation, continuous power, fire suppression equipment, emergency access, and the like, all of which would be safety class and thus very expensive. What would the modules cost? NNSA has experienced delays and cost growth in many of its larger nuclear construction projects. The modular approach offers features that could help avoid these problems, such as a smaller scale, application of lessons learned from building previous modules, and construction of each module to accommodate only the purpose for which it is built. But the modules would be separate new facilities. Given NNSA's track record, can Congress have confidence that the modules would not encounter cost and schedule problems? Two arguments for modules are that they would make the funding profile more predictable and that modules could be built as needed. But if the schedule for module construction cannot be predicted, neither can the funding profile. Compared to modules, would it be faster and less costly to upgrade PF-4, use RLUOB for AC, and move Pu-238 out of PF-4? MAR limits in PF-4 are conservatively set. Mitigation measures, discussed next, would further increase the difference between the frequency of the DBE and the frequency of an accident resulting from that earthquake. Could MAR limits be raised without serious adverse potential consequences? Would that reduce the need to build modules as a way of reducing MAR in PF-4? Safety and efficiency are not static. Both can be improved. "Improved safety," as used here, means reducing the risk of a design basis accident (DBA). (Other types of safety, such as reducing the number of falls, are dealt with on a routine basis and are not considered here.) "Improved efficiency," as used here, means increasing capacity (number of ppy). This analysis focuses on Option 10, as this analysis is most applicable to that option; the analysis would also apply to Options 8, 9, and 11. Regarding Option 1, work is already underway on improved safety through TRP. Improving safety and efficiency are not relevant to Options 2, 3, 4, and 12 because, as new buildings, they would be designed and built to comply with the most modern safety standards. Improving safety and efficiency to a significant degree is not practical for Option 5 because CMR is so vulnerable to an earthquake. This analysis is also not relevant to Options 6 and 7, which involve modifying existing buildings at sites other than LANL. How could the risk of a DBA be minimized? A DBA must be prepared for buildings that are HC-3 and higher, not Radiological Facilities. However, if RLUOB held 1 kg of WGPu, whether as an HC-3 building or a Radiological Facility with modifications and regulatory relief, it would be beneficial to construct a DBA in order to analyze the sequence of events leading to the DBA. The key point is that the DBA sequence is not inevitable; a DBA would show many points at which the accident sequence could be interrupted. Taking actions to interrupt that sequence would greatly reduce the probability that the entire DBA sequence would occur, thereby reducing the likelihood that anyone would receive any dose and reducing the dose should the DBA occur. PF-4, as an HC-2 building, has a DBA. NNSA is conducting work at PF-4 through TRP to reduce the probability and consequences of a DBA. A DBA for RLUOB might specify an amount of Pu-239E in the building and include the following sequence: an earthquake that collapsed the building, followed by a fire that converted plutonium at risk to plutonium oxide particles that the fire lofted into the air, resulting in a dose to personnel beyond DOE guidelines. This section discusses possible ways to mitigate the risk of each event in the DBA sequence. LANL did not study the probability that RLUOB could survive an earthquake of given magnitude because that analysis is not required for a Radiological Facility. However, as discussed in Appendix E , RLUOB was designed to survive the 1995 design basis earthquake, which was appropriate for an HC-3 building. Since then, the DBE has been increased in severity. If RLUOB is to be used for 1,000 g of WGPu, whether upgraded to an HC-3 building or not, it may prove desirable to strengthen it. This could be done in several ways; note that these measures could reduce the consequences as well as probability of building collapse. The Stanford Linear Accelerator Center (SLAC) in California has facilities built near the San Andreas Fault, so seismic resistance is a design consideration. Matthew Wrona, Director of the Facilities Division at SLAC, noted that most buildings typically are designed to resist vertical loads, as they must bear the gravity loads. An earthquake, however, imposes lateral (horizontal) loads as well as vertical loads, and seismic resistance requires resistance to both. Wrona pointed to several methods to strengthen an existing building to resist seismic loads: Strengthen connections between columns and (horizontal) beams, such as by using welded moment resisting connections, to increase lateral load resistance of the building. Install diagonal bracing in load bearing exterior and interior walls. Add steel plates to the inside or outside of a building to stiffen it against lateral loads. Use buttresses anchored to the ground and to the outside of the building. Buttresses would resist lateral loads. Strengthen floor diaphragms to distribute lateral loads to supporting walls. SLAC has used several of these techniques to brace office buildings, as Figure 13 shows. As Figure 14 shows, buttresses have been used for many centuries to support buildings. Another strengthening method is base isolation technology, as shown in Figure 15 . A LANL structural engineer provided the following comment: Any number of techniques could be used to strengthen RLUOB to resist higher seismic forces. External bracing could be used, and the use of this technique at SLAC is a good example. Other possibilities may be to strengthen the internal steel-to-steel connections or the installation of internal shear walls and/or bracing. Base isolation has been applied to some structures to reduce the seismic loads that they would see during an earthquake. It might be applicable to RLUOB, either at the building foundation or at the junction between the concrete structure and the steel office structure above it. Another option may be to install internal dampers that absorb the energy of seismic motion that reduce structure displacements and accelerations which lead to reduced seismic loads. The point is that there are effective upgrades that could be implemented to improve seismic resistance. To choose the most effective set of upgrades, seismic/structural engineers need to complete a thorough analysis of the existing facility with an understanding of the performance required and using the appropriate ground motion in conjunction with applicable federal, state, and local seismic codes. NNSA has undertaken several projects to reduce the risk of building collapse for PF-4. Its TRP is intended to add about 25 years of expected useful life. TRP has multiple projects, including seismic upgrades to glovebox stands, as shown in Figure 16 . This upgrade is intended to prevent the gloveboxes from falling over during an earthquake and releasing plutonium. NNSA undertook many other projects in conjunction with its June 2011 Seismic Justification for Continued Operation. It noted that repairing one building feature (drag strut) reduced the dose from 2,100 rem for a once in 5,000 year event to 143 to 278 rem for a once in 2,000 year event. NNSA took many other actions to address seismic hazards, including "strengthen[ing] the roof, thereby addressing the most significant known weakness—a building collapse failure mode," and "brac[ing] ventilation room columns, addressing the next most significant known weakness." Additional repairs, NNSA estimated, could reduce the dose to an MOI to less than 25 rem. A second part of the DBA is that building collapse is followed by a fire that engulfs several rooms of the laboratory space. Various methods could be used. The simplest is to reduce the amount of combustible material in the building. While this seems self-evident, Los Alamos removed about 20 tons of combustible material from PF-4 between 2010 and 2012. Other steps taken in PF-4 included implementing a program to control ignition sources, repairing the main fire wall, addressing other structural issues, and increasing the capability of fire suppression systems. NNSA calculated that these and other measures to reduce the consequences of a post-earthquake fire at PF-4 would reduce the dose from this accident from 2,860 rem as of December 2008 to 23 rem as of June 2012 and well under 1 rem by September 2020. (This dose is for an MOI.) Similar measures should reduce the risk of a fire in RLUOB. A fire would not loft a plutonium ingot into the air because plutonium melts at a high temperature, 1,183 degrees F, and a fire would likely form a layer of plutonium oxide on the surface of the ingot that would keep oxygen from reaching the interior. To be lofted into the air in a form in which it can disperse and be inhaled, it must be converted to tiny (respirable) particles of plutonium oxide. Such particles can be formed if a fire reaches molten plutonium, plutonium shavings, or plutonium dissolved in acid; the latter would readily combine with oxygen if the acid boiled away. NNSA has taken many steps to reduce the amount of plutonium consumed in a fire in PF-4. These include installation and use of fire-resistant safes and containers for storing nuclear material, procurement of containers for special nuclear materials that "are designed to provide increased assurance of confinement in a seismically initiated fire when stored in environments not susceptible to direct flame impingement," "replac[ing] vault sprinkler heads with lower-actuation-temperature heads that will respond sooner and limit the development of a vault fire," and "impos[ing] restrictive material-at-risk limits to reduce the amount of plutonium that could be released in an accident." Another step is making sturdier gloveboxes and anchoring them more strongly to the floor so as to reduce the risk that they would topple over in an earthquake, releasing plutonium. Figure 16 shows the progressive strengthening of gloveboxes. Future plans include installation of fire suppression equipment in gloveboxes and improving fire barriers. There are many potential ways to reduce MAR—actually, MAR per pit—that would reduce the amount of plutonium that a fire in RLUOB would consume. Since many AC techniques date back to the Cold War, it may be possible to update them to take advantage of current technologies and requirements in order to reduce MAR. Possibilities include: Take fewer samples per pit. AC at present is performed much as it has been since the Cold War, as discussed in " The Pit Production Process ." Improved analytic instruments and improved understanding of plutonium and its impurities might permit reducing the number of samples. It may also be the case that these numbers reflect an excess of caution and an abundance of resources characteristic of the nuclear weapons program during the Cold War. Taking fewer samples per pit would reduce the sample prep workload in PF-4, the AC workload in RLUOB, and the workforce and floor space required in both buildings. Perform fewer analyses per sample. Sometimes multiple analyses are performed to reduce the risk of missing needed information in process control. Reducing redundant analyses should have similar benefits as reducing the number of samples per pit. Accept less precision of measurement. While an AC procedure that originated decades ago might require precision to within plus or minus 1%, precision to within plus or minus 5% or 10% might suffice. That could permit faster sample processing, reducing MAR per pit. In addition, relaxing the requirement would, in some cases, permit one analysis technique to perform several types of measurements, while more precise techniques might require a piece of equipment for each measurement type. Using fewer pieces of equipment would also free up floor space in PF-4 or RLUOB. Devise ways to reduce the time that various AC techniques require. Faster processing would reduce the number of hours that material is at risk for each pit, and would permit more work to be done in a given amount of floor space, perhaps with fewer workers, reducing aggregate worker exposure to radiation. By reducing MAR per pit, RLUOB could support AC for a higher production rate, or could conduct AC for a given number of pits under a lower MAR ceiling. Even if an earthquake collapsed the building and a fire converted some plutonium to plutonium oxide particles, that material would not pose a threat unless it escaped from the building and was lofted into the air by the fire. Not all the plutonium at risk in RLUOB would leak into the atmosphere. The first floor of the building is laboratory space, but there is a basement below it and three floors above it. In an earthquake that collapsed the entire building, the first floor would collapse into the basement and the upper floors would collapse onto the laboratory space, sealing in some plutonium. Other steps might further reduce leakage. As a possible example, the foam used to extinguish aircraft fires, if used in a fire in RLUOB, might trap plutonium. A careful analysis of such techniques would be required to determine their efficacy and whether they would create criticality problems. Development of such techniques would be of value for RLUOB, PF-4, and other buildings containing nuclear materials. Even in a worst-case accident, the dose from plutonium released from RLUOB would be very low. NNSA, in discussing PF-4 stated, "Unmitigated/mitigated radiation doses were 7,250 rem/2,900 rem, based on an accident scenario involving 5MT [metric tons, i.e., 5,000 kg] of one plutonium material form [molten WGPu], an unconstrained full-floor fire, and an assumed 40 percent leak path factor [i.e., 40 percent of plutonium is released into the air]." (That calculation is beyond worst case, as the MAR allowance for the PF-4 main floor is 2,600 kg Pu-239E. Nonetheless, it is useful for providing a baseline for calculating the dose that might result from the release of 1 kg of WGPu.) If RLUOB held 1 kg of WGPu, and if the leak path factor for this accident at RLUOB, without mitigation, were 40%, then the resulting dose would be 1/5,000 th of 7,250 rem, or 1.45 rem. Even if the leak path factor were 100%, the dose would be 3.6 rem, near the bottom end of the dose range having no detectable clinical effects. (It is unclear if this dose is for MOI, CW, or others.) Appendix B presents another, more detailed calculation that produces even lower results for an MOI. Further, that Appendix shows that the value of "airborne release fraction" is very conservative, so that the dose could be tens or even 100 times less than shown in Table B-1 and Table B-2 . Efficiency, in this context, refers to the efficient use of space so as to enable more pit work to be performed in PF-4 and RLUOB. Producing 80 ppy would require more space for production equipment and AC. (Los Alamos has not calculated the precise amount of space required, and the requirement could change between now and 2030, when the capacity is needed.) Since pit fabrication could only be done in PF-4, more space in that building would have to be dedicated to that task. Some ways of achieving this space are straightforward: RLUOB could be utilized for AC and some MC. MC would not require much more space to support 80 rather than 30 ppy, as it is used to qualify production equipment and processes and to help solve production problems. However, some MC, such as the gas gun, might be moved into RLUOB. Some space could be repurposed; other space could be made available by moving Pu-238 out of PF-4. Space in PF-4 could be utilized more efficiently, which would have the same effect as increasing floor space. PF-4 and RLUOB could operate on two shifts per day. This would be much less costly, much more feasible, and much quicker than building new plutonium buildings, and would have much less environmental impact. LANL estimates that using two shifts per day rather than one increases productivity by a factor of 1.6. Multiple shifts are not new to the nuclear weapons complex; Rocky Flats Plant sometimes operated with three shifts a day, and SRS currently conducts some operations that way. As noted earlier, the vault in PF-4 for holding plutonium is being cleaned out, with excess material sent to WIPP for final disposition. Excess material that may need to be retrieved could be sent to other sites. It may be possible to design equipment to minimize space requirements. Space efficiency was not a major consideration when PF-4 equipment was originally designed; focusing on this goal and bringing modern technology to bear might permit more work to be done in a given space. Having more plutonium in a room would increase the dose to workers unless shielding is increased; this would be a much greater concern in PF-4, where work with kilogram quantities of plutonium is conducted, than in RLUOB, which would use very small samples. In order to examine the costs, risks, and benefits of the options discussed in this report, Congress would need further information. To gather it, Congress could direct NNSA to conduct several studies, including the following: Study of potential PF-4/RLUOB production capacity: Since it is unlikely that new plutonium buildings (especially large ones) will be built for many years, PF-4 and RLUOB have value beyond their cost. Many measures could increase capacity, such as moving Pu-238 out of PF-4, repurposing space in PF-4, and permitting RLUOB to perform all AC. Congress could direct NNSA to study whether some combination of such measures would enable production of 80 ppy while maintaining other essential plutonium missions in PF-4, and the number of ppy RLUOB and PF-4 could produce if more or less than 80. Study of repurposing PF-4 space: Los Alamos plans to repurpose some space in PF-4. Could enough space be made available for pit production and support without disrupting other critical missions in the building? If such disruption was required for pit production, could other missions be done in existing facilities elsewhere in the nuclear weapons complex, or would new facilities have to be built? If new facilities were required, what would they cost and how long would they take to build, and what would happen to the mission before they were completed? Study of the feasibility and cost of converting RLUOB to HC-3: RLUOB was built but not certified to HC-3 standards; it is sometimes called an "HC-3-like" building. In order to hold 1,000 g of WGPu while complying with regulations, it would have to be certified to HC-3. This would involve many actions. Many would be studies, but some of them could lead to physical changes to the building, such as seismic bracing or installation of equipment. It is not clear what physical work would be required. A "study of studies" would help determine if conversion would be feasible, and if so at what cost. Study of adverse consequences of allowing RL U OB to operate as is but with 1,000 g WGPu: Converting a Radiological Facility to HC-3 would entail costs, yet the dose resulting from an earthquake that collapsed RLUOB would be far below the guidelines set by DOE, as Appendix B shows. Congress could direct an independent organization to study the adverse consequences of using RLUOB for 1,000 g of WGPu as is, that is, with AC equipment installed but no steps to convert the building to HC-3. If it is determined that RLUOB as is would not provide adequate safety with 1,000 g WGPu, a related study could examine if there are additional steps short of full conversion to HC-3 that would provide adequate safety, and what they would cost. Study of having LLNL, SRS , or both perform some AC to support pit production : LLNL and SRS have infrastructure to perform AC to support pit production, though beyond some level of capacity they would need to upgrade equipment and hire additional staff. There would be benefit from dispersing AC expertise, capacity, and work to other sites in the nuclear weapons complex, but also benefit from concentrating them at LANL, the plutonium center of the nuclear weapons complex. It seems unlikely that a site other than LANL would perform all AC to support pit production. At issue: Should one or more sites other than LANL perform some AC to support pit production? If so, how much capacity should be dispersed to other sites? Which site or sites should be chosen? What would it cost to upgrade the site or sites for that capacity? Study of Pu-238 options: Pu-238 activities are costly given the high level of radioactivity of that material. Pu-238 work could be moved to INL, SRS, a module at LANL, or perhaps other sites. DOE's Office of Nuclear Energy prepared a study on this topic. However, that study did not consider the costs and benefits to the weapons program of moving Pu-238 out of PF-4; those costs and benefits might change the calculus of that move. Specifically, if moving Pu-238 to another site made a major contribution toward permitting production of 80 ppy without building new buildings, the value to the weapons program would be significant, and reducing MAR in PF-4 could help extend its service life. On the other hand, while DOE has estimated the cost of the INL or SRS options for Pu-238 to be several hundred million dollars, other costs would be involved, as well as temporary disruption of the Pu-238 program. Congress could direct NNSA to contract with an independent organization to study these costs and benefits. Study of cost implications of the regulatory system: A Radiological Facility is able to hold 38.6 g Pu-239E (26 g WGPu). As shown by RLUOB, such facilities can be affordable and can be built. In contrast, the history of the past quarter-century, as discussed in " A Sisyphean History: Failed Efforts to Construct a Building to Restore Pit Production ," has been that a facility intended to hold more than 26 g WGPu has seen cost and schedule escalate to the point where it cannot be acquired. These efforts have resulted in the expenditure of billions of dollars with the net result of canceled programs, unusable buildings that had to be demolished, and continued operations in "decrepit" facilities. Congress could task NNSA to report on cost implications of the current regulatory system governing nuclear facilities, focusing on tradeoffs between cost and risk. Long-term planning is difficult for all parties concerned . Delays and cost growth by NNSA on its major facilities reduce confidence in NNSA's cost and schedule projections, making it difficult for Congress and the Administration to budget for these facilities. NNSA sources say that congressional budgeting outside the regular budget process, such as sequesters and short-term continuing resolutions, and withdrawal of congressional support, such as the termination of MPF, make it difficult for NNSA to plan. Changes in Administration planning, such as the deferral of CMRR-NF, make it difficult for Congress and NNSA to plan. Long-term planning for pit production has proven particularly difficult . NNSA provides plans going out 10 to 20 years. However, these plans have often been stretched out, canceled, or modified substantially. Pit production at Rocky Flats Plant halted in 1989, yet LANL did not produce its first war reserve pits until 2007, NNSA has not needed to expand its small capacity, and there is still no plan for larger-scale pit production. Planning for MPF began in 2002, and Congress canceled it in 2005, followed by planning for CMRR, with the Nuclear Facility deferred "for at least five years" by the Administration in its FY2013 budget request. Similar delays have occurred with other nuclear weapons complex construction projects and with LEPs. While organizations need long-term plans as general guides to future plans, this history raises questions about the value of such planning. Requirements for pit production capacity have been fluid, reducing their credibility . The options studied for MPF in a 2003 EIS were between 125 and 450 ppy. Even if pits had a service life of 45 years, as was thought at the time, a 450-ppy capacity would support a stockpile of some 20,000 weapons, far more than the stockpile had. Then, the interim capacity at LANL was 10 ppy, with a goal of 30 ppy by 2021 and a requirement of 50-80 ppy by around 2030. Yet this latter requirement was not based on an analysis of weapons, targets, and scenarios, but on what NNSA estimated that Los Alamos could produce with PF-4 and CMRR-NF. Despite the deferral of CMRR-NF, and congressional authorization for NNSA to pursue a modular strategy as an alternative to that facility, the requirement for 50-80 ppy remains, and it is unclear if the number needed is 50 or 80. At the same time, steady increases in estimates of pit life, steady reductions in numbers of weapons, and the possibility of reusing pits from retired weapons may reduce the required capacity. As a consequence, it is hard to know what capacity is needed, and thus what new facilities or modifications to existing ones are needed. Differing time horizons between Congress and NNSA, and between political and technical imperatives, cause problems . Congress and the Administration, on the one hand, and DOE, NNSA, the labs, and the plants, on the other, work on very different timescales. It takes well over a decade, at best, for NNSA to bring a major nuclear facility project from initial approval to design, construction, and operation. In contrast, Congress and the Administration have changed course often on a plutonium strategy, sometimes from one year to the next. The more time from start to finish of a project, the more chance there is for intervening events to alter plans. Thus it would be to NNSA's advantage to drastically shorten the time from start to finish of a project. A construction cycle of a decade or more (or 24 years and counting in the case of a new plutonium facility) faces great difficulty when its funding hinges on a political cycle of one or a few years. For a successful plutonium strategy, Congress would find unacceptable management that allows costs to grow immensely, 10-fold in some cases, or that allows multi-year delays. At the same time, Congress and the Administration cannot expect a project to be completed in a couple of years. Analysis of alternatives, site surveys, compliance with NEPA requirements, planning, contracting, and construction typically take years. Thus, time is of the essence and delay is the enemy. This is a problem for Congress, the Administration, DOD, NNSA, the nuclear weapons complex, and the nation. Is there is a meeting-ground between the political and technical worlds? Can NNSA define the need for a major nuclear facility construction project, then quickly design it, comply with various federal, state, and local regulations, and build it? How could NNSA expedite the process? Can it avoid cost growth, delay, and mission creep? Conversely, once a project is defined, can Congress and the Administration commit to it on a longer-term basis? NNSA would need to gain the confidence of Congress in its ability to manage major construction projects. The capacity range studied for MPF implied the nominal ability to support a stockpile far larger than the then-current and likely future stockpile. CMRR-NF experienced a several-fold increase in estimated cost and years of schedule slippage. Failing to provide a realistic estimate of required capacity or to stay remotely close to cost and schedule estimates had consequences. Congress canceled MPF, and the Administration proposed to "defer" CMRR-NF for "at least five years." And as noted in " Two Other Failed Attempts ," two plutonium buildings were built, found to be unusable for their intended purpose, and were torn down. Congressional support for a modular strategy—yet another change in plans—increases the likelihood that the deferral of CMRR-NF will be a cancellation. Many believe that NNSA weakens its case for future projects when it releases estimates that are far in excess of a capacity that seems reasonable, or that are far below the ultimate cost and schedule, or when it changes its plans repeatedly. There are costs and risks to doing nothing . Time spent in planning and construction for new buildings to support pit production can reduce risk, for example by studying the impact of the facility on the environment, by studying the seismicity of the construction site, by designing the facility to meet requirements (such as for Hazard Category 2 or 3), and by incorporating measures in the design to reduce dose that individuals could receive from a major accident. However, if history is a guide, it could take many years before a new facility could become operational. Until then, whether the new facility is at Los Alamos or elsewhere, CMR must be used to provide AC support for pit production in PF-4. This entails multiple risks and costs: CMR is at high risk of collapse in the event of even a moderate earthquake. Collapse would kill many workers in the building. Pit production requires much more AC than PF-4 can accommodate. Collapse of CMR, without another building to conduct AC, would—not could—disrupt pit production until another facility for AC came on line, which could take years. Bringing another facility online on an emergency basis would probably cost more than doing so in an orderly manner, and shortcuts taken to expedite design, siting, and construction could increase the risk of problems down the road. CMR has a MAR of 9 kg of Pu-239E, and all the plutonium in that facility is considered at risk because no vault or container could be counted on to survive that building's collapse. Dispersal of some of that plutonium could place collocated workers and members of the public at risk. Depending on specifics of the collapse (wind direction, fire, form of plutonium, amount of plutonium escaping, etc.), dispersal of the plutonium could contaminate and force the closure of parts of the laboratory, possibly for months or years. That would disrupt laboratory operations, with operations affected at random based on which areas were contaminated. Cleanup of a large area contaminated by plutonium would be extremely costly and time-consuming. It would be a more effective use of those funds to avoid that problem by moving operations out of CMR as soon as possible. A facility can be safe without being compliant . As Appendix B shows, if RLUOB had 1 kg of WGPu, all of which was released in a DBA, the accident would result in doses well below DOE guidelines. Yet RLUOB would be in compliance with DOE regulations as a Radiological Facility only if it had less than 26 g of WGPu. As a corollary, there is a tradeoff between cost and regulatory compliance: Where is the point of diminishing returns? Should plutonium quantity in a building be limited by MAR or dose? The regulatory system defines a building's Hazard Category by MAR. An HC-3 building can hold between 38.6 grams and 2,610 grams of Pu-239E; a Radiological Facility can hold up to 38.6 grams. The objective is safety; however, MAR is a surrogate for safety. It is simple for regulators to measure MAR. In contrast, determining dose to a collocated worker or a maximally-exposed offsite individual requires a complex analysis for each building, taking into account such factors as details of construction, measures taken to increase seismic robustness and fire suppression, and assumptions on the amount of plutonium that would be lofted into the air in an earthquake, wind speed, and wind direction. Yet it is dose, not MAR, that determines whether an individual is safe, and as shown in Appendix B , even with MAR of 2,610 g Pu-239E (1,750 g of WGPu) for RLUOB, the maximum permitted in an HC-3 building, dose to those individuals would be far below DOE guidelines. Weapons and infrastructure constrain policy and strategy . Logically, these four elements should be linked, and policy and strategy should drive weapons and infrastructure. But given cancellations, multi-year schedule slippages, and major cost growth for LEPs and infrastructure facilities, even if strategy calls for having certain numbers of a certain weapon by a certain year, if an LEP is delayed by cost growth or infrastructure delays, it is the strategy that adapts. The political system is more flexible than the regulatory system . Regulators are bound by statutes, regulations, orders, and standards, and can only determine if a plan complies with these rules without regard to cost. Standards define acceptable risk: a Radiological Facility must have less than 38.6 grams of Pu-239E; a Security Category IV facility can have up to 200 grams of pure plutonium; the DOE guideline is for an MOI to receive a dose of no more than 25 rem over 2 hours. But this system is inflexible. It does not have a way of trading risk (and the benefit of reducing it) against cost (and the benefit of reducing it). As a result, it may force the expenditure of years, and many millions of dollars, to further minimize an already-minimal risk. In order to inject cost-benefit calculations into recommendations by DNFSB, Section 3202 of H.R. 1960 , the FY2014 defense authorization bill as passed by the House, required DNFSB to provide an analysis of the costs and benefits of its recommendations if requested to do so by the Secretary of Energy; in such instances, the Secretary would also be required to conduct a similar analysis. This provision, however, was not included in the final legislation, P.L. 113-66 . Even so, while the regulator can present costs and benefits, only the political system has the authority, ability, and culture to decide which tradeoffs are worth making, and to offer regulatory relief. For example, political decisions could make the difference between whether or not a RLUOB/PF-4 option is feasible. If the DOE hazard categorization standard is applied, so that RLUOB could hold only 26 grams of WGPu, then RLUOB could provide very limited AC support for pit production. If it were upgraded, the regulatory system could determine only if the upgrades would meet HC-3 requirements. In contrast, the political system could judge whether certain upgrades would reduce the risk to an MOI enough, with "enough" a matter of political judgment, and if the reduction in risk from these upgrades was worth the cost. The political system could also decide if the risk was acceptable without upgrades. There are several potential paths forward: Several options discussed in this report have the potential to produce 80 ppy, resolve the Pu-238 issue, and permit other plutonium activities, all at relatively modest cost, in a relatively short time, with no new buildings, and with minimal environmental impact. Determining the cost, schedule, feasibility, and other characteristics of these options would require detailed study. Appendix A. The Regulatory Structure Laws A dense web of "laws" (statutes, regulations, orders, standards, guides, etc.) bears on nuclear facilities and how they are to be built and operated consistent with worker safety, public health, and environmental protection. A critical point is that legislation trumps regulation: since regulations, orders, and standards derive their authority from statutes, statutes can mandate changes in them. Some of the more important laws are: Atomic Energy Act of 1954, as amended, 42 U.S.C. 2201 et seq., is the fundamental statute setting policy for civilian and military uses of atomic energy and materials. It established the Atomic Energy Commission, which was superseded by the Energy Research and Development Administration and then by the Department of Energy. Department of Energy Organization Act of 1977, 42 U.S.C. 7101 et seq., established the Department. National Environmental Policy Act (NEPA) of 1970, 42 U.S.C. 4321-4347, established a national policy on the environment, mandated the preparation of environmental impact statements for certain projects and proposals that could have a significant impact on the environment, and created the Council on Environmental Quality to, among other things, review federal activities to determine their consistency with national environmental policy. Establishment of Defense Nuclear Facilities Safety Board (DNFSB): 42 U.S.C. 2286 et seq. ( P.L. 100-456 , FY1989 National Defense Authorization Act) established DNFSB as an independent executive branch agency, as described in "Regulators," below. Note that the Nuclear Regulatory Commission does not regulate defense nuclear facilities. National Nuclear Security Administration Act, 50 U.S.C. 2401 et seq. (Title XXXII of the FY2000 National Defense Authorization Act, P.L. 106-65 ), established NNSA as a separately organized agency within DOE responsible for, among other things, the nuclear weapons program. Nuclear Safety Management: 10 CFR 830 sets forth requirements that "must be implemented in a manner that provides reasonable assurance of adequate protection of workers, the public, and the environment from adverse consequences, taking into account the work to be performed and the associated hazards." 10 CFR 830 lists its authority as 42 U.S.C. 2201, 42 U.S.C. 7101 et seq., and 50 U.S.C. 2401 et seq. Nuclear Safety Analysis Report, DOE Order 5480.23, April 30, 1992. Its purpose is "to establish requirements for contractors responsible for the design, construction, operation, decontamination, or decommissioning of nuclear facilities to develop safety analyses that establish and evaluate the adequacy of the safety bases of the facilities. The Nuclear Safety Analysis Report (SAR) required by this Order documents the results of the safety analysis." Safety Analysis Requirements for Defining Adequate Protection for the Public and Workers, Recommendation 2010-1 issued by DNFSB to the Secretary of Energy, October 29, 2010. Regulators The main regulators of nuclear weapons complex facilities are as follows: The Defense Nuclear Facilities Safety Board (DNFSB ) is an independent executive branch agency. Its mission, as set by legislation, is "to provide independent analysis, advice, and recommendations to the Secretary of Energy to inform the Secretary, in the role of the Secretary as operator and regulator of the defense nuclear facilities of the Department of Energy, in providing adequate protection of public health and safety at such defense nuclear facilities." It is to "review and evaluate the content and implementation of the standards relating to the design, construction, operation, and decommissioning of defense nuclear facilities of the Department of Energy … at each Department of Energy defense nuclear facility. The Board shall recommend to the Secretary of Energy those specific measures that should be adopted to ensure that public health and safety are adequately protected." Recommendations are central to DNFSB's role, especially since that agency does not issue regulations. Recommendations are not requirements, but "To date, the Secretary of Energy has accepted every Board recommendation, though three were accepted with conditions or exceptions described in the Department's acceptance letters." The DOE Office of Health, Safety and Security (HSS) integrates DOE "Headquarters-level functions for health, safety, environment, and security into one unified office.... HSS is focused on providing the Department with effective and consistent policy development, technical assistance, education and training, complex-wide independent oversight, and enforcement." The DOE Office of NEPA Policy and Compliance has as its mission "to assure that the Department's proposed actions comply with the requirements of the National Environmental Policy Act (NEPA) and related environmental review requirements … that are necessary prior to project implementation. The Office is the Departmental focal point for NEPA expertise and related activities in all program areas, covering virtually every facet of the Department's diverse and complex operations." The DOE Office of General Counsel reviews environmental impact statements and similar documents and decides whether to approve their release to the public. NNSA Headquarters sets policy on the nuclear weapons complex, such as major construction; its programs, such as LEPs; and its operations and maintenance. NNSA Field Offices are part of the regulatory system. Nuclear weapons complex sites are government-owned, contractor-operated. Field offices hold the contracts with the contractors and interact directly with them. For example, the Los Alamos Field Office handles day-to-day administration of the contract with the contractor, Los Alamos National Security, LLC. NNSA headquarters, in conjunction with Congress and the Administration, sets policy in such matters as how many pits to produce and what facilities to build, and the field office provides direction to the contractor for implementing policy while abiding by rules, such as for safety and security. Appendix B. Calculation of Dose as a Function of Material At Risk If Congress were to grant RLUOB regulatory relief so that it could hold 500 g to 1,000 g of WGPu, what risk would that pose to laboratory staff and members of the public? The following equations calculate dose resulting from a major accident that involved these quantities of plutonium, using assumptions as explained below. These calculations are only for dose, and are specific to RLUOB. They do not assess risk to individuals inside the building, nor do they assess risk from fire, earthquake, gas main explosions, and the like. This table calculates the dose to two types of individuals in the event of a major accident. A Maximally Exposed Offsite Individual is a hypothetical person at the location nearest to the site boundary where individuals could normally be expected to be, such as on a main road or in a house. The distance from RLUOB to MOI is assumed to be 1200 meters. A Collocated Worker is an onsite worker 100 meters from the building. Dose is calculated by multiplying the factors in this table. The calculation is specific to RLUOB; values for some factors would differ for other buildings. The calculation assumes a worst-case accident, that is, an earthquake that collapses the building, causing plutonium-containing material to spill out of containers, followed by a fire that aerosolizes the plutonium. The factors are as follows: Material At Risk (MAR): The amount of material, in this case plutonium, acted upon by an event. It is measured in units of grams of plutonium-239 equivalent (g Pu-239E), a standard used to compare the radioactivity of diverse materials. Table B-1 assumes a MAR of 500 g Pu-239E; Table B-2 uses several values of MAR. Damage Ratio (DR): The amount of damage to the structure, with 0 being no damage and 1 being complete collapse. The calculation uses a value of 1, that is, complete collapse of RLUOB, the worst case. Airborne Release Fraction (ARF): The fraction of Material At Risk released into the air as a result of the event. ARF is specific to the type of material (e.g., plutonium oxide, plutonium metal, plutonium in solution). The material in this accident is assumed to be 90% liquid (plutonium in solution) and 10% waste (such as rags with plutonium oxide particles). The value for ARF used in the calculation is 0.002, so this one value reduces dose by a factor of 500. Thus the dose resulting from an earthquake that collapsed RLUOB with 1,000g WGPu could be much higher than shown in Table B-1 if that value is in error. A DOE handbook shows that the factor 2E-3 (i.e., 0.002) is for airborne droplets containing plutonium oxide rather than for solid plutonium oxide particles that result from the aqueous solution containing plutonium having boiled away. In response to a question on the validity of using that figure in Table B-1 , Los Alamos stated: "the ARFs and RFs are almost always VERY conservative. In most of the experiments the average value was about 1 to 2 orders of magnitude lower than the value recommended for use in Safety Analysis. So, no there is not a problem. It really more goes the other way. At each stage we used very conservative values that multiply on each other, such that the final answer in no way represents reality." Consequently, the actual dose that would result from collapse of RLUOB with 1,000 g WGPu could be tens or even 100 times smaller than shown in Table B-2 . Respirable Fraction (RF): The fraction of the material released into the air that is of a particle size (3 microns in diameter or less for plutonium oxide) that, when inhaled, remains in the lungs. In this calculation, RF is assumed to be 1, the worst case. Leak Path Factor (LPF): The fraction of material that escapes the building. While ARF is related to material type, LPF is related to engineered containment mechanisms, such as robust containers. In this calculation, LPF is set at 1, that is, no containment is assumed. Source Term (ST): The amount of material released that provides dose to individuals. It is calculated by multiplying the previous five factors together. ST is then multiplied by the following four factors to arrive at dose. Chi over Q (χ/Q): The rate at which plutonium particles are deposited (fall to the ground). It includes such factors as wind speed, wind direction, and distance from the facility to the MOI or CW receiving the dose. Breathing Rate (BR): The volume of air, in cubic meters per second, that an individual breathes in. This is important in calculating dose because the more air an individual breathes in, other things being constant, the higher the dose. Specific Activity (SA): A measure of the radioactivity of a material, expressed in curies (a measure of the number of radioactive disintegrations per second) per gram of material. This table shows SA for Pu-239PE. Dose Conversion Factor (DCF): Multiplying SA by this factor converts SA to dose. Dose is expressed in rem, a measure of ionizing radiation absorbed by human tissue. DOE sets radiation exposure guidelines for MOI and CW in accidents that release radioactive material. The guideline dose for CW, 100 rem, is higher than that for MOI, 5 to 25 rem. The reason is that, just as workers in any hazardous occupation, such as mining or window washing, assume greater risk than the general public, so do workers in close proximity to SNM. The higher guideline reflects that risk. As noted in " Key Regulatory Terms ," one expert lists a dose of between 0 and 25 rem as having "no detectable clinical effects; small increase in risk of delayed cancer and genetic effects," a dose of 25 to 100 rem as "serious effects on average individual highly improbable," and for 100-200 rem "minimal symptoms; nausea and fatigue with possible vomiting." Thus the doses in Table B-1 and Table B-2 are very low and, as noted in "Airborne Release Fraction," above, could be much lower. Abbreviations: MOI, Maximally Exposed Offsite Individual; CW, Collocated Worker; DOE guideline, maximum dose (in rem) per DOE regulations. Conversion of g Pu-239E to g WGPu: The fissile material in pits is Pu-239. However, the actual material in pits, WGPu, is not pure Pu-239. Instead, it is composed mainly of that isotope as well as small amounts of other plutonium isotopes, some of which are more radioactive than Pu-239. The ratio of Pu-239 to other plutonium isotopes varies slightly from one batch to another, and the ratio changes over time as plutonium undergoes radioactive decay, with each isotope having a different rate of decay. It is useful to convert all radioactive material in a building to a single unit, in this case g Pu-239E, to facilitate compliance with MAR limits. Given the isotopic variance inherent in WGPu, no single factor can precisely convert g WGPu to g Pu-239E for all batches of WGPu. For most purposes, and for purposes of this table, multiplying g Pu-239E by 0.67 yields g WGPu. RLUOB, as a Radiological Facility, is only permitted to hold 38.6 g Pu-239E. In order for RLUOB to do the AC and some MC to support production in PF-4 of 80 pits per year, RLUOB would probably need to hold 1,000 g of weapons-grade plutonium, though a lesser amount, perhaps 500 g, might suffice. (As noted, it is not clear that RLUOB would have the floor space to do all the AC for that rate of production.) The table shows dose resulting from an accident that released those quantities of plutonium. The table includes 2,610 g Pu-239E (1,760 g WGPu) because that is the maximum amount of plutonium that a Hazard Category 3 building can hold. The conclusion is that even in a worst-case accident, with RLUOB collapsed by an earthquake and all plutonium in the building spilled out, converted to plutonium oxide particles by a fire, and lofted into the air, the dose that an MOI or a CW would receive if RLUOB contained 1,010 g of WGPu would be at least an order of magnitude below DOE guidelines. That would still be the case even if RLUOB held 1,760 g of WGPu. Appendix C. Security and Hazard Categories for Plutonium Appendix D. Preliminary Outline of Potential Tasks Required for RLUOB to Exceed Hazard Category 3 Nuclear Facility Threshold Quantity Los Alamos National Laboratory prepared the following document to indicate the types of tasks that would be necessary to enable RLUOB to contain more than 38.6 g Pu-239E under current statutes, regulations, DOE orders, DOE standards, administrative procedures, and other requirements. These tasks would convert RLUOB to an HC-3 facility. As will be seen, the list of tasks is extensive, and tasks derive from many sources. Note that while this is a list of tasks, many of these tasks would require extensive effort to complete, and some might lead to physical changes in RLUOB, such as seismic strengthening or added safety equipment. Appendix E. Comparison of Seismic Resiliency of CMR and RLUOB Structural engineers strive to make buildings safe against possible earthquake ground motion. The model building codes are constantly evolving and incorporate lessons learned from the response of buildings in real earthquakes. Prior to the 1933 Long Beach earthquake, the model building codes had very few seismic requirements. This earthquake led to new requirements being added to codes. Another big change in design codes came after the 1971 San Fernando earthquake, which showed that reinforced concrete buildings with certain characteristics were prone to collapse in large earthquakes. Since that time, the codes have implemented much stricter rules for the design of both steel and reinforced-concrete buildings. RLUOB was designed and constructed to withstand earthquake motion much better than CMR. CMR was constructed in the late 1940s and is not very seismically robust. In fact, it is a "non-ductile reinforced concrete moment frame"—the very type of structure that the 1971 San Fernando earthquake proved to be vulnerable to collapse in earthquakes. LANL estimates that it is vulnerable to collapse in an earthquake expected to strike with a frequency of once in 167 years to once in 500 years. While RLUOB, as a Radiological Facility, could have been built of light-duty design and materials because it was to have only about 6 grams of WGPu, NNSA decided to build it to a much higher standard in order to understand issues that could be encountered in building CMRR-NF. Specifically, RLUOB was designed and built to the 2003 Edition of the International Building Code supplemented to meet the requirements for seismic Performance Category 2 as provided in DOE Standard 1020-2002, that is, able to withstand ground motions associated with an earthquake expected to strike with a frequency of once in 2,500 years. It has a special reinforced concrete structure for the basement, first (laboratory), and second (office) floors. The third and fourth floors, which are also for offices, are constructed of steel framing designed to the standards of an emergency response building (e.g., a hospital or fire station), so they are more seismically robust than a typical office building. As a result, RLUOB is much sturdier than it needed to be. Based on LANL's models of seismic performance, collapsing RLUOB would take an earthquake with 4 to 12 times more force than an earthquake that would collapse CMR. Its better performance is largely the result of being able to dissipate energy through bending deformations in its steel frame. This energy absorption is key in seismic design. Brittle structures, such as CMR, cannot dissipate energy and are hence more susceptible to collapse when the ground motions exceed the building's design basis. In addition, the earthquake risk in the Los Alamos area is much better known today than it was when CMR was constructed. For example, it is now known that there is a seismic fault directly under CMR but not under RLUOB. Designing RLUOB with a more accurate understanding of the seismic characteristics of the underlying geology increases the ability of that building to withstand potential ground motion. Appendix F. Space Requirements for Analytical Chemistry to Support Production of 80 Pits Per Year LANL has never analyzed the space requirements for AC to support 80 ppy. However, in 2007 it analyzed the AC capacity of CMRR-NF plus RLUOB, and found that they could, together, support AC for 40-50 ppy. In the original plan for building both RLUOB and CMRR NF, there was to be a total of 16,500 square feet (sf) of laboratory space devoted to AC (see table below). If RLUOB were allowed to hold 1,000 g WGPu and CMRR-NF were to remain deferred, the amount of space for AC in RLUOB would exceed that value without incurring the operational penalty of having to use gloveboxes in PF-4 to the extent that would otherwise be required. Regarding the latter point, a few types of AC can be done in gloveboxes. For example, sample management, which involves cutting pieces of plutonium from a larger sample, and analysis that uses solid samples on the order of 1 to 5 g of plutonium, can be done in gloveboxes because they do not require fine manipulation. In contrast, most AC uses samples of a few drops of liquid with milligram (or smaller) quantities of plutonium; such samples require fine manipulation, which is much easier to do in hoods. Performing AC tasks of the latter type in gloveboxes exacts a penalty in the time required to do the analysis, which slows throughput and thereby reduces capacity. By performing AC tasks best suited for hoods in RLUOB and AC tasks that can be performed in gloveboxes in PF-4, by studying how to maximize efficient use of space for AC, and perhaps by using two shifts per day instead of one, it seems likely that a configuration of PF-4 plus RLUOB with 1,000 g WGPu would have the space both to fabricate 80 ppy and to provide the AC necessary to support that level of production. A detailed analysis would be needed to reach this conclusion with confidence. Appendix G. Abbreviations
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A "pit" is the plutonium core of a nuclear weapon. Until 1989, the Rocky Flats Plant (CO) mass-produced pits. Since then, the United States has made at most 11 pits per year (ppy). U.S. policy is to maintain existing nuclear weapons. To do this, the Department of Defense states that it needs the Department of Energy (DOE), which maintains U.S. nuclear weapons, to produce 50-80 ppy by 2030. While some argue that few if any new pits are needed, at least for decades, this report focuses on options to reach 80 ppy. Pit production involves precisely forming plutonium—a hazardous, radioactive, physically quirky metal. Production requires supporting tasks, such as analytical chemistry (AC), which monitors the chemical composition of plutonium in each pit. With Rocky Flats closed, DOE established a small-scale pit manufacturing capability at PF-4, a building at Los Alamos National Laboratory (LANL). DOE also proposed higher-capacity facilities; none came to fruition. In 2005, Congress rejected the Modern Pit Facility, viewing as excessive the capacity range DOE studied, 125-450 ppy. In 2012, the Administration "deferred" construction of the Chemistry and Metallurgy Research Replacement Nuclear Facility (CMRR-NF) on grounds of availability of interim alternatives and affordability. Nonetheless, options remain: Build CMRR-NF. Congress mandated it in the FY2013 cycle, but provided no funds for it then, and permitted consideration of an alternative in the FY2014 cycle. Remove from PF-4 tasks not requiring high MAR and security. Casting pits uses much plutonium that an accident might release ("Material At Risk," MAR) and requires high security. Making 80 ppy would require freeing more MAR and floor space in PF-4 for casting. Provide regulatory relief so RLUOB could hold 1,000 grams of plutonium with few changes to the building. AC for 80 ppy needs much floor space but not high MAR or high security. Several options involve LANL's Radiological Laboratory/Utility/Office Building (RLUOB). Regulations permit it to hold 26 grams of weapons-grade plutonium, the volume of two nickels; AC for 80 ppy would require 500 to 1,000 grams and perhaps space elsewhere. Augmenting RLUOB to hold the latter amounts within regulations would be costly even though the radiation dose if the building collapsed would be very low. Regulatory relief would save time and money, but would raise concerns about compliance with regulations. A complementary option is to perform some AC at Lawrence Livermore National Laboratory or Savannah River Site. Move plutonium-238 work to Idaho National Laboratory or Savannah River Site. Fabricating plutonium-238 into power sources for space probes entails high MAR, but not high security because it is not used in pits. Moving it would free MAR and floor space in PF-4. At issue is whether to conduct all plutonium work at LANL, the plutonium "center of excellence." Build concrete "modules" connected to PF-4. This would enable high-MAR work to move out of PF-4, so PF-4 and modules could do the needed pit work. At issue: are modules needed, at what cost, and when. Several options have the potential to produce 80 ppy and permit other plutonium activities at relatively modest cost, in a relatively short time, with no new buildings, and with minimal environmental impact. Determining their desirability and feasibility would require detailed study. Observations include: Differing time horizons between Congress and DOE, and between political and technical imperatives, cause problems. Doing nothing entails costs and risks. Keeping a 1950s-era building open while options are explored exposes workers to a relatively high risk of death in an earthquake. Congress may wish to consider limiting a building's permitted plutonium quantity by estimated dose instead of MAR. A facility can be safe even if it is not compliant with regulations. The political system is more flexible than the regulatory system. Regulations derive their authority from statutes. Regulators, bound by these statutes, cannot make cost-benefit tradeoffs regarding compliance. In contrast, the political system has the authority, ability, and culture to decide which tradeoffs are worth making.
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The development of super PACs is one of the most recent components of the debate over money and speech in elections. Some perceive super PACs as a positive consequence of deregulatory court decisions in Citizens United and related case SpeechNow . For those who support super PACs, these relatively new political committees provide an important outlet for independent calls for election or defeat of federal candidates. Others contend that they are the latest outlet for unlimited money in politics that, while legally independent, are functional extensions of one or more campaigns. This report does not attempt to settle that debate, but it does provide context for understanding what super PACs are and how they are relevant for federal campaign finance policy. The report does so through a question-and-answer format that emphasizes recurring public policy questions about super PACs. Now that super PACs have become established players in American elections, this updated report focuses on the background and policy matters that appear to be most relevant for legislative and oversight concerns. The report discusses selected litigation to demonstrate how those events have changed the campaign finance landscape and affected the policy issues that may confront Congress; it is not, however, a constitutional or legal analysis. Finally, a note on terminology may be useful. The term independent expenditures (IEs) appears throughout the report. IEs refer to purchases, often for political advertising, that explicitly call for election or defeat of a clearly identified federal candidate (e.g., "vote for Smith," "vote against Jones"). Campaign finance lexicon typically refers to making IEs , which is synonymous with the act of spending funds for the purchase calling for election or defeat of a federal candidate. Parties, traditional PACs, individuals, and now, super PACs, may make IEs. IEs are not considered campaign contributions and cannot be coordinated with the referenced candidate. Super PACs first emerged in 2010 following two major court rulings. As a result of the rulings, in Citizens United and SpeechNow , new kinds of PACs emerged that were devoted solely to making independent expenditures. These groups are popularly known as super PACs ; they are also known as independent-expenditure-only committees ( IEOCs ). Independent expenditures (IEs) are frequently used to purchase political advertising or fund related services (such as voter-canvassing). IEs include explicit calls for election or defeat of federal candidates but are not considered campaign contributions. IEs must be made independent of parties and candidates. In campaign finance parlance, this means IEs cannot be coordinated with candidates or parties. Determining whether an expenditure is coordinated can be highly complex and depends on individual circumstances. In essence, however, barring those making IEs from coordinating with candidates means that the entity making the IE and the affected candidate may not communicate about certain strategic information or timing surrounding the IE. The goal here is to ensure that an IE is truly independent and does not provide a method for circumventing contribution limits simply because an entity other than the campaign is paying for an item or providing a service that could benefit the campaign. Table 1 below provides an overview of how super PACs compare with other political committees and politically active organizations. In brief, super PACs are both similar to and different from traditional PACs. Super PACs have the same reporting requirements as traditional PACs, and both entities are regulated primarily by the federal election law and the FEC as political committees. Unlike traditional PACs, super PACs cannot make contributions to candidate campaigns. Super PACs' abilities to accept unlimited contributions make them similar to organizations known as 527s and some 501(c) organizations that often engage in political activity. However, while those groups are governed primarily by the Internal Revenue Code (IRC), super PACs are regulated primarily by the FEC. Unlike 527s as they are commonly described, super PACs are primarily regulated by the federal election law and regulation. Super PACs originated from a combination of legal and regulatory developments. The 2010 Citizens United decision did not directly address the topic of super PACs, but it set the stage for a later ruling that affected their developments. First, as a consequence of Citizens United , corporations and unions are free to use their treasury funds to make expenditures (such as for airing political advertisements) explicitly calling for election or defeat of federal or state candidates ( independent expenditures or IEs ), or for advertisements that refer to those candidates during pre-election periods, but do not necessarily explicitly call for their election or defeat ( electioneering communications ). Previously, such advertising would generally have had to be financed through voluntary contributions raised by traditional PACs (those affiliated with unions or corporations, nonconnected committees, or both). A second case paved the way for what would become super PACs. Following Citizens United , on March 26, 2010, the U.S. Court of Appeals for the District of Columbia held in SpeechNow.org v. Federal Election Commission that contributions to PACs that make only IEs—but not contributions—could not be constitutionally limited. Also known as independent-expenditure-only committees (IEOCs) , the media and other observers called these new political committees simply super PACs . The term signifies their structure akin to traditional PACs but without the contribution limits that bind trad itional PACs. As discussed in the next section, after Citizens United and SpeechNow , the FEC issued advisory opinions and regulations that offered additional guidance on super PAC activities. The development of super PACs is one of the most recent chapters in the long debate over political spending and political speech. Super PACs emerged quickly after the Citizens United and SpeechNow decisions and have become a powerful spending force in federal elections. Although the FEC amended its rules in 2014 to recognize super PACs, those who are concerned about the role of these groups in federal elections generally contend that more stringent regulations, or a statutory change from Congress, is necessary. In addition, super PACs can substantially affect the political environment in which Members of Congress and other federal candidates compete, as discussed later in this report. Several policy issues and questions surrounding super PACs might be relevant as Congress considers how or whether to pursue legislation or oversight. These topics appear to fall into three broad categories: the state of law and regulation affecting super PACs, transparency surrounding super PACs, and how super PACs shape the campaign environment. For those advocating their use, super PACs represent newfound (or restored) freedom for individuals, corporations, and unions to contribute as much as they wish for independent expenditures that advocate election or defeat of federal candidates. Opponents of super PACs contend that they represent a threat to the spirit of modern limits on campaign contributions designed to minimize potential corruption. Additional discussion of these subjects appears throughout this report. Thus far, Congress has not enacted legislation specifically addressing super PACs. Existing regulations and law governing traditional PACs apply to super PACs in some cases. In addition, the FEC issued rules in 2014 that recognized super PACs and reflected advisory opinions that the commission issued soon after Citizens United and SpeechNow . The FEC is responsible for administering civil enforcement of FECA and related federal election law. A December 2011 Notice of Proposed Rulemaking (NRPM) posing questions about what form post- Citizens United rules should take remained open until late 2014, reflecting an apparent stalemate over the scope of the agency's response to the ruling. In October 2014, the commission approved rules essentially to remove portions of existing regulations that Citizens United had invalidated, such as spending prohibitions on corporate and union treasury funds. These rules recognized the presence of super PACs and reflected the Citizens United and SpeechNow precedents permitting corporations (and, implicitly, unions) to make IEs and super PAC contributions. The rules did not, however, create substantially new prohibitions on or requirements for super PACs. In fact, the FEC's most substantive guidance on super PACs had already appeared in FEC advisory opinions (AOs). These AOs responded to questions posed by members of the regulated community , as those governed by campaign finance law are sometimes known, seeking clarification about how the commission believed campaign finance regulation and law applied to specific situations applicable to super PACs. Six AOs are particularly relevant for understanding how the FEC interpreted the Citizens United and SpeechNow decisions with respect to super PACs, as briefly summarized below. In July 2010, the FEC approved two related AOs in response to questions from the Club for Growth (AO 2010-09) and Commonsense Ten (AO 2010-11). In light of Citizens United and SpeechNow , both organizations sought to form PACs that could solicit unlimited contributions to make independent expenditures (i.e., form super PACs). The commission determined that the organizations could do so. In both AOs, the commission advised that while post- Citizens United rules were being drafted, political committees intending to operate as super PACs could supplement their statements of organization (FEC form 1) with letters indicating their status. The major policy consequence of the Club for Growth and Commonsense Ten AOs was to permit, based on Citizens United and SpeechNow , super PACs to raise unlimited contributions supporting independent expenditures. In June 2011, the commission approved an AO affecting super PAC fundraising. In the Majority PAC and House Majority PAC AO (AO 2011-12), the commission determined that federal candidates and party officials could solicit contributions for super PACs within limits. Specifically, the commission advised that contributions solicited by federal candidates and national party officials must be within the PAC contribution limits established in FECA (e.g., $5,000 annually for individual contributions). It is possible, however, that federal candidates could attend fundraising events—but not solicit funds themselves—at which unlimited amounts were solicited by other people. In AO 2011-11, the commission responded to questions from comedian Stephen Colbert. Colbert's celebrity status generated national media attention surrounding the request, which also raised substantive policy questions. The Colbert request asked whether the comedian could promote his super PAC on his nightly television program, The Colbert Report . In particular, Colbert asked whether discussing the super PAC on his show would constitute in-kind contributions from Colbert Report distributor Viacom and related companies. An affirmative answer would trigger FEC reporting requirements in which the value of the airtime and production services would be disclosed as contributions from Viacom to the super PAC. Colbert also asked whether these contributions would be covered by the FEC's "press exemption," thereby avoiding reporting requirements. In brief, the commission determined that coverage of the super PAC and its activities aired on the Colbert Report would fall under the press exemption and need not be reported to the FEC. If Viacom provided services (e.g., producing commercials) referencing the super PAC for air in other settings, however, the commission determined that those communications would be reportable in-kind contributions. Viacom would also need to report costs incurred to administer the super PAC. Although the super PAC subsequently terminated its operations, the AO guidance potentially remains relevant for other super PACs that might in the future operate in connection with media organizations. On December 1, 2011, the FEC considered a request from super PAC American Crossroads. In AO 2011-23, Crossroads sought permission to air broadcast ads featuring candidates discussing policy issues. American Crossroads volunteered that the planned ads would be "fully coordinated" with federal candidates ahead of the 2012 elections, but also noted that they would not contain express advocacy calling for election or defeat of the candidates. In brief, the key question in the AO was whether Crossroads could fund and air such advertisements without running afoul of coordination restrictions designed to ensure that goods or services of financial value are not provided to campaigns in excess of federal contribution limits. (As a super PAC, Crossroads is prohibited from making campaign contributions; coordinated expenditures would be considered in-kind contributions.) Ultimately, the FEC was unable to reach a resolution to the AO request. In brief, at the open meeting at which the AO was considered, independent commissioner Stephen Walter and Democrats Cynthia Bauerly and Ellen Weintraub disagreed with their Republican counterparts, Caroline Hunter, Donald McGahn, and Matthew Petersen, about how FEC regulations and FECA should apply to the request. As a result of the 3-3 deadlocked vote, the question of super PAC sponsorship of "issue ads" featuring candidates appears to be unsettled. Although deadlocked votes are often interpreted as not granting permission for a planned campaign activity, some might also regard the deadlock as a failure to prohibit the activity. As a practical matter, if the FEC is unable to reach agreement on approving or prohibiting the conduct, it might also be unable to reach agreement on an enforcement action against a super PAC that pursued the kind of advertising Crossroads proposed. Also at its December 1, 2011, meeting, the FEC considered AO request 2011-21, submitted by the Constitutional Conservatives Fund PAC (CCF), a leadership PAC. CCF and other leadership PACs are not super PACs, although the CCF AO request is arguably relevant for super PACs. Specifically, in AO request 2011-21, CCF sought permission to raise unlimited funds for use in independent expenditures, as super PACs do. The FEC held, in a 6-0 vote, that because CCF is affiliated with a federal candidate, the PAC could not solicit unlimited contributions. To the extent that the CCF request is relevant for super PACs, it suggests that leadership PACs or other committees affiliated with federal candidates may not behave as super PACs. Super PACs must follow the same reporting requirements as traditional PACs. This includes filing statements of organization and regular financial reports detailing most contributions and expenditures. In the Commonsense Ten AO, the FEC advised super PACs to meet the same reporting obligations as PACs known as nonconnected committees (e.g., independent organizations that are not affiliated with a corporation or labor union). These reports are filed with the FEC and made available for public inspection in person or on the commission's website. Super PACs and other political committees must regularly file reports with the FEC summarizing, among other things, total receipts and disbursements; the name, address, occupation, and employer of those who contribute more than $200 in unique or aggregate contributions per year; the name and address of the recipient of disbursements exceeding $200; and the purpose of the disbursement. Reporting timetables for traditional PACs, which apply to super PACs, depend on whether the PAC's activity occurs during an election year or non-election year. During election years , PACs may choose between filing monthly or quarterly reports. They also file pre- and post-general election reports and year-end reports. During non-election years , PACs file FEC reports monthly or "semi-annually" to cover two six-month periods. The latter include two periods: (1) "mid-year" reports for January 1-June 30; and (2) "year-end" reports for July 1-December 31. Super PACs also have to report their IEs. IEs are reported separately from the regular financial reports discussed above. Among other requirements, independent expenditures aggregating at least $10,000 must be reported to the FEC within 48 hours; 24-hour reports for independent expenditures of at least $1,000 must be made during periods immediately preceding elections; and independent expenditure reports must include the name of the candidate in question and whether the expenditure supported or opposed the candidate. The name, address, occupation, and employer for those who contributed at least $200 to the super PAC for IEs would be included in the regular financial reports discussed above, but donor information is not contained in the IE reports themselves. In addition, as the " Is Super PAC Activity Sufficiently Transparent? " section discusses later in this report, the original source of some contributions to super PACs can be concealed (either intentionally or coincidentally) by routing the funds through an intermediary. Since their inception in the middle of the 2010 election cycle, super PACs have raised and spent more than $2 billion. More than half that amount—almost $1.4 billion as of June 2016—went toward IEs supporting or opposing federal candidates. (Remaining amounts apparently were spent on items such as administrative expenses and nonfederal races.) Table 2 and Figure 1 below summarize super PAC receipts, disbursements, and IEs between the 2010 and 2014 election cycles. Table 3 summarizes financial activity of the 10 super PACs reporting the largest receipts and expenditures for 2014. The table reports total disbursements rather than only IEs. Therefore, it is important to note that although these entities raised and spent the most overall, other super PACs might have more direct impact on the election through higher spending on IEs that call for election or defeat of particular candidates. Some general patterns of super PAC activities have emerged since 2010, as noted briefly below. Super PACs have proliferated since they first emerged in 2010. As Figure 2 below shows, approximately 80 organizations quickly formed in response to the 2010 Citizens United and SpeechNow rulings. By 2012, 455 super PACs were active in federal elections. The figure increased to almost 700 in 2014—an increase of more than 800% in just four years. Super PAC financial activity also has increased rapidly. The first super PACs spent a total of approximately $93 million, almost $65 million of which was spent on IEs advocating for or against candidates, during the 2010 cycle. These figures are notable not only for their size, but also because most of these organizations did not operate until the summer of the election year. As Table 2 shows, super PAC fundraising and spending escalated quickly in subsequent election cycles. As would be expected, super PAC spending peaked, at almost $800 million, during the only presidential election year for which they were in operation, 2012. As of this writing in the final months of the 2016 presidential election, the pattern appears likely to continue. Partial-cycle FEC summary data show that by March 2016, super PACs already had raised more than they did during the entire 2014 cycle ($697.7 million versus $696.2 million). They also had already spent more than $529 million, including $275.6 million on IEs. By June 2016, super PACs had spent $772.7 million, including $367.8 million on IEs. Center for Responsive Politics analysis of FEC data accessed in August 2016 found more than 2,300 super PACs had raised almost $1 billion and spent almost $500 million in IEs. From the beginning, a relatively small proportion of super PACs have been responsible for most super PAC financial activity. Just 10 super PACs accounted for almost 75% of all super PAC spending in 2010. In 2012, although more than 800 super PACs registered with the FEC, only about 450 of those groups reported raising or spending funds (as shown in Figure 2 ). Furthermore, although all super PACs combined spent less than $100 million in 2010, two Republican super PACs alone—Restore Our Future and American Crossroads—each spent more than $100 million in 2012. These two groups were the only super PACs that raised or spent more than $100 million in 2012. The most financially active Democratic super PAC, Priorities USA Action, spent approximately $75 million. All other super PACs individually raised and spent less than $50 million. A small number of groups continued to dominate in 2014, when the five highest-spending super PACs alone were responsible for disbursing more than $236 million, about 35% of the total for all super PACs that election cycle. Despite some exceptions, for-profit corporations generally have not made large contributions to super PACs as some predicted they would after Citizens United . On the other hand, as discussed elsewhere in this report, for-profit corporations, unions, and other entities are widely believed to support super PACs through politically active tax-exempt organizations (e.g., 501(c)(4)s). Furthermore, some super PACs (and politically active tax-exempt organizations) have played what one group of researchers call "ephemeral" roles, in which they engage in particular races but subsequently shift their focus or cease operations altogether. Just as a small number of super PACs is responsible for most spending, relatively few donors provide super PAC funding. As noted elsewhere in this report, super PACs must report their donors, but existing reporting obligations fall to the entity receiving the contribution rather than to the contributor. As a result, there is no definitive "official" summary of all contributions from specific individuals. Media accounts and other research have reported that a small group of donors provides some of the most consequential super PAC funding. During the 2016 cycle, for example, the Washington Post reported that as of February of the election year, 41% of super PAC funds raised at that point in the cycle had come "from just 50 mega-donors and their relatives." Some super PACs with few donors (including candidate relatives) have played major roles in promoting particular candidates, especially in presidential races. In some cases, super PACs are the primary "outside" spenders in campaigns. The extent to which super PACs choose to become involved in individual races varies substantially. As Figure 3 below shows, super PACs accounted for about half of all IEs in the 2012 cycle. Super PACs were less dominant in IEs overall in 2014, but they nonetheless spent more on IEs than did political parties. In the 2016 election cycle (not shown in the figure), super PAC spending accounted for almost 84.7% of IEs made through June 30. As super PACs become increasingly common in politics—but without recognition in statute—Congress could consider conducting oversight or pursue legislation to clarify these new groups' place in federal campaigns. Super PAC activity might also be relevant for congressional oversight of the FEC as that agency continues to consider various rulemakings and reporting requirements. Looking ahead, questions about super PAC relationships with other organizations (particularly the issues of coordination and contribution limits), transparency, and their effect on future elections may be of particular interest. Super PACs address some of the most prominent and divisive issues in campaign finance policy. Most attention to super PACs is likely to emphasize their financial influence in elections, as is typically the case when new forces emerge on the campaign finance scene. Underlying that financial activity is law, regulation, or situational guidance (e.g., advisory opinions)—or the lack thereof—that shape how super PACs operate and are understood. As noted previously, despite Citizens United and SpeechNow , Congress has not amended federal election law to reflect the rise of super PACs or otherwise regulate the groups, although the FEC has issued regulations and advisory opinions based on court decisions. If Congress considers it important to recognize the role of super PACs in election law itself, Congress could amend FECA to do so. As it has generally done with other forms of PACs, Congress could also leave the matter to the FEC's regulatory discretion. The following points may be particularly relevant as Congress considers how or whether to proceed. If Congress believes that additional clarity would be beneficial, it could choose to enact legislation. This approach might be favored if Congress wishes to specify particular requirements surrounding super PACs, either by amending FECA, or by directing the FEC to draft rules on particular topics. Legislation has a potential advantage of allowing Congress to specify its preferences on its timetable. It has the potential disadvantage of falling short of sponsors' wishes if sufficient agreement cannot be found to enact the legislation. Relatively little legislation has been devoted specifically to super PACs. Table 4 below briefly summarizes relevant legislation introduced during the 114 th Congress. As an alternative to legislation, Congress could choose to defer to the FEC (or perhaps other agencies, such as the IRS or SEC) with respect to new or amended rules affecting super PACs. This approach has the potential advantage of delegating a relatively technical issue to an agency (or agencies) most familiar with the topic, in addition to freeing Congress to pursue other agenda items. It has the potential disadvantage of producing results to which Congress might object, particularly if the six-member FEC deadlocks, as it has done on certain high-profile issues in recent years. If Congress chose the rulemaking approach, providing as explicit instructions as possible about the topics to be addressed and the scope of regulations could increase the chances of the rules reflecting congressional intent. Doing so might also increase the chances that consensus could be achieved during the implementation process. Despite high-profile activity, much about super PACs remains unknown. The following points may warrant consideration as the super PAC issue continues to emerge. As noted previously, the FEC considers super PACs to be political committees subject to the requirements and restrictions contained in FECA and FEC regulations. As such, super PACs are prohibited from coordinating their activities with campaigns or other political committees (e.g., parties). Some observers have raised questions about whether super PACs were or are really operating independently or whether their activities might violate the spirit of limits on contributions or coordination regulations. The following points may be relevant as Congress assesses where super PACs fit in the campaign environment. Concerns about super PAC independence appear to be motivated at least in part by the reported migration of some candidate campaign staff members to super PACs that have stated their support for these candidates. Similarly, some super PACs reportedly have been organized or otherwise substantially supported by individuals with long-standing personal or professional connections to the candidates those super PACs support. A second source of concern may be that legally separate organizations (e.g., 501(c) tax-exempt political organizations, which are generally not regulated by the FEC or federal election law) operate alongside some super PACs. Media reports (and, it appears, popular sentiment) sometimes characterize these entities, despite their status as unique political committees or politically active organizations, as a single group. Some also question whether large contributions—that would be prohibited if they went to candidate campaigns—were essentially routed through super PACs as IEs. Donors who wish to do so may contribute to candidate campaigns in limited amounts and in unlimited amounts to super PACs supporting or opposing these or other candidates. As noted previously, super PACs must identify donors who contributed at least $200. This requirement sheds light on contributions that go directly to super PACs, but not necessarily those that go indirectly to super PACs. In particular, the original source of contributions to trade associations or other organizations that later fund IEs through super PACs could go unreported. For example, assume Company A made a contribution to Trade Association B, and placed no restrictions on how the contribution could be used. Trade Association B then used Company A's funds to contribute to a super PAC. Trade Association B—not Company A—would be reported as the donor on FEC reports. As Figure 4 below shows, an essential element in this relationship in this series of events is whether the original contribution was "made for the purpose of furthering" an independent expenditure. In practice, this means that those who do not wish their identities to be reported to the FEC could make an unrestricted donation to an intermediary organization, which then funnels the money to a super PAC. (They might also choose to donate to a politically active 501(c) entity for strategic or policy reasons, such as supporting advocacy generally, which might include contributions to super PACs.) By contrast, if a corporation, union, or individual chose to contribute directly to a super PAC, or to make IEs itself, the entity's identity would have to be disclosed to the FEC. Because super PACs are prohibited from coordinating their activities with campaigns, Congress might or might not feel that gathering additional information about super PACs' independence is warranted. Whether or not super PACs are sufficiently independent and whether their activities are tantamount to contributions could be subject to substantial debate and would likely depend on individual circumstances. Concerns about the potential for allegedly improper coordination between super PACs and the candidates they favor are a prominent aspect of debate. Some might contend that more coordination would benefit super PACs and candidates by permitting them to have a unified agenda and message, whereas others could argue that prohibiting any coordination is important to preserve independence. Candidate frustration with "outside" spending is not unique to super PACs. Indeed, uncoordinated activities by traditional PACs, parties, and interest groups are a common occurrence in federal elections. Some observers contend that the ability to coordinate should, therefore, be increased. Others, however, warn that permitting more communication between outside groups and campaigns would facilitate circumventing limits on campaign contributions. If Congress chose to limit potential coordination between super PACs and candidates or parties, it could amend FECA to supersede the existing coordination standard, which is currently housed in FEC regulations and has long been complex and controversial. Over time, some "traditional" PACs—not operating as super PACs—have adapted super PAC organizational characteristics. Specifically, in October 2011, the FEC announced that, in response to an agreement reached in a recent court case ( Carey v. FEC ), the agency would permit nonconnected PACs—those that are unaffiliated with corporations or unions—to accept unlimited contributions for use in independent expenditures. The agency directed PACs choosing to do so to keep the IE contributions in a separate bank account from the one used to make contributions to federal candidates. As such, nonconnected PACs that want to raise unlimited sums for IEs may create a separate bank account and meet additional reporting obligations rather than forming a separate super PAC. In addition to the organizational questions noted above—which may involve transparency concerns—Congress may be faced with examining whether enough information about super PACs is publicly available to meet the FECA goal of preventing real or apparent corruption. The following points may be particularly relevant as Congress considers transparency surrounding super PACs. In the absence of additional reporting requirements, or perhaps amendments clarifying the FEC's coordination rules, determining the professional networks that drive super PACs will likely be left to the media or self-reporting. In particular, relationships between super PACs and possibly related entities, such as 527 and 501(c) organizations, generally cannot be widely or reliably established based on current reporting requirements. As is the case with most political committees, assessing super PAC financial activities generally requires using multiple kinds of reports filed with the FEC. Depending on when those reports are filed, it can be difficult to summarize all super PAC spending affecting federal elections. Due to amended filings, data can change frequently. Reconciling IE reports with other reports (e.g., those filed after an election) can also be challenging and require technical expertise. Streamlining reporting for super PACs might have benefits of making data more available for regulators and researchers. On the other hand, some may argue that because super PAC activities are independent, their reporting obligations should be less than for political committees making or receiving contributions. Because super PACs (and other PACs) may file semi-annual reports during non-election years, information about potentially significant fundraising or spending activity might go publicly unreported for as long as six months. Consequently, some super PACs did not file detailed disclosure reports summarizing their late "off-year" activity until early election-year primaries are held. For example, some super PAC spending that occurred in late 2011 or late 2015 ahead of the 2012 and 2016 New Hampshire and South Carolina primaries, and Iowa caucuses, was not disclosed until well after the contests were held. Given the preceding points, a policy question for Congress may be whether the implications of the current reporting requirements represent "loopholes" that should be closed or whether existing requirements are sufficient. If additional information is desired, Congress or the FEC could revisit campaign finance law or regulation to require greater clarity about financial transactions. As with disclosure generally, the decision to revisit specific reporting requirements will likely be affected by how much detail is deemed necessary to prevent corruption or accomplish other goals. Super PACs are only one element of modern campaigns. Regular media attention to super PACs might give an overstated impression of these organizations' influence in federal elections. Nonetheless, super PACs have joined other groups in American politics, such as parties and 527 organizations, that are legally separate from the candidates they support or oppose, but whom some regard as practically an extension of the campaign. As with most campaign finance issues, whether Congress decides to take action on the super PAC issue, and how, will likely depend on the extent to which super PAC activities are viewed as an exercise in free speech by independent organizations versus thinly veiled extensions of individual campaigns.
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Super PACs emerged after the U.S. Supreme Court permitted unlimited corporate and union spending on elections in January 2010 (Citizens United v. Federal Election Commission). Although not directly addressed in that case, related, subsequent litigation (SpeechNow v. Federal Election Commission) and Federal Election Commission (FEC) activity gave rise to a new form of political committee. These entities, known as super PACs or independent-expenditure-only committees (IEOCs), may accept unlimited contributions and make unlimited expenditures aimed at electing or defeating federal candidates. Super PACs may not contribute funds directly to federal candidates or parties. Super PACs must report their donors to the FEC, although the original source of contributed funds—for super PACs and other entities—is not necessarily disclosed. This report provides an overview of policy issues surrounding super PAC activity in federal elections. Congress has not amended the Federal Election Campaign Act (FECA) to recognize formally the role of super PACs. The FEC issued rules in 2014 to reflect their presence. The most substantial policy guidance about super PACs occurred through advisory opinions that the agency issued in 2010 and 2011 after the Citizens United and SpeechNow decisions. Various issues related to super PACs may be relevant as Congress considers how or whether to pursue legislation or oversight on the topic. These include relationships with other political committees and organizations, transparency, and independence from campaigns. Throughout the post-Citizens United period, relatively few bills have been devoted specifically to super PACs, although some bills would address aspects of super PAC disclosure requirements or coordination with campaigns or other groups. As of this writing, relevant legislation in the 114th Congress includes H.R. 424, H.R. 425, H.R. 430, H.R. 5494, S. 6, S. 229, S. 1838, and S. 3250. Since their inception during the 2010 election cycle, super PACs have raised and spent more than $2 billion. Although the number of these groups has increased rapidly, only a few groups typically dominate most super PAC spending. Super PACs can emerge and disappear intermittently; groups that are active one election cycle may be diminished or absent in the next. In some cases, super PACs have formed to support single candidates and have featured few donors. For those advocating their use, super PACs represent freedom for individuals, corporations, and unions to contribute as much as they wish for independent expenditures that advocate election or defeat of federal candidates. Opponents of super PACs contend that they represent a threat to the spirit of modern limits on campaign contributions designed to minimize potential corruption. This report will be updated periodically to reflect major policy developments.
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The U.S. House and Senate have produced two major bills ( H.R. 2454 , the American Clean Energy and Security Act of 2009 (also known as the Waxman-Markey bill) and S. 1733 , the Clean Energy Jobs and American Power Act of 2009 (also known as the Kerry-Boxer bill)) addressing greenhouse gas (GHG) emissions associated with concerns over global Climate Change. This report summarizes and compares provisions for green jobs training and worker adaptation assistance for climate change impacts. Under a two-part subtitle for "Green Jobs & Worker Transition" (Title IV Subtitle B of H.R. 2454 , and Title III, Subtitle A of S. 1733 ), essentially identical provisions are focused (in Part I) on the development of programs to provide training and education in energy efficiency and renewable energy, and (in Part II) on providing retraining and financial assistance for workers made redundant (or whose earnings have been substantially reduced) by climate change mitigation measures. Since the provisions in both bills are so similar, this report will focus on the provisions as discussed in S. 1733 . A "Chairman's Mark" of S. 1733 was released in October 2009. Any resulting modifications to applicable areas of the original Kerry-Boxer version are discussed in the report. Reducing GHG emissions will likely require the curtailed use of fossil fuels for generating electricity, powering vehicles, and fuelling the furnaces of industrial production. Current legislation envisions an economic "price" on high-carbon fossil fuels to encourage switching to cleaner energy alternatives. Since fuel costs are often the third-highest cost component in manufacturing a product (after materials and labor), any increase in fuel costs could significantly affect the competitiveness of such products and therefore the profitability of an enterprise. Some companies may be able to adapt, finding more efficient ways to manufacture their products, while other businesses will cut labor costs. The legislative provisions examined in this report are intended to assist the development of green jobs training programs and to establish an internet-based clearinghouse for information on the green jobs industry. The provisions also seek to provide employment retraining and financial assistance for workers found to have been made redundant by climate change mitigation requirements, or those whose earnings have been significantly reduced. A summary of provisions in S. 1733 , "Clean Energy Jobs and American Power Act" Title III, Subsection A follows. Essentially the same organization and titles exist in H.R. 2454 , "American Clean Energy and Security Act," Title IV, Subtitle B, with only the section numbering differing. Green jobs training provisions in Part 1 of both bills focuses on the development of training programs in renewable energy and energy efficiency. Part 2 of both bills focuses on a new government program specifically to assist workers impacted by climate change mitigation measures. The Secretary of Education (in consultation with the Secretaries of Energy and Labor) is authorized to competitively award grants to eligible partnerships to develop programs of study in the fields of clean energy, renewable energy, energy efficiency, climate change mitigation and climate change adaptation. An eligible partnership can submit an application describing the partnership, its qualifications, area of focus, need of the labor market addressed, methodology and approach to meeting student needs, description of applied learning programs, placement of students in nontraditional fields, and description of applicant's proposed plan to consult with labor, apprenticeship and job training programs in the area for which a curriculum is proposed. Applications will be subject to a peer review process for recommendations to the Secretary for grant awards. An internet-based information and resources clearinghouse is to be established no later than 18 months after the date of enactment to aid career and technical education and job training in renewable energy by collecting and providing information on technological changes, best practices in training, and education, with an emphasis on renewable energy industry and job training program collaboration. In establishing the clearinghouse, the Secretary is to solicit information and expertise from the renewable energy industry, and institutions of higher education, technical schools, and community colleges that provide training in renewable energy. Separate sections of the clearinghouse are to focus on solar and wind energy systems, energy transmission systems, geothermal systems for energy and heating, and energy efficiency technical training. Each of these sections shall include information on basic environmental science and processes needed to understand renewable energy systems, federal government and industry resources, and points of contact. A "Green Construction Careers" demonstration project is to be established not later than 180 days after enactment. The purpose of the demonstration projects is to promote "middle class careers" and "quality employment practices" in the green construction sector on construction projects related to this act for "targeted workers" who reside in the same area as the project. The Secretaries of Education, Energy, and Labor are to evaluate the initial projects at the end of three years with an eye to identifying further projects, if they are deemed successful. Qualified pre-apprenticeship and apprenticeship programs aimed at targeted workers are to be used by contractors on the projects, or approved alternatives if contractor apprenticeship programs are outside the residence area of the project. The Government Accountability Office will report on the projects to Congress. A petition for eligibility for adjustment assistance can be filed by a group of workers, a union or other duly authorized representative of such workers, employers, or other entities acting on the behalf of such workers. The petition is to be filed simultaneously with the Secretary of Labor and the governor of the state in which the workers' employment site is located. The Secretary will publish the filing in the Federal Register and initiate an investigation to determine eligibility. The governor shall ensure that rapid response activities and appropriate core services authorized under federal law are made available to workers covered by the petition, and shall assist the Secretary by verifying such information and providing such other assistance as the Secretary may request. Workers may be eligible to apply for such assistance if: (a) they are employed in energy producing or transforming industries; industries dependent on energy industry; energy-intensive manufacturing industries; consumer goods manufacturers; or other industries determined by the Secretary to be adversely affected by any requirement of Title VII of the Clean Air Act (CAA); (b) the Secretary determines a significant number of workers become separated partially or totally from employment; (c) sales, production, or delivery of goods and services have decreased as a result of any requirement of Title VII of CAA, including the shift from fossil fuels to other sources of energy (including renewables) that results in the closing of a facility or layoff of employees at a facility that mines, produces, processes, or uses fossil fuels to generate electricity; a substantial increase in cost of energy for a manufacturing facility (not offset by assistance under title VII of CAA); or other situations the Secretary determines are adverse impacts of any requirement of Title VII of CAA. Public agency and service workers are also eligible for assistance if they are found to be adversely impacted by provisions of Title VII of CAA. The Secretary is authorized to collect such information as may be necessary to verify applications, with protection afforded to information considered confidential as noted in the section. A determination of eligibility would be due not later than 40 days after a petition was filed. Representatives of the domestic industry (including employers, union representatives or other duly authorized representatives) would be notified as to the result of a determination by the Secretary. Procedures for applying for benefits would follow certification of eligibility. Climate change adjustment assistance payments are to be made to certified, eligible workers for any week of unemployment on or after the date of certification, as long as specified conditions are met (including the circumstances of separation and length of previous employment). Workers receiving assistance payments under this section shall be ineligible to receive any other form of unemployment insurance during the period the worker is receiving climate change adjustment assistance under this section. Workers are to enroll in a training program unless circumstances exist to waive this requirement such as: a recall to work; the worker has "current marketable skills;" the worker is within two years of eligibility for old-age benefits under social security or a private pension; or the worker's health precludes participation in a training program (but such a health issue may not necessarily preclude the worker from other requirements for benefits). Climate change adjustment payments shall be equal to 70% of the average weekly wage of the worker, but are not to exceed the average weekly wage for all workers in the worker's state of residence. Such benefits are to be payable for a maximum of 156 weeks. Eligible workers will also receive information and employment services such as skills and diagnostic testing, information on financial aid and career counseling and training available locally and regionally, job vacancy listings, and information on the availability of support services such as childcare and transportation. Training would be approved for a worker if the Secretary determines that there is no suitable employment available and the worker would have a reasonable expectation of employment once trained. The worker must be qualified to take the training program (which must be available at a reasonable cost). States will receive funds for the administrative costs of the program of approximately 15% of assistance each fiscal year, and for employment services training. A state may decline such funding if it chooses. A one-time, lump sum reimbursement for job search expenses is authorized for an eligible worker up to $1,500 for workers who have completed the training program and are no longer eligible for climate change adjustment assistance. Relocation assistance is authorized (a one-time, lump sum up to three times the worker's weekly wage, not to exceed $1,500) if an eligible worker cannot secure suitable employment in the commuting areas in which the worker resides and, among other qualifiers, has a bona fide job offer in the area of relocation. Health insurance coverage for eligible workers will be continued and 80% of the premium will be paid (to the insurer) while the worker is receiving assistance under this section. The Secretary is authorized to enter into agreements with any state or state agency to meet the requirements of this part including data reporting. Each cooperating state or state agency shall advise each worker applying for benefits of procedures and deadlines, eligibility for training, benefits and climate change adjustment assistance. Adversely affected workers receiving benefits under this part are not eligible for benefits of other unemployment insurance under the laws of the state. A finding by a cooperating state agency on eligibility for benefits can only be reviewed under the laws of that state. If no agreement is in force with a state or state agency, the Secretary shall promulgate regulations for assistance under Section 312. Apprenticeship or other on-the-job training programs under this part shall not displace an employed worker, or impair an existing contract for services or collective bargaining agreement. The total amount of funds to be disbursed for the purposes of Section 312 shall not exceed the amount deposited into the Worker Transition Fund established in Section 209 of Division B. The Secretary may waive any section of this part to ensure that a member of the Armed Forces reserve serving on a period of duty (as described in the section) and who is an adversely affected worker is eligible to receive climate change assistance, training, and other benefits. A study on the circumstances of older workers is prescribed in the section. Sec. 20 8 . Energy Efficiency and Renewable Energy Worker Trainin g . An "Energy Efficiency and Renewable Energy Worker Training Fund" is to be established in the U.S. Treasury, funded by [the Environmental Protection Agency's Administrator from] auction proceeds from emission allowances. The Department of Energy's Secretary is to use these funds in accordance with section 171(e)(8) of the Workforce Investment Act of 1998. Sec. 209. Worker Transition. A separate account is to be established in the Treasury known as the "Worker Transition Fund" to receive proceeds from emissions auctions and is to be made available to carry out Part 2 of Subtitle A of Title III of Division A. Essentially, there are no differences in content between the original Kerry-Boxer version of the bill and the Chairman's Mark except for Section 313, General Provisions. In the Chairman's Mark, definition (10) was added to correct the omission of the term "industries dependent upon energy industries." A summary of differences between the House and Senate bills follows, with section numbers referring to the Senate bill (unless otherwise stated). Overall, these differences do not appear to be material. Section 313, General Provisions . In the Chairman's Mark, definition (16) defines "State" to include the District of Columbia and the Commonwealth of Puerto Rico; and the term "United States" when used in the geographic sense is defined to include such Commonwealth. This definition is not in H.R. 2454 . Section 313, General Provisions . In the Chairman's Mark, definition (20) adds citation (45 U.S.C. 351, et seq.) for the Railroad Insurance Act. This cite is not in H.R. 2454 . Section 313, General Provisions . The Spending Limit designation of where funding for the Climate Change Worker Assistance Fund is to be established in a proposed Title VII of the Clean Air Act differs with H.R. 2454 . In the Senate version, Section 209 of Division B has proceeds of allowance auctions being available pursuant to section 771(b)(5) of the CAA. The House version has amounts deposited per section 782(j) of the CAA. This appears to be a result of differences in House-Senate organization for proposed new sections of the CAA. Increased Funding for Energy Worker Training Program: Section 422 of H.R. 2454 adds another $25 million in funding to Section 171(e)(8) of the Workforce Investment Act of 1998, and establishes a separate account in the U.S. Treasury to be known as the "Energy Efficiency and Renewable Energy Worker Training Fund." Title IV of the American Recovery and Reinvestment Act of 2009 (ARRA) specifies that $100 million of the $4.5 billion made available to the U.S. Department of Energy's Office of Electricity Delivery and Energy Reliability be used for worker training. Title VIII of ARRA provides $500 million to the U.S. Department of Labor under "Training and Employment Services" for research, labor exchange, and job training projects that prepare workers for careers in renewable energy and energy efficiency. Both the House and Senate bills contain essentially the same provisions intended to provide employment retraining with a focus on jobs in renewable energy and energy efficiency in Part 1—Green Jobs, and financial assistance for workers found to have been made redundant by climate change mitigation requirements, or those whose earnings have been significantly reduced in Part 2—Climate Change Worker Adjustment Assistance. The source of funding for the provisions of Part 1, while apparently associated with the establishment of the "Energy Efficiency and Renewable Energy Worker Training Fund," is not clearly established in either bill. The term "Green Jobs" is undergoing definition at the Labor Department as to what these jobs are, and the sector or sectors they will be classified in under the North American Industry Classification System (NAICS). The NAICS is used by the federal government to collect and analyze data with regard to the U.S. economy. There is agreement that Green Jobs will relate to renewable energy and energy efficiency, but the extent to which these jobs will be exclusive to these areas is under debate as the skills and training necessary may be transferable from and to other job classifications. The level and specialization of these jobs could vary from tradesmen such as electricians and welders, to technical engineers or financial managers, and from intellectual design to maintenance workers. Part 2 of the legislation focuses on assisting workers impacted by climate change mitigation measures. Climate change mitigation may adversely affect the competitiveness of U.S. industries as legislation requiring adaptation to a low-carbon future has the potential to increase the costs of manufactured products. As such, if a group of workers can show how their current or prospective employment is impaired by such measures, then these workers may apply for climate change adjustment assistance. Assistance may include a monetary allowance while workers are retrained or otherwise seeking new jobs or seeking full employment if their work hours are reduced. The proposed legislation appears to be adaptable to the training needs of affected workers from various employment levels and backgrounds, as assistance may be provided for up to three years for eligible workers. Training for Part 1—Green Jobs seems to be focused on providing qualified workers for renewable energy construction projects, i.e., wind and solar projects, energy transmission systems, and energy efficiency jobs envisioned by the act. It is likely that while certain of these jobs will require new skills, many of these jobs can be filled by tradesmen with existing skills in electrical wiring and welding. Other skills in machining and parts fabrication may also be directly transferable. Many of these jobs may require workers to follow projects as they are won and built, and require moving on to where the jobs are. Many of these projects will be built where the renewable resources are best, and for large scale wind or solar thermal projects, this means the broad plains of the Midwest or the sunny arid desert regions of the Southwest. Funds are to be made available to states to carry out the retraining, on-the-job training, career counseling, or other employment services. The federal government may seek to audit use of funds and applicants to guard against fraud or misuse of funds. Eligible workers must be citizens or nationals of the United States, or have "satisfactory immigration status" to receive program benefits. Linkages of "apprenticeship" and "pre-apprenticeship" programs with business and industry needs must be addressed (and eventually with potential employers' needs), and secondary schools prepared to advise students on apprenticeship career options. The separate jobs retraining and assistance program envisioned by S. 1733 appears to be more comprehensive than existing workforce (such as at "One Stop Career Center") and Employee Retirement Income Security Act apprenticeship programs, perhaps raising issues of equity for unemployed workers not eligible for Climate Change Worker Adjustment Assistance. "Middle class careers" and "quality employment" are described as goals of the Green Construction careers demonstration project in Section 303. But over the longer term, higher paying, less transient jobs are more likely to come from positions in manufacturing companies rather than jobs in construction. Development of a competitive, domestic renewable energy industry which designs and produces the turbines, solar panels, and related parts and components is the likely source of these jobs, but may require a longer-term focus on the needs of future markets. More clarity may be sought with regard to the federal policies, oversight, and planning for the support or development of industries and businesses expected to absorb retrained workers. Retraining programs and climate adjustment assistance benefits are projected up to three years for eligible workers, during which time the worker may or may not be placed. The worker may then apply for a lump sum for job search assistance or relocation, or both if suitable employment is not found. At the same time, adjustment assistance to climate change-impacted industries is to be made available through allocations and auctions of emissions allowances, but such businesses are likely to downsize to survive. Growth in green industries and other sectors is assumed to provide future employment as companies look to climate change business opportunities. Coordination of government, education, and retraining providers and potential employers on one hand, and corresponding efforts to create or rebuild competitive industrial sectors on the other hand will likely be crucial if the desired economic growth and employment results are to be realized.
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This report summarizes and compares provisions for green jobs training and worker adaptation assistance for climate change mitigation impacts in two recent bills: H.R. 2454, the American Clean Energy and Security Act of 2009 (also known as the Waxman-Markey bill), and S. 1733, the Clean Energy Jobs and American Power Act of 2009 (also known as the Kerry-Boxer bill). Under a two-part subtitle for "Green Jobs & Worker Transition" (Title IV Subtitle B of H.R. 2454, and Title III, Subtitle A of S. 1733), essentially identical provisions are focused (in Part I) on the development of programs to provide training and education in energy efficiency and renewable energy, and (in Part II) on providing retraining and financial assistance for workers made redundant (or whose earnings have been substantially reduced) by climate change mitigation measures. Since the provisions in both bills are so similar, this report will focus on the provisions as discussed in S. 1733. A "Chairman's Mark" of S. 1733 was released in October 2009. Any resulting modifications to applicable areas of the original Kerry-Boxer version are discussed in the report. The green jobs training provisions in Part 1 of S. 1733 focuses on the development of training programs in climate change mitigation, renewable energy and energy efficiency, the authorization of competitive grants to organizations and partnerships developed to provide relevant education, training, and an internet-based clearinghouse for general information on the programs and technologies. Part 2 of S. 1733 focuses on assisting workers impacted by climate change mitigation measures. If a group of workers can show how their current or prospective employment is impaired by climate change mitigation measures, then these workers would apply for climate change adjustment assistance. Assistance would include a monetary allowance while workers are retrained or otherwise seeking new jobs or seeking full employment if their work hours are reduced. Assistance may be provided for up to three years for eligible workers. Workers receiving assistance under Part 2 would not be eligible for any other form of unemployment insurance. The separate jobs retraining and assistance program envisioned by S. 1733 appears to be more comprehensive than existing workforce and apprenticeship programs, perhaps raising issues of equity for unemployed workers not eligible for Climate Change Worker Adjustment Assistance. More clarity may be sought with regard to the federal policies, oversight, and planning for the support or development of industries and businesses expected to absorb retrained workers. Growth in green industries and other sectors is assumed to provide future employment as companies look to climate change business opportunities. Coordination of government, education and retraining providers and potential employers on one hand, and corresponding efforts to create or rebuild competitive industrial sectors on the other hand, will likely be crucial if the desired economic growth and employment results are to be realized. "Middle class careers" and "quality employment" are described as goals of the Green Construction careers demonstration projects. But over the longer term, higher paying, less transient jobs are more likely to come from jobs in manufacturing companies rather than jobs in construction. Development of a competitive, domestic renewable energy industry which designs and produces the turbines, solar panels and related parts and components may provide these jobs, but may require a longer-term focus on the needs of future markets.
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According to the Mexican government there are seven drug cartels operating in Mexico. The Mexican government reports that the major cartels – Gulf, Sinaloa, and Juárez—are present in much of Mexico. The Gulf cartel has a presence in 13 states and its center of operations is in the northern state of Tamaulipas, which borders southeastern Texas, and is a key transit point for drug shipments to the United States. (See Figure 1 for map of Mexican states.) The Juárez cartel has been found in 21 Mexican states and its principle base is in Ciudad Juárez, in Chihuahua state, across from El Paso, Texas. The Sinaloa cartel has a presence in 17 states, and is based in the northwestern state of Sinaloa. In addition, the Tijuana cartel is present in at least 15 states and is based in Tijuana, Baja California, near San Diego, California; the Colima cartel is present in 7 states and is based in the Pacific state of Colima; the Oaxaca cartel is present in 13 states and its operations are based in the southern states of Oaxaca and Chiapas; and the Valencia cartel is present in 13 states with a base in the central state of Michoacán. In recent years, the major cartels have formed alliances with one another; the two rival alliances now compete for turf. The Tijuana cartel formed an alliance with the Gulf cartel as a result of prison negotiations by their leaders. Several cartels have also formed an alliance known as "The Federation." The Federation is led by representatives of the Sinaloa, Juárez, and Valencia cartels. The cartels work together, but remain independent organizations. (See Figure 2 , for map of the cartels' areas of influence.) In August 2006, Mexico's Deputy Attorney General for Organized Crime, José Luis Santiago Vasconcelos, indicated that this re-organization, and mounting violence, are the result of Mexico's success in capturing cartel leadership. From January 2000 through September 2006, the Mexican government arrested over 79,000 people on charges related to drug trafficking. Of these arrests, some 78,831 are low level drug dealers. Mexico also arrested 15 cartel leaders, 74 lieutenants, 53 financial officers, and 428 hitmen ( sicarios ). In addition, Mexican authorities arrested nearly 10,000 people on drug-related charges from December 2006 through August 2007. On August 16, 2006, the United States Drug Enforcement Administration (DEA) and Coast Guard arrested Tijuana cartel leader Francisco Javier Arellano Felix, along with other Tijuana cartel leaders, on a boat off the Mexican coast. His brother, Francisco Rafael Arellano Felix, was extradited to the United States in September 2006. In January 2007, Mexico extradited 15 persons wanted for prosecution in the United States, including four senior drug traffickers. The drug traffickers included Osiel Cárdenas Guillén, the alleged head of the powerful Gulf cartel, who is believed to have maintained control of the cartel since his 2003 imprisonment. Ismael Higuera Guerrero and Gilberto Higuera Guerrero of the Tijuana cartel led by the Arellano Felix family; and, Hector Palma Salazar of the Sinaloa cartel and a leader of the Federation alliance were also extradited to the United States. The pace of extraditions from Mexico continued to increase in 2007, with a record 73 suspected criminals extradited to the United States, compared to 63 alleged criminals extradited to the United States in 2006. Mexico, a major drug producing and transit country, is the main foreign supplier of marijuana and a major supplier of methamphetamine to the United States. Although Mexico accounts for only a small share of worldwide heroin production, it supplies "a large share of the heroin distributed in the United States." The State Department estimates that 90% of cocaine entering the United States transits Mexico. In 2006, the National Drug Intelligence Center estimated that Mexican and Colombian drug trafficking organizations annually generate between $8.3 and $24.9 billion in wholesale drug earnings in the United States. Mexico's cartels have existed for some time, but have become increasingly powerful in recent years with the demise of the Medellín and Cali cartels in Colombia. Closure of the cocaine trafficking route through Florida also pushed cocaine traffic to Mexico, increasing the role of Mexican cartels in cocaine trafficking. The National Drug Intelligence Center now considers Mexican drug cartels as dominating the U.S. illicit drug market. According to the Center, Mexican cartels "control the transportation and wholesale distribution of most illicit drugs in every area of the country except the Northeast." The Center also notes that Mexican cartels are making inroads into the Northeast by developing "cooperative relationships with other [drug trafficking organizations, DTOs] in that area." Colombian groups continue to be the "dominant cocaine and heroin traffickers, particularly in the Northeast; however they are relinquishing control to Mexican DTOs in order to shield themselves from law enforcement detection." In February 2006, Mexico's Deputy Attorney General for Organized Crime, José Luis Santiago Vasconcelos, asserted that Colombians continue to control drug trafficking in Mexico. The DEA, however, maintains that the Mexican cartels now have command and control over the drug trade and are starting to show the hallmarks of organized crime, such as organizing into distinct cells with subordinate cells that operate throughout the United States. As a result of their dominance of the U.S. illicit drug market, Mexican cartels are the leading wholesale launderers of drug money from the United States. Mexican and Colombian trafficking organizations annually smuggle an estimated $8.3 to $24.9 billion in drug proceeds into Mexico for laundering. Mexican cartels also produce methamphetamine and marijuana in the United States. Mexican cartels have long grown marijuana in the United States, often on federal land in California, but they are now expanding production to the Pacific northwest and, to a lesser extent, the eastern United States. (See Figure 3 ). Mexican marijuana producers in California, the Pacific northwest, and eastern United States are increasingly linked to each other and "[m]any of these groups maintain their affiliation with the larger groups in California and Mexico and maintain some level of coordination and cooperation among their various operating areas, moving labor and materials to the various sites – even across the country – as needed." There is evidence that Mexican cartels are also increasing their relationships with prison and street gangs in the United States in order to facilitate drug trafficking within the United States as well as wholesale and retail distribution of the drugs. For example, in January 2006, the National Drug Intelligence Center reported that gangs such as the Latin Kings and Mara Salvatrucha (MS-13) buy methamphetamine from Mexican drug cartels for distribution in the southwestern United States. According to the FBI, Mexican cartels focus only on wholesale distribution, leaving retail sales of illicit drugs to street gangs. The Mexican cartels reportedly work with multiple gangs and do not take sides in U.S. gang conflicts. In addition to drug trafficking, Mexican cartels have been tied to both human and arms trafficking, auto theft, and kidnapping. Mexican drug traffickers increasingly smuggle money back into Mexico in cars and trucks, likely due to the effectiveness of U.S. efforts at monitoring electronic money transfers. Mexican law enforcement officials note that while the drug cartels may sometimes traffic persons who are willing to act as mules, they do not engage in large-scale human trafficking as that would add further risk to the transit of drug shipments. Separate criminal groups focus on human trafficking. U.S. law enforcement officials report that the Tijuana cartel has been weakened due to the arrests and deaths of several cartel leaders, forcing the cartel to focus its energies on controlling trafficking routes through the corruption of Mexican law enforcement officials and intimidation measures, including kidnapping, torture, and murder. The Gulf Cartel is one of the most powerful Mexican cartels. Its center of operations is in the northern state of Tamaulipas, which borders southeastern Texas, and is a key drug transit point for drug shipments into the United States. Mexico extradited Gulf Cartel leader Osiel Cárdenas Guillen to the United States in 2007 where he faces multiple charges including drug trafficking and threatening to murder U.S. federal agents in Matamoros, Mexico. The Gulf Cartel is notoriously violent. Cárdenas was the first drug cartel leader to create his own paramilitary organization, the Zetas, discussed in more detail below. Mexican authorities report that in 2008 they plan to extend anti-cartel operations beyond patrolling to seeking out cartel gunmen in their safehouses. The Gulf cartel is believed to be responsible for two shootouts in Reynosa, Mexico, in early January 2008. Mexican authorities believe the shootouts were in reprisal for a confrontation between Mexican federal authorities and cartel members in Rio Bravo, Mexico, just across from Donna, Texas. The Rio Bravo confrontation led to the death of three Gulf cartel gunmen and the arrest of 10 other alleged cartel members, including three U.S. citizens. The McAllen, Texas, police chief stated that he does not believe that cartel violence is spilling over into the McAllen area. The Gulf cartel is reportedly branching out into other trafficking activities, including migrant smuggling. One possible explanation for the cartel's expansion into other smuggling efforts is that drug profits are down because of recent U.S. and Mexican enforcement efforts. The Gulf cartel is reportedly involved in human smuggling along the Texas border. U.S. authorities report that the drug cartels take part in human smuggling to divert U.S. law enforcement attention away from drug routes. The Sinaloa cartel is based in the northwestern state of Sinaloa and headed by Joaquín "El Chapo" Guzmán. Guzmán is a fugitive who escaped from a Mexican prison in 2001. Alleged former Sinaloa cartel leader Hector Palma Salazar was extradited to the United States in January 2007 and faces charges in California for conspiracy to distribute large quantities of cocaine. In February 2008, Palma Salazar was sentenced to 16 years' imprisonment for cocaine trafficking. As noted above, the Sinaloa cartel has been engaged in a turf war with the Gulf cartel for the last several years to establish control of lucrative trafficking routes into the United States. In October 2007, Mexican authorities arrested Sandra "Queen of the Pacific" 'vila Beltrán, a senior member of the Sinaloa cartel who was instrumental in building ties with between the Sinaloa cartel and Colombian cocaine traffickers. She faces drug trafficking charges in Mexico and the United States has reportedly requested her extradition on similar charges. In November 2007 Peruvian authorities announced that the arrest of five Sinaloa cartel members in Peru. Peruvian authorities report that the Sinaloa cartel is the largest purchaser of Peruvian cocaine, the majority of which is destined for European markets. The Sinaloa cartel is also reported to be expanding into human smuggling, perhaps in response to the shut down of drug trafficking routes. The Sinaloa cartel reportedly now controls most migrant smuggling routes into Arizona. The Tijuana cartel is headed by the Arellano Félix family. The cartel has suffered several arrests in recent years and it is not clear who is currently heading the cartel at this time. At its peak the cartel supplied 40% of cocaine consumed in the United States. While weaker than in the past, the cartel reportedly continues to control the Tijuana-San Diego corridor. Baja California, where Tijuana is located, was Mexico's most violent state in 2007 with over 400 murders. In September 2007, Mexico sentenced Benjamin Arellano Félix to 22 years' imprisonment on organized crime and drug trafficking charges. The United States requested his extradition in January 2007 to face drug trafficking, racketeering, and money laundering charges. The U.S. Coast Guard captured Francisco Javier Arellano Félix in the Sea of Cortes in August 2006. He pled guilty to running a criminal enterprise and money laundering and in November 2007 was sentenced to life imprisonment without the possibility of parole in the United States. Yet another brother, Francisco Rafael Arellano Félix, was extradited to the United States in September 2006. He subsequently pled guilty to conspiracy to distribute cocaine and intent to distribute based on a 1980 drug bust. In September 2007, Francisco Rafael Arellano Felix was sentenced to six years in federal prison. The Juárez cartel is headed by Vicente Carrillo Fuentes and is based in Ciudad Juárez, across the border from El Paso, Texas. The Juárez cartel was dominant in the 1990s, but became less dominant following the death of leader Amado Carrillo Fuentes. The Juárez cartel was the principal target of the "Maxiproceso" effort which issued 110 arrest warrants of alleged cartel members and accomplices in the late 1990s, 65 of which were executed against persons allegedly tied to the Juárez cartel. Maxiproceso prosecutions continued in 2007, including the acquittal of Arturo Hernández who was charged with being a leader of the Juárez cartel's hitmen and spies. Although the cartel was weakened, it has a presence throughout much of Mexico and is considered one of the four major cartels. The Juárez cartel is widely believed to be benefitting from its membership in the Federation alliance of drug cartels and profiting from increased sales of Mexican heroin used to make cheese (a mixture of Mexican heroin and cold medicine) in Texas. Other reports, cited by the Government Accountability Office (GAO), indicated that the Juárez cartel may no longer be tied to the Federation due to murders committed by another Federation member. The Colima cartel, also known as the Amezcua Contreras cartel, is based in the western state of Colima and focuses in synthetic drugs. Its leaders, the Amezcua Contreras brothers, are often referred to as the "Methamphetamine Kings." The three brothers have been imprisoned since 1997, yet the cartel continues to function in seven Mexican states. The United States has long sought the extradition of José de Jesús Amezcua Contreras, but an October 2007 list of extraditable drug capos prepared by the Mexican Attorney General's office reportedly stated that he cannot be extradited because of a standing judicial order blocking his extradition to the United States. In May 2007, Luis Amezcua Contreras also requested a judicial order blocking extradition to the United States. In December 2007, the Mexican newspaper El Milenio reported that the Colima cartel is starting to reconsolidate its position and is starting to win control of some trafficking routes dominated by the Sinaloa, Tijuana, and Gulf cartels. The Oaxaca cartel focuses on marijuana trafficking and operates in southern Mexico, particularly in the states of Oaxaca and Chiapas. It is led by Pedro Díaz Parada, who was arrested by federal agents in January 2007. Pedro Díaz Parada was sentenced to 33 years' imprisonment in 1985, but subsequently escaped prison twice – once in 1987 and again in 1992. Press reports indicate he ordered the murder of the sentencing judge in 1987. The Mexican government reportedly considers Díaz Parada to be one of the leading traffickers of drugs into southern Mexico via Mexico's border with Guatemala. The Oaxaca cartel reportedly joined forces with the Tijuana cartel in 2003 and press reports indicate that Díaz Parada was the most important representative of the Tijuana cartel in southeastern Mexico at the time of his arrest. Díaz Parada is also alleged to have ties with Colombian cocaine traffickers. Díaz Parada faces several charges including possession of marijuana and cocaine with the intent to distribute and illegal firearm possession. The Valencia cartel, led by Luis and Armando Valencia, is strong in central Mexico with a base in the state of Michoacán. The cartel is aligned with the Federation and is reported to operate in the strategic trafficking state of Colima, on Mexico's Pacific coast. Mexican cartels employ individuals and groups of enforcers, known as sicarios . In August 2006, Mexico's Deputy Attorney General for Organized Crime, José Luis Santiago Vasconcelos, postulated that these gangs are becoming increasingly powerful as they fill the void left in cartels when their leadership are arrested by the Mexican government. The Mexican government arrested over 300 sicarios from January 2000 through September 2006, with Gulf cartel enforcers accounting for over one-quarter of arrests. This included 134 enforcers from the Gulf cartel, 107 from the Tijuana cartel, 98 from the Sinaloa cartel, 66 from the Juárez cartel, 15 from the Millennium cartel, 6 from the Oaxaca cartel, and 2 from the Colima cartel. Some analysts speculate that the Gulf cartel lost more of its enforcers because of greater exposure due to their mobility throughout Mexico defending Gulf cartel territory and competing for new territory. The Gulf and Sinaloa cartels also employ more disciplined groups respectively known as the Zetas and Negros. In July 2006, the Mexican daily Reforma reported findings of a Mexican federal investigation that the Gulf cartel is recruiting MS-13 gang members and Guatemalan Kaibiles. Mexican and U.S. law enforcement officials, however, deny that there are significant ties between Mexican cartels and MS-13, indicating that the cartels will work with Central American gangs on specific tasks, but that these gangs are not as disciplined as the cartels, so the cartels have not deepened ties with them. The Zetas are unique among drug enforcer gangs in that they operate "as a private army under the orders of Cárdenas' Gulf cartel, the first time a drug lord has had his own paramilitary." Most reports indicate that the Zetas were created by a group of 30 lieutenants and sublieutenants who deserted from the Mexican military's Special Air Mobile Force Group (Grupo Aeromovil de Fuerzas Especiales, GAFES) to the Gulf cartel in the late 1990s. As such, the Zetas were able to carry out more complex operations and use more sophisticated weaponry. The Zetas were instrumental in the Gulf cartel's domination of the drug trade in Nuevo Laredo, and have fought to maintain the cartel's influence in that city following the 2003 arrest of its leader Osiel Cárdenas. Press reports have charged that these soldiers turned cartel enforcers were trained in the United States; however, the Washington Office on Latin America was unable to confirm this claim while researching a June 2006 special report on drug violence. Estimates on the number of Zetas range from 31 to up to 200. Reports indicate that while the Zetas were initially comprised of members of special forces, they now include federal, state, and local law enforcement personnel as well as civilians. In September 2005 testimony to the Mexican Congress, then-Defense Secretary Clemente Vega indicated that the Zetas had also hired at least 30 former Guatemalan special forces (Kaibiles) to train new recruits because "the number of former Mexican special forces men in their ranks had shrunk from 50 to no more than a dozen, and they were finding it hard to entice more members of the Mexican military to join." The Zetas act as assassins for the Gulf cartel. They also traffic arms, kidnap, and collect payments for the cartel on its drug routes. Mexican law enforcement officials report that the Zetas have become an increasingly sophisticated, three-tiered organization with leaders and middlemen who coordinate contracts with petty criminals to carry out street work. The Zetas have maintained the territory of the Gulf cartel in the northern cities of Matamoros and Nuevo Laredo following the 2003 arrest of the Gulf cartel leader, Osiel Cárdenas. In addition to defending the cartel's terrain in northern Mexico, Zetas are believed to control trafficking routes along the eastern half of the U.S.-Mexico border. Although initially found mainly along Mexico's northern border, the Zetas now have a presence in southern Mexico, where the Gulf cartel is disputing territory previously controlled by the Juárez and Sinaloa cartels. A recent federal investigation found that the Zetas also engage in kidnapping, drug dealing, and money laundering. In July 2006, local police in the southern state of Tabasco unknowingly arrested Mateo Díaz López, believed to be a leader of the Zetas. The arrest prompted an assault on the police station killing 4 people, including 2 police officers, but the assault did not succeed in liberating Díaz López, who was subsequently transferred to a prison in Guadalajara. The Zetas also trained the Michoacán-based "La Familia" enforcer gang which has carried out numerous executions in that state. The Familia maintains close ties to the Zetas, but are a smaller entity. In response to the Zetas, the Sinaloa cartel established its own heavily-armed enforcer gangs, the Negros and Pelones. Both are less sophisticated than the Zetas, and focused on attacks against adversaries. Edgar "La Barbie" Valdés Villarreal is alleged to be the head of the Negros. The Negros are believed to be "responsible for the recent rise in attacks against police officers in Nuevo Laredo, in an attempt to wrest control over the local police from the Zetas." In recent turf wars in Tamaulipas, Guerrero, Michoacán, Nuevo León, and Tabasco, the Zetas have alleged that the Sinaloa cartel and Negros leader "La Barbie," enjoy police protection. The Mexican government dismissed these charges, noting that it has at varying times focused on prosecutions of different cartels, and each time the affected cartel charges that the government is working on behalf of a rival organization. In May 2006, "La Barbie" made similar allegations of police protection of the Zetas in a full-page ad in a Mexico City daily. Mexican cartels advance their operations, in part, by corrupting or intimidating law enforcement officials. For example, Nuevo Laredo municipal police have reportedly been involved in the kidnapping of Gulf cartel competitors to hand over to the Zetas. The Zetas then hold them for ransom or torture them for information about their drug operations. The International Narcotics Control Board (INCB) reports that although Mexico has made concerted efforts to reduce corruption in recent years, it remains "a serious problem." Recent efforts to combat corruption include promoting professionalism in law enforcement agencies and inclusion of rule of law lessons in training. Nevertheless, the INCB recommends that Mexico continue to promote efforts to combat corruption. Some agents of Mexico's Federal Investigative Agency (AFI) are believed to work as enforcers for the Sinaloa cartel, and the Attorney General's Office (PGR) reported in December 2005 that one-fifth of its officers are under investigation for criminal activity. The PGR reported in late 2005 that nearly 1,500 of AFI's 7,000 agents were under investigation for suspected criminal activity and 457 were facing charges. In November 2005, a video depicting the interrogation of four Zetas who revealed their methods of torture, ties to Mexican law enforcement agencies, and recruitment techniques, was given to the Dallas Morning News . The video ends with the murder of one of the Zetas. The Mexican government sent mixed signals about the involvement of AFI agents in the kidnapping of the Zetas, first announcing that eight agents were under investigation, and then announcing that AFI agents had no connection to the kidnapping and murder of the four Zetas. However, a report from a non-governmental organization says that "subsequent U.S. and Mexican press reports based on Mexican court files have concluded that AFI agents probably kidnapped the Zetas in the resort city of Acapulco, then handed them over to members of the Sinaloa cartel to be interrogated and executed." In recent years, the Mexican federal government conducted purges and prosecution of police forces in Nuevo Laredo; Apatzingan, Michoacán; and, Tijuana, Baja California. The Fox administration launched Operation Secure Mexico in June 2005 to combat drug violence and police corruption in cities with high incidences of drug violence. Federal officers arriving in Nuevo Laredo were fired on by municipal police leading to the arrest of 41 municipal police and the suspension of the entire 700-member Nuevo Laredo police force to investigate corruption. Less than one-half would be cleared to return to duty. In late June 2005, federal police rescued 44 people, the majority of whom claimed that they had been kidnapped by municipal police before being transferred to Gulf cartel safe houses. In spite of these efforts, reports indicate that the Zetas continue to have influence over Nuevo Laredo's municipal police, and that warring cartels are gaining influence in all law enforcement present in the city. In 2006, Mexico launched the Northern Border (Frontera Norte) initiative, a federal-state effort to fight violence that included the deployment of 800 Federal Protective Police (PFP) officers to Nuevo Laredo. These 800 officers are in addition to the 300 federal officers deployed in Nuevo Laredo under Operation Secure Mexico. In March 2006, four PFP officers were killed after locating a cartel safe house. Federal officials announced that initial evidence indicated that municipal police officers were responsible for the killings. The anti-cartel operations begun by President Calderón in December 2006 included ballistic checks of police weapons in places such as Tijuana where there is concern that police are also working for the cartels. In April 2007 over 100 state police officers in the northern state of Nuevo León were suspended due to corruption concerns. In June 2007, President Calderón purged 284 federal police commanders, including federal commanders of all 31 states and the federal district. These commanders were suspended and subjected to drug and polygraph tests. The Mexican government immediately named replacements for the 284 dismissed commanders. The new commanders all successfully passed an array of examinations designed to weed out corrupt officers, including financial checks, drug testing, and psychological and medical screening. These tests are to be repeated on a regular basis. The 2002 arrest of Benjamin Arellano Felix, head of the Tijuana cartel, and the 2003 arrest of Gulf cartel head Osiel Cárdenas, led to a realignment of Mexican cartels and increased turf wars. While in prison, Arellano Felix and Cárdenas forged an alliance against the Sinaloa cartel and its ally the Juárez cartel. Cartels are now largely aligned into two blocks in support of the Gulf and Sinaloa cartels. Below is a description of three turf wars: Nuevo Laredo (across the border from Laredo, Texas), Guerrero (in southern Mexico), and Michoacán (in central Mexico). These examples are illustrative but not exhaustive descriptions of cartel violence in Mexico. The border city of Nuevo Laredo, across from Laredo, Texas, has been particularly hard hit by drug violence since the Sinaloa cartel began to contest the Gulf cartel's domination of Nuevo Laredo following the 2003 arrest of Gulf cartel leader Osiel Cárdenas. This has led to the most publicized of Mexico's turf wars due to the intensity of the violence and its proximity to the United States. Over 60 U.S. citizens have been kidnapped in Nuevo Laredo since the beginning of the turf war, at least 20 are still missing. Press reports indicate that hundreds of Mexicans have been kidnapped in Nuevo Laredo. Murders are on the increase in this city of 350,000, with 600 murders since 2003. Nuevo Laredo has not had a police chief in nearly a year due to the violence. The most recent chief resigned, but his predecessor was murdered. On February 19, 2007, the day after President Calderón announced the expansion of his counternarcotics operation into Nuevo Laredo, gunmen wounded Mexican Congressman Horacio Garza and killed his driver in Nuevo Laredo. The Gulf cartel is believed to be responsible for the attack. In July 2007 drug cartels reportedly threatened to kill an unnamed American journalist in Laredo for writing reports on the cartels. Both the Dallas Morning News and San Antonio Express-News took measures to protect their journalists working in the area. The warring cartels are thought to compete for influence over law enforcement and the media, and use intimidation and murder as they see fit. In February 2006, gunmen suspected of ties with drug traffickers attacked offices of the daily El Mañana after it published a picture of a federal police officer and linking him to the Sinaloa cartel, critically injuring a reporter. The paper subsequently announced that it would scale back coverage of drug violence. The Committee to Protect Journalists has noted a high level of self-censorship among media in Nuevo Laredo and other parts of northern Mexico. U.S. Ambassador Tony Garza closed the U.S. consulate in Nuevo Laredo from July 29 to August 8, 2005 due to safety concerns and submitted a diplomatic note to the Mexican government in January 2006 expressing U.S. concern over violence in this border city. In April 2007, the State Department advised Americans to use caution when traveling in Mexico due to drug violence, though it noted that no Americans are known to have been targeted. In 2007, the epicenter of the turf war appeared to shift from Nuevo Laredo, just across from Laredo, Texas, to the northern Mexican state of Nuevo Leon, long considered to be one of Mexico's most prosperous and stable states. There are two possible explanations for the shift in the turf war: (1) the Gulf cartel and its enforcer gang, the Zetas, succeeded in maintaining control of the Nuevo Laredo corridor and (2) the Gulf and Sinaloa cartels reached a truce to reduce violence in Nuevo Laredo in response to the government crackdown in the area. The cities of Zihuatenejo and Acapulco have witnessed increased drug violence due to the Gulf cartel's challenge to the Sinaloa cartel's control of Guerrero. A state police chief was murdered in Acapulco on April 28, 2006, days after the attempted murder of a former state attorney general in the resort city. The Zetas interrogated in the video described above were allegedly abducted in Acapulco. There were several beheadings in 2006, including that of a police officer in retribution for a shootout. In March 2007 the torture and beheading of a man with a Z on his chest, apparently for the Zetas, was video taped and briefly circulated on the internet. Four cartels are engaged in a turf war in Michoacán—the Juárez, Gulf, Millennium, and Colima cartels. The Colima cartel, headed by the Amezcua brothers (who are known as "the Kings of Methamphetamine") controlled the drug trade in Michoacán, but was weakened following the 1998 arrest of José de Jesús Amezcua and the 2001 arrest of Adán Amezcua. While the Colima cartel continues to operate, the Millennium cartel now controls the state. Michoacán authorities have noted the presence of the Gulf cartel's Zetas and the "Familia," a Gulf Cartel enforcer gang trained by the Zetas that operates in Michoacán. Three shootouts between July 21 and July 23, 2006 left eight dead. On July 28, 2006, a man presumed to work for the Sinaloa cartel was shot 100 times in what was believed to be a warning to the Sinaloa cartel. The town of Apatzingan, a center of drug cartel activity, has been a key area in the federal effort against cartels launched in December 2006. Violent deaths have increased in Michoacan in 2007, perhaps as a result of the pressure put on the cartels. There have also been allegations of human rights violations by the federal military and police forces in the area. Since taking office in December 2006, President Calderón has made combating drug cartels and drug violence a top priority of his administration. He has called increasing drug violence in Mexico a threat to the Mexican state, and has sent 24,000 soldiers and federal police to nine states to combat the cartels. Mexico's Attorney General, Eduardo Medina Mora, indicated in April 2007 that the government's anti-cartel initiative will expand beyond counter-cartel police and military operations to include institutional and operational reforms. He also stated that the only way Mexico can successfully defeat the cartels unless it gets more cooperation from the United States in combating arms trafficking and money laundering from the United States to Mexico. In October 2007 the White House Office of National Drug Control Policy reported that the Mexican government's increased pressure on cartels coincided with cocaine shortages in 37 U.S. cities and a 24% increase in the retail price of cocaine during the second quarter of 2007. President Calderón maintains that his administration will stand up to threats of violence by the cartels and that it will take at least two years to take back control of Mexico. While many support the government's plan, critics note that drug violence continues. According to press reports, a Mexican government report from early 2007 charged that "the cartels remain intact and executions have spread to previously violence-free areas." Press reports indicate that between 1,800 and 1,900 Mexicans were killed in cartel related violence in the first nine months of 2007; the Mexican government does not maintain statistics on cartel murders. In addition to the anti-drug operations, President Calderón has increased salaries of troops involved in counter-cartel operations by nearly 50%; placed the Federal Preventative Police (PFP) and the Federal Investigative Agency (AFI) under one commander as part of his plans to create a unified federal police force; and announced the "Platform Mexico" initiative to improve federal, state, and local law enforcement capacity to exchange information on drug cartels, including the creation of a database that will cover 5,000 police stations by 2009. President Calderón has indicated that he will use extradition as a major tool to combat drug traffickers. In January 2007, Mexico extradited 15 persons wanted for prosecution in the United States, including four senior drug traffickers: Osiel Cárdenas Guillén, the alleged head of the powerful Gulf cartel; Ismael Higuera Guerrero and Gilberto Higuera Guerrero of the Tijuana cartel led by the Arellano Felix family; and, Hector Palma Salazar of the Sinaloa cartel. From January through August 2007 Mexico extradited 64 suspected criminals to the United States, compared to the record 63 alleged criminals extradited to the United States in 2006. Mexico is one of the largest recipients of U.S. counternarcotics assistance, though it receives significantly less assistance than larger counterdrug programs in Afghanistan or Colombia. The United States provides counternarcotics assistance to Mexico through the International Narcotics Control and Law Enforcement (INCLE) account. Annual figures on INCLE assistance to Mexico are shown in the table below. The Administration's budget request for FY2008, $27.8 million, cuts U.S. counternarcotics assistance to Mexico by 22% compared to FY2007 levels. In its Congressional Budget Justification , the State Department contends that these cuts are appropriate because Mexico is the thirteenth largest economy in the world. Since FY2002, border security programs have typically accounted for about 35% of INCLE assistance to Mexico. Other major components of INCLE assistance include aviation support; operational support for Mexico's drug interdiction and eradication programs; and, professionalization and training of Mexican law enforcement personnel. On October 22, 2007, the United States and Mexico issued a joint statement announcing a multi-year plan for $1.4 billion in U.S. assistance to Mexico and Central America to combat drug trafficking and other criminal organizations. The Administration requested $500 million for Mexico and $50 million for Central America in the FY2008 Supplemental Appropriations request. The joint statement highlights current efforts of both countries, including Mexico's 24% increase in security spending in 2007. The stated objective of the Mérida Initiative is "to maximize the effectiveness of our efforts to fight criminal organizations—so as to disrupt drug-trafficking (including precursor chemicals); weapons trafficking, illicit financial activities and currency smuggling, and human trafficking." All of the proposed FY2008 funding for the Merida Initiative is through the INCLE account, administered by the Department of State's Bureau of International Narcotics and Law Enforcement Affairs. The proposed $500 million in funding for Mexico is largely in the form of equipment and training. The funding would provide helicopters, surveillance aircraft, scanners, training, and information technology improvements for Mexican federal law enforcement and intelligence agencies. Congress did not provide funding for the Mérida Initiative in the FY2008 Consolidated Appropriations Act ( P.L. 110-161 ) and as of February 2008 there is no legislative vehicle to fund the Mérida Initiative. The FY2008 Consolidation Appropriations report expressed congressional disappointment that the Administration did not consult with Congress prior to the publication of the $550 million request. Congressional interest in the proposed supplemental funding for the Mérida Initiative is likely to continue in the second session of the 110 th Congress, as Congress may consider the FY2008 Supplemental request in addition to the FY2009 Budget request. In February 2008, the Administration requested $450 million in funding for the Mérida Initiative in Mexico. For additional information on the Mérida Initiative, see CRS Report RL32724, Mexico-U.S. Relations: Issues for Congress , by [author name scrubbed] and [author name scrubbed] and CRS Report RL34112, Gangs in Central America , by [author name scrubbed]. Current U.S. counternarcotics policy toward Mexico focuses on the interdiction and eradication of drug shipments, primarily through border security screening efforts along the U.S.-Mexico border. Supporters of U.S. counternarcotics policy maintain these efforts have disrupted drug shipments and decreased rates of drug use among American youth. Some critics of current policy call for an expansion of U.S. counternarcotics efforts beyond the conventional law enforcement approach. The Calderón administration has also called for increased U.S. efforts in areas it considers critical in combating drug trafficking and cartel violence. The President's National Drug Control Strategy for 2007 asserts that the Administration is following a balanced drug strategy that focuses on: prevention of drug use; treatment; and disrupting the illicit drug market. In the last five years significant achievements have been made in reducing youth use of LSD, Ecstasy, and methamphetamine. The Administration maintains that domestic and international law enforcement efforts against drug trafficking not only disrupt the drug supply but are key to combating the corrosive impact of the drug trade on societies and governments. By countering the influence of drug trafficking organizations, U.S. assistance helps countries improve security; increase economic development; and improve the rule of law. Enforcement efforts against drug cartels are also a key element of protecting U.S. national security. The Government Accountability Office (GAO) recently determined that U.S. assistance has successfully improved Mexico's capacity to combat drug trafficking. The GAO noted that cooperation between the countries has improved significantly in recent years, but that there is room for further cooperation. GAO pointed to the need for an agreement to allow U.S. law enforcement to board Mexican vessels at high seas when those vessels are suspected of carrying drugs. GAO also called for increased surveillance cooperation and for the United States to coordinate its border narcotics strategy with Mexico. Non-governmental groups and individuals have advocated alternative strategies. For example, in his recent book High Society , Joseph Califano, the president of the National Center on Addiction and Substance Abuse (CASA) at Columbia University, argues for more assertive international counternarcotics efforts. He maintains that counternarcotics has long taken a back seat to other foreign policy concerns, be it the Cold War or terrorism. Califano contends that this has resulted in reduced diplomatic pressure on drug producing countries that are needed as allies in other endeavors. He has stated that prevention of illicit drug flows into the United States should be a foreign policy priority and that United Nations drug treaties should be strengthened. He also calls for increased penalties for drug traffickers and stronger banking laws to prevent money laundering. The non-governmental organization Washington Office on Latin America (WOLA) called for a combination of U.S. domestic programs and targeted foreign aid to Mexico in its June 2006 report on cartel violence in Mexico, State of Siege: Drug-Related Violence and Corruption in Mexico . WOLA suggested cutting cartel revenue by reducing U.S. demand for illicit drugs through improved drug prevention education and increasing access to addiction treatment. Drug prevention and treatment programs (including research) currently account for 35% of U.S. federal counterdrug spending. Yet, WOLA reports that only one-third of U.S. schools offer drug prevention curricula shown to effectively reduce drug use and calls for increased funding to guarantee that schools are using effective drug prevention curricula. WOLA also calls for reducing arms trafficking into Mexico by requiring background checks for all U.S. gun purchases and limiting the number of weapon and ammunition purchases to prevent the re-sale and trafficking of weapons legally purchased in the United States to Mexican cartels. In Mexico, WOLA calls for restoration of public order and support of judicial and police reforms to create effective oversight mechanisms to detect and deter police corruption. Finally, WOLA notes that Mexican authorities currently lack the investigative capacity to solve drug crimes, including murder of police officers, and calls on Mexico to extradite major criminals to the United States, which has the institutional capacity to successfully prosecute major drug traffickers. Michael Shifter, of the Inter-American Dialogue, also calls for renewed focus on demand reduction and reduction in arms trafficking from the United States. He notes that many Latin American nations resent what they consider to be the United States' unilateral approach to counternarcotics policy and calls for increased multilateral efforts. Shifter maintains that weak institutions, poverty, and social exclusion in Latin America, make Latin American nations, including Mexico, more vulnerable to drug trafficking and cartel violence. He suggests that counternarcotics efforts may be more successful if they address these systemic problems which enable drug cartels to gain power and influence. The Mexican government urges the U.S. Congress to approve the Administration's request for $1 billion in funding to support the Mérida Initiative in FY2008 and FY2009. Mexico maintains that its counternarcotics efforts will fail without more U.S. support to: reduce arms trafficking into Mexico; stop the trafficking of drug earnings into Mexico; and reduce Americans' demand for illicit drugs. Requesting assistance from the United States is a sensitive issue in Mexico, a country that traditionally has been wary of U.S. intervention. In February 2008, the Director of the White House Office on National Drug Control Policy, John P. Walters, reportedly urged Congress to approve funding for the Mérida Initiative to take advantage of an "historic opportunity" to assist Mexico. He also called for more awareness among U.S. marijuana users about how their consumption of the drug is funding Mexican drug cartels. Walters maintained that over 60% of Mexican drug cartel profits from the United States are from marijuana. Other U.S. counternarcotics efforts, most notably the Andean Counterdrug Initiative, include funds for alternative development programs to encourage drug crop farmers to switch to production of licit crops. The United States does not fund alternative development programs in Mexico. Mexican officials interviewed for this report indicated that Mexico also does not fund alternative development programs in marijuana and opium poppy growing regions of the country. These officials suggested that there is a weaker correlation between poverty and drug crop cultivation in Mexico than in other countries in the region.
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Mexico, a major drug producing and transit country, is the main foreign supplier of marijuana and a major supplier of methamphetamine to the United States. Although Mexico accounts for only a small share of worldwide heroin production, it supplies a large share of heroin consumed in the United States. An estimated 90% of cocaine entering the United States transits Mexico. Violence in the border region has affected U.S. citizens and more than 60 Americans have been kidnapped in Nuevo Laredo. In July 2007, Mexican drug cartels reportedly threatened to kill a U.S. journalist covering drug violence in the border region. The proposed Mérida Initiative would provide at least $950 million to combat drug and organized crime. Although Mexican drug cartels, or drug trafficking organizations, have existed for quite some time, they have become more powerful since the demise of Colombia's Cali and Medellín cartels in the 1990s. Mexican drug cartels now dominate the wholesale illicit drug market in the United States. Arrests of key cartel leaders, particularly in the Tijuana and Gulf cartels, have led to increasing drug violence as cartels fight for control of the trafficking routes into the United States. The Gulf and Sinaloa cartels reportedly use personal "enforcer gangs" to perpetuate violence and intimidate Mexican citizens and public officials. Mexican President Felipe Calderón has called drug violence a threat to the Mexican state. This report provides an overview of: Mexican cartels and their operations, including the nature of cartel ties to gangs such as the Mara Salvatrucha; Mexican cartel drug production in the United States; and the presence of Mexican cartel cells in the United States. Mexican cartels allegedly have used their vast financial resources to corrupt Mexican public officials who either turn a blind eye to cartel activities or work directly for them. Since 2005, the Mexican government has made numerous efforts to purge corrupt police. In December 2006, President Felipe Calderón launched operations against the cartels in 9 of Mexico's 32 states. He has pledged to use extradition as a tool against drug traffickers, and sent 73 criminals to the United States as of August 2007, including the alleged head of the Gulf Cartel. This report also examines potential policy approaches to the problem of drug trafficking and violence. Current U.S. and Mexican policy emphasizes interdiction and eradication. Supporters of this policy maintain that these efforts have reduced the supply of drugs in the United States. Critics maintain that Administration officials have refused to release data showing that cocaine prices are falling, suggesting that the drug supply is growing, not shrinking. These critics suggest that more emphasis should be placed on demand reduction in the United States, including drug prevention education and treatment. The Mexican government urges the United States to increase its efforts to reduce U.S. demand for drugs, stating that it cannot succeed in its efforts against the cartels so long as cartels stand to earn billions of dollars annually from the U.S. illicit drug market. Critics of current policy, including the Mexican government, are also calling for increased efforts to combat arms trafficking from the United States to Mexico. This report may be updated. For further information on Mexico, see CRS Report RL34215, Mexico's Drug Cartels, by [author name scrubbed].
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This report provides a brief analysis of Haiti's development needs. It examines the current situation in Haiti, Haiti's development needs, and what is being done by the Haitian government, the United States, and foreign donors to meet those needs. It also addresses priority areas for Haitian development. Haiti and its multilateral and bilateral donors developed an international assistance strategy, known as the Interim Cooperation Framework (ICF), to address Haiti's short-term needs following the collapse of the government of President Jean-Bertrand Aristide in February 2004. The Cooperation Framework has been extended through 2007, and is the basis from which a long term Poverty Reduction Strategy is being developed. The second part of the report uses the Interim Cooperation Framework's outline to organize statistics related to the priority needs that have been established. These statistics illustrate the challenges posed by current conditions of poverty in Haiti for achieving Haiti's development goals. Haiti's poverty is massive and deep. Over half the population (54%) of 8.2 million people live in extreme poverty, living on less than $1 a day; 76% live on $2 or less a day. Poverty among the rural population is even more widespread: 69% of rural dwellers live on less than $1 a day, and 86% live on less than $2 a day. Hunger is also widespread: 81% of the national population and 87% of the rural population do not get the minimum daily ration of food defined by the World Health Organization. In order to reach its Millennium Development Goal of eradicating extreme poverty and hunger by 2015, Haiti's Gross Domestic Product (GDP) would have to grow 3.5% per year, a goal the International Monetary Fund (IMF) says Haiti is not considered likely to achieve. Economic growth for FY2006 is estimated to have been 2.5%. Over the past 40 years, Haiti's per capita real GDP has declined by 30%. Therefore, economic growth, even if it is greater than population growth, is not expected to be enough to reduce poverty. The likelihood that economic growth will contribute to reduction of poverty in Haiti is further reduced by its enormous income distribution gap. Haiti has the second largest income disparity in the world. Over 68% of the total national income accrues to the wealthiest 20% of the population, while less than 1.5% of Haiti's national income is accumulated by the poorest 20% of the population. When the level of inequality is as high as Haiti's, according to the World Bank, the capacity of economic growth to reduce poverty "approaches zero." President René Préval, who was inaugurated to a five-year term on May 14, 2006, recently completed his first year in office. He outlined his government's two main missions to be building institutions as provided for in the constitution—including the new municipal posts filled by elections on December 3, 2006—and creating conditions for private investment in order to create jobs. Préval has criticized the donor community for not dispersing funds quickly enough. Some international donors have complained that Préval's government keeps changing priorities - first children's needs, then road-building, then security issues. Crime and kidnapping levels have been high, leading Préval's government and the U.N. Mission in Haiti (MINUSTAH) to focus on improving security. Plagued by chronic political instability and frequent natural disasters, the Republic of Haiti remains the poorest country in the Western Hemisphere. The United Nations designates Haiti as one of the fifty "least developed countries" in the world. "Least Developed Countries" (LDCs) [are] a category of States that are deemed highly disadvantaged in their development process..., and facing more than other countries the risk of failing to come out of poverty. As such, the LDCs are considered to be in need of the highest degree of attention on the part of the international community....the UN gives a strong signal to the development partners of these countries, and points to the need for special international support measures and concessions in their favour. Haiti has many priorities for development that are deeply interconnected. To address the persistent poverty crisis in the country, the Haitian government and the international donor community, including the United States, are implementing and developing assistance strategies that address many development needs simultaneously. In the short-term, they are trying to implement projects that will boost public and investor confidence. At the same time, the government and donors are pursuing medium-term development plans that will improve living conditions for Haiti's vast poor population and construct government institutions capable of providing services and stability. The Haitian government is working with international donors to develop a long-term poverty reduction plan. Since 2000, in response to unresolved elections disputes and questions of transparency, U.S. and other foreign donors have directed assistance through non-governmental organizations. The interim government (2004-2006) focused on macroeconomic performance. The Préval Administration has continued efforts begun by that government, maintaining fiscal discipline and implementing structural economic reforms. Now that an elected government is in place, donors are looking at how to ensure transparency as they provide funds directly to the government again. In addition, since President Préval took office in May 2006, both the new government and international donors are shifting from a short-term program to carry Haiti through a transition period to a long-term program to help reduce poverty in Haiti. Haiti and its multilateral and bilateral donors developed an international strategy for assistance to address Haiti's short-term needs in between the collapse of the government of President Jean-Bertrand Aristide and the time a new government could be elected and installed. The World Bank, the Inter-American Development Bank, the United Nations, and the European Commission convened the International Donors Conference on Haiti in July 2004. Working in conjunction with Haiti's interim government, the conference adopted the Interim Cooperation Framework (ICF), which focused on development goals in four general areas: political governance, economic governance, economic recovery, and access to basic services. At the conference, international donors, including the United States, pledged $1.2 billion from 2004 to 2006 to help Haiti rebuild its infrastructure, strengthen institutions, and improve basic services. According to the IMF, about $960 million of these funds had been disbursed as of December 2006. In July 2006, international donors pledged $750 million to bridge Haiti's budget gap and fund economic, social, and democratic reconstruction projects through September 2007. The Interim Cooperation Framework establishes priority needs and projects that fall under four broad categories. For each of these four strategic axes, the Framework provides a strategy, priority objectives, and monitoring indicators. The "Strengthen Political Governance and National Dialogue" axis addresses security, police, and disarmament; the judicial system and human rights; and the electoral process. The "Strengthen Economic Governance and Institutional Development" category promotes improved and more transparent management of public finances; strengthening the capacities of public institutions; and decentralization in favor of regional, urban, and local preparation of development strategies. The "Promote Economic Recovery" objective aims to reverse Haiti's trend of economic regress by promoting macro-economic stability; providing reliable electricity; reviving the private sector; and providing jobs and access to micro-finance. Economic Recovery programs also aim to help farmers meet their needs; improve roads and transport; and rehabilitate and protect the environment. "Improve Access to Basic Services" is the fourth axis. Because basic services are so scarce in Haiti, the priorities in this category are many. They range from immediate goals such as providing emergency humanitarian aid to more long-term goals. Health-related long-term goals include increasing the availability of potable water and lavatories; extending minimal health services and improving access to them, improving the ability to address food security, and improving solid waste management. Programs also include improving the quality of and access to education at all levels; engaging disadvantaged youth; supporting Haitian artisans; and reinforcing the media as a means of promoting pluralism and democracy. Other priorities include improving slums and the government's ability to provide social safety nets and protection. Progress has been made toward these objectives since 2004, such as the organization of elections, jobs creation, and broader access to clean water and other services. The economic policies of the strategy focused on restoring macroeconomic stability and establishing good governance practices, and had success in areas such as the preparation of budgets before the commencement of a fiscal year, and improvements in fiscal transparency. But because the emphasis was not on economic growth, results were negligible, according to the Haitian government, and Haitians did not experience an improvement in living conditions. Building on drafts created by the interim government (2004-2006), the Préval Administration produced an Interim Poverty Reduction Strategy for the years 2007-2009. This plan calls for actions to be taken with a macroeconomic framework focusing on three goals: maintain macroeconomic stability; target actions to reduce poverty; and create conditions conducive to continuous and sustainable growth driven by private initiative. The strategy notes that programs already outlined need to continue, and that the absence of a sector in this strategy does not mean that sector is not important. Partially in response to criticism that too many priorities were set forth in earlier plans, the Haitian government says this plan focuses on those sectors that can be effectively financed in the first year, considering limitations of time, and human and financial resources. The Interim Poverty Reduction Strategy defines major priorities for 2007-2009 to be infrastructure, energy, education, health and security. The government established these priorities for intervention activities: Growth favorable to the productive sectors, focusing on agriculture, industry, trade, environment, craft industries, transportation, electricity, communications, and tourism; Governance and institutional reforms, addressing justice and rule of law, fiscal transparency, modernization of the management of public affairs, deconcentration, and decentralization; and Development of social sectors, emphasizing health, HIV/AIDS, education, water, sanitation, and housing. With such low, or negative, economic growth over the last forty years, Haiti's per capita income has dropped by about 1% a year. The government does not anticipate that real economic growth alone can alleviate poverty. As a result, the government has called for growth policy that is "pro-poor," and for first priority to be given to investment projects that have social and human benefits. International donors are assisting Haiti in developing a long-term Poverty Reduction Plan to succeed the Interim Cooperation Framework. It will build on the priorities, needs, and programs already laid out in the Interim Cooperation Framework and the Interim Poverty Reduction Strategy, as well as lessons learned in implementing those strategies. An important part of this strategy, as it was with the others, is developing the final plan through a participatory process, with the overarching goal of ensuring that the interests of Haiti's most disadvantaged population are taken into account. A participatory process is also intended to strengthen democratic and governance processes by building consensus among various political and civic entities, and promoting Haitian "ownership" of the development plan. According to the Haitian government's strategy paper, the participatory process was to begin in the first quarter of 2007. A final Poverty Reduction Strategy Paper is to be submitted to the Haitian Parliament in July 2007, and implementation is to begin in October 2007. Some analysts have questioned whether Poverty Reduction Strategies (PRS) in general represent the best development strategy for a country. Poverty Reduction Strategy Papers are required to qualify for debt relief through the World Bank's Heavily Indebted Poor Country (HIPC) initiative and the IMF's Poverty Reduction and Growth Facilities. Therefore, some groups say, fulfilling requirements set by the international financial institutions drives the Poverty Reduction Strategy process, and becomes another type of conditionality, rather than the poverty reduction goals of a country like Haiti driving the formulation of debt relief and loan packages, as the PRS process was supposed to do. ActionAid, an international anti-poverty agency, argues that the World Bank and IMF's focus on poverty "is limited to lessening the social damage done by the negative impacts of their structural adjustment policy reforms...", and that alternatives or reforms to structural adjustment are generally precluded from discussion. In a review of earlier Poverty Reduction Strategies in seven countries, including Haiti, ActionAid reported that although there was general support for locally generated poverty reduction strategies, the evidence suggested there was little in-country "ownership" of the plans except among some of the bureaucracies that implement them. The study found that "important constituencies are being excluded through the consultation design or their own lack of capacity." The report also concluded that the IMF and the World Bank continued to have significant influence and control over the process and content of the Poverty Reduction Strategies themselves and their subsequent debt relief and loan packages. This influence, the report said, meant that "largely discredited adjustment instruments and targets have reappeared...," leaving the PRS susceptible to "the charge of new form, same substance, and...same impact on the working poor and excluded." Another group, the Bretton Woods Project, which monitors the World Bank and the IMF in collaboration with non-governmental organizations and researchers, says these international financial institutions should broaden their sources for development analysis, and that "Ministers from indebted countries and prominent academics have recently voiced concerns about the conflicts of interest underlying the Bank's role as analyst and lender." Some of these groups caution civil society organizations about participating in the public consultations for these Strategies. Poverty Reduction Strategies are not necessarily development strategies, they say, because the public consultation process excludes discussions of other important elements of development policy, such as trade policies, domestic and foreign investment strategies, industrial policies, deficit spending, and other issues. They suggest either broadening the scope of discussion within Poverty Reduction public consultations or supplementing them with public forums led by civil society organizations. The U.S. Agency for International Development (USAID)'s primary objective in Haiti for 2007-2009 is, "Helping to meet the basic needs of Haitian citizens." According to USAID's FY2007 Budget Justification, these basic needs include "better education and healthcare; more jobs and economic opportunities; greater access to equitably applied justice; humanitarian assistance; and institutions capable of providing these basic needs." USAID's programs are based on the objectives, strategy, and monitoring indicators established under the Interim Cooperation Framework. USAID began implementing new strategies in three areas in FY2007. Because Haiti's poor have become even more vulnerable by the complex disasters arising out of instability and insecurity, one program is aimed at protecting vulnerable populations. This program includes efforts to: (1) improve emergency preparedness and disaster mitigation; (2) protect and increase the food security of groups such as children under five years of age, and pregnant and lactating women; (3) work with vulnerable populations to increase family income and decrease food insecurity; and (4) promote stability by providing short-term employment opportunities in violence-prone areas, especially for out-of-school youth. The proposed budget for this program for FY2007 was $10.6 million in Development Assistance (DA), and $19 million in Economic Support Funds (ESF). (Congress has passed Continuing Resolutions for FY2007, and funding for FY2007 is still unclear.) The second new strategy involves democracy and governance. This program aims to strengthen civil society organizations so that they can reach out to groups traditionally excluded from the political process, and apply pressure on the Haitian government to create and implement good governance reforms. Judicial reform programs focus on improving the Justice Ministry's capacity to function; providing protection and treatment for victims of organized violence; preventing human trafficking; and providing specialized education and other opportunities for marginalized youth in Haiti's most violent areas. Other programs aim to strengthen the parliament, and help local government institutions be able to incorporate citizen input and deliver services. The proposed FY2007 budget for this program is $8 million in Development Assistance (DA), and $13 million in Economic Support Funds (ESF). The third new strategy involves education. The four elements of this program include (1) investment in primary schools to achieve equitable access to quality basic education; (2) supporting the social integration of adolescents through vocational/technical education; (3) strengthening the capacity of the Ministry of Education; and (4) increasing government oversight of education at the local level. The proposed FY2007 funding for this program is $4.6 million in Development Assistance (DA), and $6 million in Economic Support Funds (ESF). Overall, the Bush Administration requested $198 million for Haiti for FY2007. Levels for child survival and health, development assistance, and counternarcotics assistance funds decreased. HIV/AIDS funding increased as part of the President's Emergency Plan for AIDS Relief. The Administration's FY2008 request of $223 million represents increases in Economic Support Funds and HIV/AIDS funding, but decreases in all other categories of aid to Haiti from FY2006 and proposed FY2007 levels. Comparing FY2006 levels to FY2008 requested levels of aid to Haiti, ESF would increase from $49.5 million to $63.5 million; Global HIV/AIDS Initiative funding would increase from $47.3 million $83 million. Child Survival and Health would decrease from $19.8 million to $18.0 million; Development Assistance would decrease from $29.7 million to $14.8 million; Foreign Military Financing from $98,000 to $0; International Military Education and Training from $213,000 to $200,000; International Narcotics Control and Law Enforcement would decrease from $17.5 million to $9 million, and P.L. 480 food assistance would decrease from $39.5 million to $34.5 million. According to the IMF Mission Chief for Haiti, the Préval Administration has made concerted efforts to continue the strong macroeconomic performance initiated by the interim government, maintaining fiscal discipline and continuing structural economic reforms, such as passing a new organic budget law. Most analysts agree, however, that even strong macroeconomic performance will not be enough to reduce poverty in Haiti. The IMF points out that enormous political, technical, and institutional challenges must also be overcome before Poverty Reduction objectives can be achieved. The World Bank and others say that it is highly unlikely that economic growth will reduce poverty as long as Haiti's income inequality remains as high as it is—and by 2030 the income gap is expected to grow. Three factors contributing to income inequality are: a large disparity in the capacity to generate income, with the rural areas having the least capacity; access to education, which only half the population has; and whether or not a household receives remittances from abroad. Analysts say that policy aimed at reducing income inequality in Haiti should address decentralization, to provide more and better infrastructure and services throughout the country. According to the World Bank, public spending on education that is targeted toward the poor can reduce poverty in both the short- and long-term. Access to education, it says, can reduce poverty relatively quickly by increasing individual productivity and helping to shift poor people from low-paying agricultural employment to better paying jobs in the industrial and service sectors. In the long-term, the Bank says, education can increase poor children's chances of breaking out of the cycle of poverty by gaining access to formal employment. This means, however, that investment and the economy must be strong enough to create job opportunities for newly educated people. USAID defines three groups of challenges facing development efforts in Haiti: public sector institutions with little capacity to govern; a weak private sector whose growth is extremely limited by an atmosphere of insecurity; and the degradation of Haiti's natural resources, which are needed for productive economic activities. Because Haiti's current capacity is so limited, and its needs are so great, the IMF maintains that technical assistance will be crucial in making progress. According to the Haitian government, there has never been a systematic policy for poverty reduction nor a coherent program with precisely defined objectives. Haiti's limited capacity to develop plans and absorb funds, and donors' concerns over transparency of government spending continue to pose obstacles to the execution of development programs. Both donors and the Haitian government share responsibility for addressing problems with the disbursement of funds and the coordination of foreign assistance. The Préval Administration notes in its Interim Poverty Reduction Strategy Paper that the capacities of those who have a stake in the poverty reduction process are also "generally inadequate for the implementation of such a process," and calls for assistance to strengthen those stakeholders' capacities as well. USAID's Office of Transition Initiatives, which provides "fast flexible short-term assistance targeted at key political transition and stabilization needs," worked in Haiti from 2004 to 2006. Its mission identified three ingredients necessary to increase security in Haiti's most violence-prone areas: community ownership, development assistance, and rule of law, and said that all three elements must be present. It also said that programs targeted at reducing violence must address "spoilers," whether political or criminal, who want to incite disorder to promote their own interests. The Millennium Development Goal that the Haitian government agreed to in 2000 for environmental sustainability was to reverse losses by 2015. According to the IMF, this will be difficult to achieve, as losses have continued over the last decade, and environmental policies are weak. Currently, only 3.8% of total land area is forested. A weak political structure combined with ongoing political tensions, violence, massive poverty, and income inequality have made it difficult to pursue the goals of interim development and poverty reduction plans, and will do so for the successor Poverty Reduction Plan as well, if not adequately addressed. Several indices show Haiti lagging far behind countries in the region and the world in terms of development. As mentioned earlier, the United Nations designates Haiti as one of the fifty "least developed countries" in the world. The Economist Intelligence Unit ranked Haiti second-to-last in its 111-country Quality-of-Life Index. The Quality-of-Life Index uses the weighted measure of nine quality-of-life indicators to determine a country's quality-of-life score on a progressive scale from 1 to 10. With a score of 4.090, Haiti trailed behind the other 21 Latin American and Caribbean countries included in the study. The United Nations Development Program's Human Development Index (HDI) measures a country's indicators for life-span, education, and income against established goalposts, yielding a score along a progressive scale from 0 to 1. Haiti's HDI score is 0.482, behind the Latin American and Caribbean regional score of 0.795. Haiti ranked 154 th out of 177 countries (177 being the least developed), the only country in the Americas or the Caribbean to fall in the category of countries of "low human development." This section uses the Interim Cooperation Framework's outline to organize statistics related to some of the priority needs that have been established. These figures and tables put international efforts into the context of Haitian poverty, drawing a statistical overview to convey the extent of the poverty in Haiti and the obstacles that must be overcome in order for development to occur there.
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Haiti's poverty is massive and deep. Over half the population (54%) of 8.2 million people live in extreme poverty, living on less than $1 a day; 76% live on less than $2 a day. Poverty and hunger among the rural population is even more widespread. In order to reach Haiti's goal of eradicating extreme poverty and hunger by 2015, its Gross Domestic Product (GDP) would have to grow 3.5% per year, a goal Haiti is not considered likely to achieve. In the past 40 years, Haiti's per capita real GDP has declined by 30%. Therefore economic growth, even if greater than population growth, is not expected to be enough to reduce Haiti's endemic poverty. Since Haiti's 2006 elections, the new government and international donors are shifting from a short-term program to carry Haiti through a transition period to a long-term program to help reduce poverty in Haiti. Haiti and its multilateral and bilateral donors developed an international aid strategy to address Haiti's short-term needs in between the collapse of President Jean-Bertrand Aristide's government and the installation of a new, elected government. Through the Interim Cooperation Framework (ICF) international donors pledged $1.2 billion from 2004 to 2006, and $750 million more through September 2007. The ICF places priority needs and projects into four broad "axes": political governance and national dialogue; economic governance and institutional development; economic recovery; and access to basic services, with a strategy, priority objectives, and monitoring indicators for each. Building on drafts created by the interim government (2004-2006), President René Préval's Administration produced an Interim Poverty Reduction Strategy (PRS) for the years 2007-2009. This plan calls for actions to be taken within a macroeconomic framework focusing on three goals: maintain macroeconomic stability; target actions to reduce poverty; and create conditions conducive to continuous and sustainable growth driven by private initiative. International donors are assisting Haiti in developing a long-term Poverty Reduction Plan to build on and succeed the Interim Cooperation Framework (ICF). An important part of this strategy is developing the final plan through a participatory process, with the goals of ensuring that the interests of Haiti's most disadvantaged population are taken into account and that democratic and governance processes are strengthened. The PRS is to be completed by July 2007, and implemented beginning in October 2007. The U.S. Agency for International Development's 2007-2009 programs are based on the objectives, strategy, and monitoring indicators established under the ICF. Some critics say that the PRS process does not allow adequate country input, uses limited development analysis, and should include discussion of alternative policies and other aspects of development policy. Enormous political, technical, and institutional challenges must be overcome before Poverty Reduction objectives can be achieved. The figures in this report put international efforts into the context of Haitian poverty, drawing a statistical portrait to convey the extent of the poverty and obstacles that must be overcome in order for sustainable development to occur in Haiti. This report will not be updated.
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Generally speaking, there are two types of mortgage-backed securities (MBSs). The first are those securities that are packaged and issued by government sponsored entities (GSEs) — the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac") — and a wholly owned government corporation, the Government National Mortgage Association ("Ginnie Mae"). The second are those MBSs that are packaged and issued by private market participants (i.e., mortgage companies, savings and loans, and commercial banks), known as private label MBSs. The laws governing the issuance of these two types of MBSs are different. MBSs offered by the GSEs and Ginnie Mae are exempt from the registration requirements and ongoing disclosure obligations contained in the federal securities laws. Private label MBSs do not enjoy a blanket exemption from the federal securities laws and are classified by the Securities and Exchange Commission as a type of "asset-backed security" (ABS) that must register under the Securities Act of 1933 ('33 Act or Securities Act) or obtain an exemption and provide continuing disclosures required by the Securities Exchange Act of 1934 ('34 Act or Exchange Act). This report will provide an overview of the registration requirements for private label MBSs under the Securities Act. It also highlights the most frequently used exemptions for private label MBSs. It outlines potential liability for fraud and/or material misstatements in the required disclosures and the consequences for failure to register when required by federal securities laws. This report will not discuss reporting requirements or liability for MBSs under the Exchange Act of 1934. The Securities Act requires issuers of all types of securities to register the offering with the Securities and Exchange Commission (SEC) or to qualify for an exemption from the registration requirements. A registration statement consists of two parts: a prospectus, which must be delivered with every offer to sell the securities and contain the information outlined in Section 10 of the Securities Act, and other information which need not be provided to potential purchasers but must be on file with the SEC and available for public inspection. Failure to file a registration statement when one is required results in a violation of Section 5 of the '33 Act and strict liability under Section 12(a)(1). Sections 4 and 5 of the Securities Act require issuers of securities to register the offerings and provide prospectuses for sales that are not exempt. Sections 7 and 10 of the Securities Act prescribe the information required in the registration statements and prospectuses that are issued pursuant to offerings under Sections 4 and 5. Section 7 requires the registration statement to contain the information and documents outlined in Schedule A (15 U.S.C. §77aa), which is the Schedule under which all issuers that are not foreign governments must file. Section 7 grants the Commission the power to prescribe rules and regulations describing the information and documents to be contained in registration statements if the Commission deems them to be "necessary or appropriate in the public interest or for the protection of investors." Pursuant to this authority, the Commission has designed registration statements, which correspond to the various types of securities and types of issuers of securities. For private label MBSs, issuers must use either registration statement Form S-1 or Form S-3. Form S-3 is the preferable registration statement type for most issuers because it is considered to be less burdensome than other types of registration statements. In order to be eligible for Form S-3, in most cases, the registrant must already have a class of securities registered pursuant to Sections 12(b) or 12(g) of the Exchange Act (15 U.S.C. §78 l ), or be required to file reports pursuant to Section 15(d) of the Exchange Act for at least the preceding 12 months (15 U.S.C. §78o). The Commission included this requirement under the theory that information contained in the disclosures required by these sections could be incorporated by reference into the new MBS registration, thereby reducing the work required to prepare a new MBS registration statement. The registrant must also have filed all reports required in a timely manner within the previous 12 months. If the MBS offering qualifies as an offering of investment grade securities, however, the requirements for use of Form S-3 are slightly different. A non-convertible security (such as an MBS) may qualify as an investment grade security if, at the time of sale, "at least one nationally recognized statistical rating organization ... has rated the security in one of its generic rating categories which signifies investment grade; typically, the four highest rating categories (within which there may be sub-categories or gradations indicating relative standing) signify investment grade." An offering of investment grade MBSs occurs when MBSs that qualify as investment grade are offered for cash and delinquent assets within the asset pool do not constitute 20% or more of the pool (measured in dollar volume). If the offering is an offering of investment grade MBSs, the registrant is not required to have securities registered pursuant to Sections 12(b) or 12(g) of the Exchange Act (15 U.S.C. §78 l ) or be subject to the reporting requirements of Section 15(d) of the Exchange Act (15 U.S.C. §78o) in order to register using Form S-3. The issuer of an offering of investment grade MBSs still must have filed all reports required in the previous 12 calendar months in a timely fashion to qualify to use Form S-3. If the MBS offering does not qualify to use Form S-3, then the offering must be registered on Form S-1, which is the form all registrants must use if they do not qualify to register on another form. Shelf-registration allows an issuer to file a registration statement and, instead of selling the securities immediately following the effective date, place the securities on a "shelf" to be sold when the issuer believes the time to be right. This is a popular method of registration for private label MBSs. Mortgage related securities, a subset of MBSs, automatically qualify for "shelf-registration." Even if the private label MBS offering in question is not a mortgage related security, the private label MBS offering may qualify for shelf-registration nonetheless. For private label MBS offerings, the securities may remain on the "shelf" for up to three years from the initial effective date. Once the company "takes down" the securities for sale, if there has been a change involving the structural features of the MBSs, credit enhancement or other aspects of the MBSs that were not described in the base prospectus, a new registration statement, or post-effective amendment may be required. Some changes do not warrant such labor intensive disclosure, however, and the changes may be described in the final prospectus filed with the SEC. If the securities have not been sold by the end of the original three-year period, another registration statement may be filed. Private label MBSs are required to file registration statements that comply with Regulation AB. Regulation AB is tailored specifically to various types of asset-backed securities (like MBSs). The Commission realized that disclosures required by other SEC regulations were not properly tailored to elicit useful information for MBS investors. Other regulations required too much information irrelevant to MBSs and little or no information about other aspects of MBSs that investors needed in order to make informed investment decisions. Therefore, Regulation AB requires more information about the assets in a particular securitized pool, delinquent assets in the pool, the structure of the transaction, the experience of the servicer of the asset pool as well as other parties involved in administering the particular asset pool at issue, and other information unique to offerings of asset-backed securities (like credit enhancements on the asset pool). Information with respect to the registrant (management of the registrant company, performance of the registrant company's stock) may be omitted for MBS offerings because this information does not necessarily inform the investor about the potential performance of the asset pool. Certain offerings of private label MBSs may be exempt from registration under the Securities Act. The most common exemptions for MBS offerings are described below. The most common exemption from registration for MBSs is the exemption for so-called "private placement offerings." Section 4(2) of the Securities Act exempts "transactions by an issuer not involving any public offering." Section 3(b) allows the Commission to exempt certain offerings, not in excess of a specified dollar amount, from registration by rule or regulation. Pursuant to its authority in these two sections, the Commission adopted Regulation D. Regulation D, found in Rules 501 through 508 under the Securities Act, provides guidance to issuers regarding which offerings would not be considered "public offerings." The issuer must file notice with the SEC of any sales pursuant to Regulation D. Under Rule 504, an issuer (except an issuer that is an investment company) may sell up to $1 million worth of private label MBSs in any 12-month period to any number of purchasers, regardless of their accreditation. No information is required to be provided to investors purchasing securities pursuant to this exemption. An issuer may sell up $5 million worth of private label MBSs in a 12 month period to any number of accredited investors and up to 35 other purchasers. Accredited investors are defined to include large, frequent market participants that are presumed to have the ability to independently obtain the information that they need. If the securities are offered to unaccredited investors, some disclosure is required under Rule 502, but a full registration statement is not required. Rule 506 is likely the most common exemption from registration for MBSs. Under this rule, an issuer may sell any amount of securities to any number of accredited investors and up to 35 so-called "sophisticated investors." In order for the unaccredited investors to be considered "sophisticated," the issuer must reasonably believe that those investors (or their representatives) are capable of evaluating the merits and risks of the securities offered. If the securities are offered to unaccredited investors, some disclosure is required under Rule 502, but a full registration statement is not required. This section exempts sales of up to $5 million from registration if the sales are made to accredited investors. To qualify for this exemption, the issuer may not publicly advertise the sale of the securities, nor may the issuer publicly solicit buyers. The issuer must also file notice with the Commission of the sale, a requirement similar to that of Regulation D. Rule 144A allows the unlimited resale of securities that were never registered pursuant to the Securities Act so long as the purchaser is a "qualified institutional buyer" (QIB). QIBs are defined as enumerated types of institutional investors (i.e., insurance companies or employee benefit plans) that own over $100 million in securities unaffiliated with the entity making the offering. Because the market for private label MBSs consists primarily of QIBs, Rule 144A is commonly used. Section 28 of the Securities Act gives the Commission the authority to, conditionally or unconditionally, "exempt any person, security, or transaction, or any class of persons, securities, or transactions, from any provision or provisions of this title or of any rule or regulation issued under this title, to the extent that such exemption is necessary or appropriate in the public interest, and is consistent with the protection of investors." The Commission, therefore, has wide discretion to create exemptions from the registration requirements of the Securities Act. Sections 11 and 12 of the Securities Act provide private causes of actions for material misstatements or omissions contained in the registration of private label MBS securities. Section 15 of the act creates liability for controlling persons. These causes of action are described in this section. Section 11 creates a private right of action for purchasers of securities issued pursuant to a false or materially misleading registration statement. To establish liability, a plaintiff must show that the registration statement, at the time it became effective, contained a material misstatement or omission. A statement is material if "an average prudent investor ought reasonably to be informed [of the information] before purchasing the security registered." For the purposes of Section 11, a statement is material if, had it been stated correctly or disclosed, it "would have deterred or tended to deter the average prudent investor from purchasing the securities in question." Because Section 11 requires an effective registration statement in order to apply, securities that are sold pursuant to an exemption from registration are not subject to liability for violations of Section 11. Liability for violations may include the difference between the amount paid for the security and the value at the time the suit is brought, or the difference between the amount paid for the security and the price at which the security was sold in the market before the suit, or the difference between the amount paid for the security and the price at which it was sold after suit, but before judgment is entered, if that amount is less than the damages representing the difference between the amount paid for the security and the value at the time the suit was brought. A number of lawsuits have been filed by investors against issuers of MBSs alleging violations of Section 11 of the Securities Act. Alleged violations include failure to comply with the underwriting standards described in the offering documents, failure to disclose true risks of default on loans, and misrepresentations that the assets backed by the securities were, in fact, "investment grade." As these cases move through the courts, issues facing the causes of action will become more clear. A claim of liability under Section 11 may always be defeated by proof that the purchaser knew of the untruth or omission at the time the security was acquired. Furthermore, if a defendant can prove that "any portion or all [of the damages suffered by the plaintiff] represents other than the depreciation in value of such security resulting from" the misstatement in the registration statement, that portion of the damages is not recoverable. In other words, if a defendant can show that it was not the misstatement or omission in the registration statement that caused the value of the shares to fall, but some other market force, the plaintiff cannot recover the loss of value represented by the extraneous influence. The issuer has absolute liability under Section 11. Section 11 allows other individuals, besides the issuer, to be sued for violations, including corporate executives and others who signed the registration statement. These defendants may assert the "due diligence" defense. For the purposes of this defense, there are two portions of a registration statement: the "expert" portions and the "unexpert" portions. For example, in MBS offerings, the portion describing the pooling and servicing agreement for the underlying asset pool is prepared and signed by experts in accounting and auditing. Defendants, other than the expert that prepared the "expert" section at issue, may assert a due diligence defense to the preparation of the expert portions if the defendants can show that, after a reasonable investigation, they "had no reasonable grounds to believe and did not believe" there to be any material misstatements or omissions in the expert portion of the registration statement. "Reasonable investigation" means that which is required of a reasonable man in the care of his own property. In other words, those who sign the registration statement are entitled to trust the experts paid to prepare the expert portions, absent any red flags. With respect to the unexpert portions (and to the expert portions for the expert charged with preparing and signing those portions), defendants may assert the due diligence defense if they can show that, after a reasonable investigation the defendants had reasonable grounds to believe and did believe that there was no material misstatement or omission. This is a higher standard than the standard described in the preceding paragraph. Those signing the registration statement are not entitled to assume all information in it is correct because they trust those who prepared the statement. The defendants must, at the least, have read the registration statement and taken into account all knowledge available to them to gauge the statements accuracy. Section 12 applies to two different scenarios, each of which may apply to the issuance of private label MBSs. Both are briefly described below. Under Section 12(a)(1), a seller is strictly liable for selling securities in violation of Section 5. To establish a claim under this subsection, a plaintiff need only show that he bought securities and that the securities were not registered. The burden is on the defendant to show that there was an exemption for the offering. Section 12(a)(2) creates liability for any person who sells securities pursuant to a prospectus or oral communication that contains a material misstatement or omission. Liability under this section is not strict liability, however. A defendant who can prove that "he did not know, and in the exercise of reasonable care could not have known of such untruth or omission" will not be held liable. A defendant may reduce his liability under 12(a)(2) to the extent that he can show the decrease in the securities' value was caused by factors other than the alleged misstatement or omission in the prospectus or oral communication. Furthermore, this section only applies to public offerings; private placements, such as those accomplished under Rules 506, are not covered. Many of the suits filed alleging violations of Section 11 in the registration and sale of MBSs, also allege violations of Section 12(a)(2). As these cases move through the courts, issues facing the causes of action will become more clear. Section 15 makes those persons or entities that, through stock ownership or other arrangement, control the persons or entities that are liable under Sections 11 and 12 jointly and severably liable for violations of those sections. This provision could become important for the purposes of private label MBS liability. Issuers of MBSs are typically specially created for the purposes of a specific offering. Therefore, in order to recover for violations of Section 11 and 12 in MBS offerings, it may be necessary to sue the persons controlling the entities making the offering. The Commission has the statutory authority to bring an action for violation of the Securities Act, as well as any violation of the rules and regulations issued by the Commission pursuant to the act. Whenever the Commission believes a person has violated or is about to violate the provisions of the Securities Act, the Commission has the power to issue a cease and desist order. Pursuant to any cease and desist order, the Commission has the authority to order accounting and disgorgement. The Commission may also bring civil or criminal actions for violations of the act. In conjunction with the enforcement described above, the Commission may bring an action for violation of Section 17 of the Securities Act. Section 17 is a general antifraud provision. It prohibits any individual, in the offer or sale of securities, from employing various means or devices of fraud. Some courts have held that there is an implied private right of action under Section 17 (similar to that of Rule 10b-5 of the Exchange Act), but the Supreme Court has yet to rule on this question.
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Mortgage-backed securities that are packaged and issued by private industry participants are required to comply with the Securities Act of 1933. Issuers of so-called private label mortgage-backed securities must either register these securities pursuant to the rules the Securities and Exchange Commission has set forth, or obtain an exemption from registration. Failure to register or fall under an exemption could result in liability for the issuer and other parties involved in the offering. Furthermore, material misstatements or omissions in the offering materials may also result in liability under the Securities Act. This report will provide an overview of the Securities Act of 1933 as it may be applied to mortgage-backed securities issued by private industry participants.
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Has an attorney engaged in unethical conduct when he or she secretly records a conversation? The practice is unquestionably unethical when it is done illegally; its status is more uncertain when it is done legally. The issue is complicated by the fact that the American Bar Association (ABA), whose model ethical standards have been adopted in every jurisdiction in one form or another, initially declared surreptitious recording unethical per se and then reversed its position. Moreover, more than a few jurisdictions have either yet to express themselves on the issue or have not done so for several decades. A majority of the jurisdictions on record have rejected the proposition that secret recording of a conversation is per se unethical even when not illegal. A number endorse a contrary view, however, and an even greater number have yet to announce their position. Federal and state law have long outlawed recording the conversation of another. Most jurisdictions permit recording with the consent of one party to the discussion, although a few require the consent of all parties to the conversation. Both the ABA's Code of Professional Responsibility (DR 1-102(A)(3)) and its successor, the Model Rules of Professional Conduct (Rule 8.4(b)), broadly condemn illegal conduct as unethical. They also censure attorney conduct that involves "dishonesty, fraud, deceit or misrepresentation." In 1974, the ABA concluded in Formal Opinion 337 that the rule covering dishonesty, fraud, and the like "clearly encompasses the making of recordings without the consent of all parties." Thus, "no lawyer should record any conversation whether by tapes or other electronic device, without the consent or prior knowledge of all parties to the conversation." The Opinion admitted the possibility that law enforcement officials operating within "strictly statutory limitations" might qualify for an exception. Reaction to the Opinion 337 was mixed. The view expressed by the Texas Professional Ethics Committee was typical of the states that follow the ABA approach: In February 1978, this Committee addressed the issue of whether an attorney in the course of his or her practice of law, could electronically record a telephone conversation without first informing all of the parties involved. The Committee concluded that, although the recording of a telephone conversation by a party thereto did not per se violate the law, attorneys were held to a higher standard. The Committee reasoned that the secret recording of conversations offended most persons' concept of honor and fair play. Therefore, attorneys should not electronically record a conversation without first informing that party that the conversation was being recorded. The only exceptions considered at that time were "extraordinary circumstances with which the state attorney general or local government or law enforcement attorneys or officers acting under the direction of a state attorney general or such principal prosecuting attorneys might ethically make and use secret recordings if acting within strict statutory limitations conforming to constitutional requirements," which exceptions were to be considered on a case by case basis. ... [T]his Committee sees no reason to change its former opinion. Pursuant to Rule 8.04(a)(3), attorneys may not electronically record a conversation with another party without first informing that party that the conversation is being recorded. Supreme Court of Tex as Prof essional Eth ics Comm ittee Opinion No. 514 (1996). A second group of states—Arizona, Idaho, Kansas, Kentucky, Minnesota, Ohio, South Carolina, and Tennessee—concurred, but with an expanded list of exceptions, for example, permitting recording by law enforcement personnel generally, not just when judicially supervised; or recording by criminal defense counsel; or recording statements that themselves constitute crimes, such as bribery offers or threats; or recording confidential conversations with clients; or recordings made solely for the purpose of creating a memorandum for the files; or recording by a government attorney in connection with a civil matter; or recording under other extraordinary circumstances. A third group of jurisdictions refused to adopt the ABA unethical per se approach. In one form or another the District of Columbia, Mississippi, New Mexico, North Carolina, Oklahoma, Oregon, Utah, and Wisconsin suggested that the propriety of an attorney surreptitiously recording his or her conversations where it was otherwise lawful to do so depended upon the other circumstances involved in a particular case. In 2001, the ABA issued Formal Opinion 01-422 and rejected Opinion 337 's broad proscription. Instead, Formal Op inion 01-422 concluded that: 1. Where nonconsensual recording of conversations is permitted by the law of the jurisdiction where the recording occurs, a lawyer does not violate the Model Rules merely by recording a conversation without the consent of the other parties to the conversation. 2. Where nonconsensual recording of private conversations is prohibited by law in a particular jurisdiction, a lawyer who engages in such conduct in violation of that law may violate Model Rule 8.4, and if the purpose of the recording is to obtain evidence, also may violate Model Rule 4.4. 3. A lawyer who records a conversation without the consent of a party to that conversation may not represent that the conversation is not being recorded. 4. Although the Committee is divided as to whether the Model Rules forbid a lawyer from recording a conversation with a client concerning the subject matter of the representation without the client's knowledge, such conduct is, at the least, inadvisable. There seems to be no dispute that where it is illegal to record a conversation without the consent of all of the participants, it is unethical as well. Recording requires the consent of all parties in 10 states: California, Florida, Illinois, Massachusetts, Michigan, Montana, New Hampshire, Oregon, Pennsylvania, and Washington. Only two states, Colorado and South Carolina, have expressly rejected the approach of the ABA's F ormal Opinion 01-422 since its release. Yet a number of other states have yet to withdraw earlier opinions that declared surreptitious records ethically suspect: Arizona, Idaho, Indiana, Iowa, Kansas, and Kentucky. A substantial number of states, however, agree with the ABA's F ormal Opinion 01-422 that a recording with the consent of one, but not all, of the parties to a conversation is not unethical per se unless it is illegal or contrary to some other ethical standard. This is the position of the bar in Alabama, Alaska, Hawaii, Minnesota, Missouri, Nebraska, New York, Ohio, Oregon, Tennessee, Texas, Utah, and Vermont. In four other states—Maine, Mississippi, North Carolina, and Oklahoma—comparable opinions appeared before the ABA's F ormal Opinion 01-422 was released and have never withdrawn or modified. Yet even among those that now believe that secret recording is not per se unethical, some ambivalence seems to remain. Nebraska, for example, refers to full disclosure as the "better practice." New Mexico notes that the "prudent New Mexico lawyer" hesitates to record without the knowledge of all parties. And Minnesota cautions that surreptitiously recording client conversations "is certainly inadvisable" except under limited circumstances. Although the largest block of states endorse this view, whether it is a majority view is uncertain because a number of jurisdictions have apparently yet to announce a position, for example, Arkansas, Connecticut, Delaware, Georgia, Louisiana, Nevada, New Jersey, North Dakota, Rhode Island, West Virginia, and Wyoming. Besides Rule 8.4's prohibition on unlawful, fraudulent, deceptive conduct, the Code of Professional Conduct also condemns making a false statement of material fact or law. As a consequence even when surreptitious recording is not considered a per se violation, it will be considered unethical if it also involves a denial that the conversation is being recorded or some similar form of deception. While illegality and false statements exist as exceptions to a general rule that permits surreptitious recording, evidence gathering is an exception to a general rule that prohibits such recordings. The earlier ABA opinion conceded a possible exception when prosecuting attorneys engaged in surreptitious recording pursuant to court order. Various jurisdictions have expanded the exception to include defense attorneys as well as prosecutors. Some have included use in the connection with other investigations as well. Other circumstances thought to permit a lawyer to record a conversation without the consent of all of the parties to the discussion in one jurisdiction or another include instances when the lawyer does so in a matter unrelated to the practice of law; or when the recorded statements themselves constitute crimes such as bribery offers or threats; or when the recording is made solely for the purpose of creating a memorandum for the files; or when the "the lawyer has a reasonable basis for believing that disclosure of the taping would significantly impair pursuit of a generally accepted societal good."
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In some jurisdictions, it is unethical for an attorney to secretly record a conversation even though it is not illegal to do so. A few states require the consent of all parties to a conversation before it may be recorded. Recording without mutual consent is both illegal and unethical in those jurisdictions. Elsewhere the issue is more complicated. In 1974, the American Bar Association (ABA) opined that surreptitiously recording a conversation without the knowledge or consent of all of the participants violated the ethical prohibition against engaging in conduct involving "dishonesty, fraud, deceit or misrepresentation." The ABA conceded, however, that law enforcement recording, conducted under judicial supervision, might breach no ethical standard. Reaction among the authorities responsible for regulation of the practice of law in the various states was mixed. In 2001, the ABA reversed its earlier opinion and announced that it no longer considered one-party consent recording per se unethical when it is otherwise lawful. Today, this is the view of a majority of the jurisdictions on record. A substantial number, however, disagree. An even greater number have yet to announce an opinion. An earlier version of this report once appeared as CRS Report 98-251. An unabridged version of this report is available with the footnotes and attachment as CRS Report R42650, Wiretapping, Tape Recorders, and Legal Ethics: An Overview of Questions Posed by Attorney Involvement in Secretly Recording Conversation.
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This report addresses the cyber-vulnerability of critical infrastructure industries which regularlyuse industrial control systems. Industrial control systems may be vulnerable to infiltration bydifferent routes, including wireless transmission, direct access to control system computers,exploitation of dial-up modems used for maintenance, or through the Internet. This report willspecifically discuss the potential for access to industrial control systems through the Internet. The vulnerability of U.S. critical infrastructure to cyber-attack and catastrophic failure was brought to light in 1997 in the report of the President's Commission on Critical InfrastructureProtection. (1) Among other concerns, the computersystems used to remotely control processequipment were highlighted as specific points of vulnerability. These systems were updated duringthe Y2K crisis, but their cyber-security generally has not been a high priority. The events ofSeptember 11, 2001 have heightened the public awareness of the nation's vulnerability to terroristattack, and a National Research Council report has identified "the potential for attack on controlsystems" as requiring "urgent attention." (2) Critical infrastructure is defined in the USA PATRIOT Act as those "systems and assets, whether physical or virtual, so vital to the United States that the incapacity or destruction of suchsystems and assets would have a debilitating impact on security, national economic security, nationalpublic health or safety, or any combination of those matters." (3) Several industry sectors consideredto be critical infrastructures use industrial control systems in their daily activities. These industriescould be significantly affected by a cyber-attack targeting industrial control systems such assupervisory control and data acquisition (SCADA) systems, distributed control systems, and others. The President's Commission on Critical Infrastructure Protection report stated, From the cyber perspective, SCADA systems offer some of the most attractive targets to disgruntled insiders and saboteurs intent on triggering a catastrophicevent. With the exponential growth of information system networks that interconnect the business,administrative, and operational systems, significant disruption would result if an intruder were ableto access a SCADA system and modify the data used for operational decisions, or modify programsthat control critical industry equipment or the data reported to controlcenters. (4) The most commonly discussed industrial control systems include supervisory control and dataacquisition (SCADA) systems and distributed control systems (DCS). (5) SCADA systems are oftenused for remote monitoring over a large geographic area and to transmit commands to remote assets,such as valves and switches. For example, they can be found in water utilities and oil pipelines,where they monitor flow rates and pressures. Based on the data that these systems provide, computerprograms or operators at a central control center balance the flow of material. Generally, SCADAsystems process little data internally, instead performing analysis in a more central location, but arethe primary conduits for raw data to and commands from a control center. They may be vulnerableto implantation of faulty data and to remote access through dial-up modems used for maintenance. Distributed control systems are process control systems, commonly deployed in a single manufacturing or production complex, characterized by a network of computers. DCS generallyprovide processed information to, or a series of commands from, a central location. For example,at a chemical plant, a DCS might simultaneously monitor the temperature of a series of reactors andcontrol the rate at which reactants are mixed together, while performing real time processoptimization and reporting the progress of the reaction. An attack targeting a DCS might causeextensive damage at a single facility, but might not affect more than the single site. These process control systems can be interconnected within a single industry as well. This might be the case in an infrastructure which both transports and processes material. As an example,the oil and gas infrastructures contain both processing and refining sites, as well as holding facilitiesand distribution systems. Refining and processing sites may utilize DCS in discrete locations. Thedistribution and holding facilities might be managed by a SCADA system which collected data fromand issued commands to different geographic sites from a single location. (6) Industrial control system technologies are often employed in critical infrastructure industries to allow a single control center to manage multiple sites. Industrial control systems were originallyimplemented as isolated, separate networks. (7) Theywere viewed as secure systems which protectedremote locations from being physically broken into and mistreated. For example, the establishmentof remote control systems in dams reportedly protected against unlawful release of the dammedwater, as no hand-operable valves and switches were accessible. (8) The networking of industrial control systems on a greater scale has led to increased synergy and efficiency, and, due to market needs (e.g. deregulated markets), real time information from thesesystems is increasingly important for commercial purposes. Consequently, industrial control systemsare becoming linked to corporate computer systems, potentially making them vulnerable to cyber-attack throughthe Internet. Original control systems were designed to be free standing networkswithout Internet access. Therefore, it has been necessary to add network access capabilities to theselegacy systems to integrate them into the corporate structure. This has created, in the worst cases,a labyrinth of connections which is perhaps not rigorously constructed for cyber-security or welldocumented. Many organizations, including the General Accounting Office, researchers at several Department of Energy National Laboratories, and private security and consulting companies, haveidentified systemic and specific security vulnerabilities in select process control systems. (9) Amongthese vulnerabilities are poor cyber-security practices, such as weak passwords, a lack of robustprotocols, and communication in clear text. While some vulnerabilities arise from the manner bywhich the process control system is operated, others are believed to be integral to the control systemconfiguration itself. Some industrial control systems, including legacy systems, are proprietary, and contain non-standard architectures and command syntax. This can be considered both an advantage and adisadvantage. Proprietary systems with esoteric command structures are often non-intuitive, andcould be difficult to operate by an untrained individual. Incorrect commands could cause no results,and may increase the probability that the intruder would be noticed and removed from the system.Additionally, different companies may have different command sets, even if they are both membersof the same industry, as their proprietary systems may have significantly different structures. Thus,if a hacker or terrorist successfully attacks one company, that experience may not be valuable for useat the next company. Others assert that many new control systems, as well as upgrades to legacysystems, are being assembled from commercial, off-the-shelf equipment and software, providingcommonalities across different industry sectors. They point to the needs of system maintenance andnew component integration as leading to similar control system architectures both within andbetween critical infrastructure sectors. By adopting such equipment and software, vulnerabilities thatare identified impact all sectors. The degree of integration between control system networks and publicly accessible networks is difficult to judge from the open literature. This makes assessment of the vulnerability of criticalinfrastructure industries from Internet based attack difficult to know with certainty. (10) Faced with anunclear risk, it may be difficult, from an industry perspective, to justify the additional costs ofupgrading privately-held industrial control systems to higher security standards. (11) Current off-the-shelf industrial control systems have been designed foroperational speed and functionality, ratherthan for secure operation, and therefore may not have a high degree of operational security. (12) Addition of security requirements may degrade the performance of these components belowoperating standards. Events have shown that utility control system networks may be vulnerable to cyber-based incidents. Computers at an inactive nuclear power plant in Ohio were infected by the Slammerworm in January 2003. The infection disabled some computer functionality, including monitoringsystems for portions of the power plant. (13) Also,it has been reported that other control systemcomputers have been compromised by other viruses. (14) Given the uncertain vulnerability level and the potential systemic weaknesses involved in current off-the-shelf technology, there appears to be little market incentive to directly increaseindustrial control systems security. Therefore the security systems for the corporate network, whichblock initial intrusion through the Internet, may be the sole planned protection for the industrialcontrol systems. Such an approach has been criticized, as while it may provide initial barriers tointrusion, it would not reduce any inherent vulnerabilities in the control system network. (15) Security analysts also contend that industrial control systems are less obscure now than when they were initially developed. Foreign utility companies increasingly use current commercial off-the-shelf industrialcontrol systems, increasing the international availability of systems and theirdocumentation. Due to the similarity between these systems and systems installed domestically,potential terrorists need not break into an American utility to test their plans. (16) Instead, preliminarytesting might be performed outside of the United States on equipment held in other countries. Some security analysts believe that the industrial control system vulnerability should be addressed before potentially catastrophic events occur, and that techniques for reducing thevulnerability are already known. They contend that the majority of attacks on industrial controlsystems will come through corporate networks, via the Internet. While standardized informationtechnology protection methods have not yet been developed specifically for industrial controlsystems, these analysts contend that if general network benchmark standards were uniformly appliedacross corporate networks, corporate networks vulnerability to intrusion could be reduced by 80-88%. (17) This would indirectly reduce the industrial controlsystems vulnerability to intrusion, asroutes through the corporate network would no longer be available. These benchmark standardsinclude disabling unneeded server functionality, patching known security flaws, and updatingprograms to the most recent version. Other security analysts claim that in addition to general network security, specific protection for industrial control systems must also be established. Such protection might be addressed bysuccessfully isolating the control system network from the corporate computer network or byimplementing stronger security measures at known junctions of the two networks. Such an effortmight significantly increase the difficulty of infiltrating the control system network from theInternet. (18) In contrast, control systems may have vulnerabilities unrelated to those associated with corporate networks, and may require more specific protection, including against attacks not transitingthe corporate network. (19) Protecting corporatenetworks from intrusion may not address enough ofthe vulnerable access routes into industrial control systems. Joe Weiss, Executive Consultant withKEMA Consulting, asserts that firewalls, intrusion detection, encryption, and other technology needto be developed specifically for control systems. (20) Some companies have taken aggressive steps to protect their industrial control systems, and arepossible examples for how secure industrial control systems can be established. (21) While mostsecurity experts agree that critical infrastructure industries which view secure industrial controlsystems as a priority can reduce vulnerabilities, some assert that most critical infrastructure industriesare not willing to voluntarily commit resources, time and effort into reducing these vulnerabilities. Stuart McClure, President and Chief Technical Officer of the security company Foundstone, claims,"[Industries] have fallen into the regulation trap. Unless the government regulates it, they're not yettaking [security] seriously." (22) Some critical infrastructure industry representatives are skeptical that a cyber-terror attackwould target industrial control systems. (23) Sincethere are no reported terrorist cyber-attacks ondomestic critical infrastructure industrial control systems which have caused significant, publiclyreported damage, even in cases where hackers have successfully broken into these systems, industryrepresentatives believe the cyber-threat to be low. Diane Van de Hei, executive director of theAssociation of Metropolitan Water Agencies and contact person for the water utility InformationSharing and Analysis Center (ISAC), was quoted as saying, "If we had so many dollars to spend ona water system, most of it would go to physical security." (24) Analysts have also doubted that terrorist groups will use cyber-attacks to affect critical infrastructure. They point to the lack of documented terrorism-related cyber-attacks on criticalinfrastructure as indicative of low threat probability. "It suggests that, as so many commentatorshave noted, that cyberterror or cyberattacks on infrastructure are an unlikely threat to the security ofthe United States." (25) Some critical infrastructure companies believe that the potential damage likely to be caused by a cyber-attack on control systems would be small and manageable through already existingprocedures. Since fluctuations and equipment failure are part of expected, normal business, plansand procedures for these naturally occurring events are in place. They assert that the damage causedby cyber-attack would be similar to that already routinely seen. (26) Some industry representatives emphasize that the unfamiliar and uncommon commands used in legacy industrial control systems will continue to provide as high a barrier to future destructiveattempts as it has in the past. (27) While utilityindustry leaders agree that they have been the target ofmillions of cyber-security incidents, some do not analyze the origin or method of attack. Will Evans,vice president of IT services at People's Energy Corp., reportedly claimed, "[A large utility] couldhave a million [intrusion] events that need to be analyzed. I don't think anybody has the capabilityto do that in-house." Utility industry representatives contend that the vast majority of computer intrusion events are searches for vulnerable computers in the corporate network by inexperienced hackers, and, of thedangerous minority actually performed by experienced crackers, many are focused on economicaspects of the corporate network rather than the industrial control systems network. (28) From theperspective of critical infrastructure industries, discontented employees who possess insideinformation about industrial control systems are a greater security risk than external attempts tobreach security. There is evidence that al Qaeda is interested in the vulnerabilities of the U.S. public and private utilities. The discovery in Afghanistan of a computer containing structural analysis programs fordams, combined with an increase in Web traffic relating to SCADA systems, (29) prompted theNational Infrastructure Protection Center (NIPC) to issue a warning information bulletin. (30) Ananalysis of cyber-attack data collected during the second half of 2001 showed that the corporatesystems of energy industry companies are attacked twice as often as other industries, and that a largenumber of these attacks originate from the Middle East. (31) Additionally, according to one expert,these statistics do not reflect intrusions directed at control systems which lack firewalls or intrusiondetection systems, resulting in an under-reporting of the actual number of attacks. (32) There have been examples of individuals specifically breaking into utility companies' control systems. The most notable event occurred in Maroochy Shire, Australia, where, in Spring, 2000, adiscontented former employee was able to remotely access the controls of a sewage plant anddischarge approximately 264,000 gallons of untreated sewage into the local environment. (33) In 1994,a hacker successfully broke into the computer system of the Salt River Project in Arizona and wasable to gain access to computers monitoring canals. (34) Another example, from March, 1997, occurredwhen a teenager in Worcester, MA was able to remotely disable part of the public telephoneswitching network, disrupting telephone service for 600 residents, including the fire department, andcausing a malfunction at the local regional airport. (35) Reportedly, an intrusion into the SCADAsystems of a global chemical company occurred where a former employee attempted to disablechemical operating systems at a production plant. (36) Often, it is difficult to assess from public reports to what degree a critical infrastructure industry has been breached. (37) For example, acyber-break-in at the California Independent System Operator(Cal-ISO), California's primary electric power grid operator, went undetected for 17 days in April,2001. Greg Fishman, a representative of Cal-ISO, reported the intruders "never really got close atall to our operational systems that run the grid." (38) It is not clear what information was compromisedduring the intrusion, who the perpetrators were, or what their goal in gaining access was. To date,there has been no indication that the perpetrators of this attack were able to access any sensitiveinformation or systems. The consequences of an attack on the industrial control systems of critical infrastructure couldvary widely. It is commonly assumed that a successful cyber-attack would cause few, if any,casualties, but might result in loss of infrastructure service while control was wrested from theattacker and damage repaired. For example, a successful cyber-attack on the public telephoneswitching network might deprive customers of telephone service while technicians reset and repairedthe switching network. An attack on a chemical or liquid natural gas facility's control systems mightlead to more widespread physical damage. Lower probability events include catastrophic infrastructure failure, where the failure of one part of the infrastructure leads to the failure of other parts, causing widespread effect. Such failuremight occur due to the synergistic effect of infrastructure industries on each other. A simple examplemight be an attack on electrical utilities where electricity distribution was disrupted; sewagetreatment plants and waterworks could also fail, as perhaps the turbines and other electricalapparatuses in these facilities shut down. On August 5, 2002, the faulty closure of an emergencyvalve at one of Singapore's two natural gas suppliers blocked the flow of natural gas to sevenelectrical power plants. As an immediate result, power levels dropped 30%, and even after reservepower was employed, there was still a 8% shortfall. The power outage lasted up to 90 minutes. (39) Several chemical production plants were forced to shutdown their facilities during the power outage,and required several days to restore full production. (40) Some experts warn of a cascade event, where a terrorist is able to manipulate control systems and cause catastrophic failure within an infrastructure. Cascade events can be very damaging,causing widespread utility outages. Twice in 1996, arcing between high voltage transmission linesand trees resulted in widespread power outages. On July 2, 1996, a cascade event left 2 millioncustomers in 11 states and 2 Canadian provinces without power. (41) Most service was restored within30 minutes. (42) On August 10, 1996, a similar eventcaused 7.5 million customers in seven westernstates and part of Canada to be without power for up to nine hours. (43) The August 2003 blackout of the northeastern United States and parts of Canada, also a cascade event, has been invoked as indicative of the potential effects a successful terrorist cyber-attack onelectrical utility control systems. (44) While it wasquickly determined that the power outage was notcaused by terrorism, (45) there were questionswhether control system failure, computer viruses orworms, or operator-error played roles in the outage. (46) It has been suggested by some that the Blasterworm, which had been contributing to congestion of the Internet, might have exacerbated theproblems faced by utilities leading up to the blackout event. (47) The scenario which causes the highest degree of concern among experts is the combined use of a cyber-attack on critical infrastructure in conjunction with a physical attack. (48) This use of cyber-terrorism could result in an amplification of the physicalattack's effects. An example of this mightbe a conventional bombing attack on a building combined with a temporary denial of electrical ortelephone service. The resulting degradation of emergency response, until back-up electrical orcommunication systems can be brought into place and used, could increase the number of casualtiesand public panic. Others believe that the consequences of a cyber-attack on critical infrastructure would be very limited, and that excessive focus has been given to an unsubstantiated terrorist threat. (49) Cyber-security experts who doubt the effectiveness of such an attack rangein opinion regarding an attack'simpact. Some believe that a cyber-attack on critical infrastructure control systems, while havingsome effect, would not be devastating, but rather only have minor impact. (50) For example, securitymanagers in some electric utilities reportedly believe that experience in dealing with natural disastersand power outages may translate well to recovering quickly from a cyber-attack. (51) Other believe thatthere could be significant impacts from a successful attack on control systems, but that such successwould be very unlikely. (52) Finally, some believethat while it is possible to use computers to generatehigh consequence attacks, it would be much more likely that a terrorist group would resort to asimpler conventional attack which would yield results of a similar magnitude. (53) The creation of the Department of Homeland Security has centralized within the Directorate of Information Analysis and Infrastructure Protection a number of offices related to criticalinfrastructure control system security: the Critical Infrastructure Assurance Office (CIAO), theNational Infrastructure Protection Center, the National Infrastructure Simulation and Analysis Center(NISAC), and part of the Department of Energy's Office of Energy Assurance. (54) CIAO and NIPC were created in response to Presidential Decision Directive No. 63, issued in 1998. (55) CIAO coordinated the federalgovernment's initiatives on critical infrastructure assuranceand promotes national outreach and awareness campaigns about critical infrastructure protection. NIPC was a national critical infrastructure threat assessment, warning, vulnerability, and lawenforcement investigation and response agency. Among other programs, NIPC developed theInfraGard program, which serves as a clearinghouse for information sharing and analysis formembers of critical infrastructure industries. NISAC was created in 2001 through the passage of the USA PATRIOT Act. It is charged to "serve as a source of national competence to address critical infrastructure protection and continuitythrough support for activities related to counterterrorism, threat assessment, and risk mitigation." (56) This center is to provide modeling and simulation capabilities for the analysis of criticalinfrastructures, including electricity, oil, and gas sectors. (57) It is located at Sandia NationalLaboratories and Los Alamos National Laboratory. (58) The Department of Homeland Security created a National Cyber Security Division, located in the Information Analysis and Infrastructure Protection Directorate, to identify, analyze, and reducecyber-threats and vulnerabilities; disseminate threat warning information; coordinate incidentresponse; and provide technical assistance in continuity of operations and recovery planning. (59) Thisdivision has the responsibility for implementing programs for research and development in cyber-security, usingexpertise from the Science and Technology Directorate to provide research anddevelopment functions and execution. The President's Critical Infrastructure Protection Board has released The National Strategy to Secure Cyberspace , in which a general strategic overview, specific recommendations and policies,and the rationale for these actions are presented. (60) This document addresses concerns regardingdigital control systems and SCADA networks, rates SCADA network security as a national priority,and recommends joint public/private efforts in discovering solutions to potential vulnerabilities. This strategy identifies the Department of Homeland Security, in coordination with other federalagencies, as the department responsible for developing best practices and new technologies toincrease SCADA security. Some cyber-security experts have criticized this plan, claiming thatvulnerabilities will remain because of its lack of enforcement regulations. (61) The Department of Energy's Office of Energy Assurance has also been involved in developing techniques to secure energy production and availability. (62) Part of this effort has been thedevelopment of "simple, common-sense approaches to improve the overall level of protection inSCADA and digital control networks." (63) Adocument describing a general approach to improvingcyber-security in SCADA systems has been released. (64) Department of Energy National Laboratories. The Department of Energy National Laboratories have developed a series of test bed facilities to testsecurity measures developed for critical infrastructure. The Idaho National Engineering andEnvironmental Laboratory, in conjunction with Sandia National Laboratory, are developing aSCADA test bed to help identify vulnerabilities and improve the security and stability of SCADAsystems. (65) This test bed is part of an integratedCritical Infrastructure Test Range, which includescyber security, wireless communications, power transmission, and physical security testbeds. (66) ThePacific Northwest National Laboratory has developed a Critical Infrastructure Protection AnalysisLaboratory where, among other things, the vulnerability of SCADA systems can be determined. (67) Research into advanced technologies is currently underway at Department of Energy laboratories to address process control system security. For example, Sandia National Laboratoryunder the Laboratory Directed Research and Development program has been developing securecontrol systems for the energy industry. (68) Research includes new information architectures,cryptographic methods, and information system security assessments. Much of this work arises fromneeds discovered through partnerships with systems manufacturers. While a prototype system todemonstrate proof of principle has been implemented at the Sandia National Solar Thermal TestFacility, this system has not been widely implemented in the field. (69) Similar security efforts, thoughless directly focused on industrial control systems, are being developed at both Lawrence LivermoreNational Laboratory and Los Alamos National Laboratory. The National Institute of Standards and Technology (NIST) has initiatives in industrial control system security. NIST, in conjunction with a number of industry groups, federal governmentagencies, and professional societies, have created the Process Control Security Requirements Forumto develop process control information security requirements. Through their Critical InfrastructureProtection program, the National Institute of Standards and Technology is developing informationsecurity requirements, best-practice guidelines, and test methods for the process control sector. (70) Scientists at NIST are also actively involved in many industry-standards forums. The Department of Defense, through the Combating Terrorism Technology Support program, provides support for the protection of infrastructure elements. As part of this program, encryptionalgorithms for SCADA systems are being developed and tested with the end goal of providingrecommendations to industry regarding their use. (71) The Federal Energy Regulatory Commission (FERC) is an independent regulatory agency within the Department of Energy that, among other duties, regulates interstate commerce in oil,natural gas, and electricity. FERC has published a final rule related to critical energy infrastructureinformation. In this rule, critical energy infrastructure information (CEII) is defined as: ... information about proposed or existing critical infrastructure that: (i) Relates to the production, generation, transportation, transmission, ordistribution of energy; (ii) Could be useful to a person in planning an attack on critical infrastructure;(iii) Is exempt from mandatory disclosure under the Freedom of Information Act, 5 U.S.C. 552; and(iv) Does not simply give the location of the criticalinfrastructure. (72) Whether or not information falls under the CEII categorization is initially determined by the companies submitting the information to FERC. Categorization of select information as CEII maylead to greater information sharing between industry and the federal government. The FERC has also published a notice of public rulemaking which includes cyber-security standards for the electric industry. (73) Thisproposed regulation would require the electric industry toself-certify that they are meeting minimum cyber-security standards. It has been reported that FERCwill likely adopt standards developed by the North American Electric Reliability Council in the finalversion of this regulation. (74) The final version ofthis regulation has not been issued. (75) Some industry groups have taken steps towards addressing control system security, generally as part of an overall cyber-security initiative. (76) Some groups have launched initiatives in developinginfrastructure security programs. (77) The NorthAmerican Electric Reliability Council has developeda set of minimum cyber-security standards for the electricity industry, as well as guidelines forsecuring remote access to critical electric infrastructure. (78) Another approach is to develop voluntary best-practices for process control system security. Several organizations are taking part in such initiatives. For example, the Instrument Society ofAmerica has formed a committee, ISA-SP99, to develop a series of reports on best-practices andprocedural improvements which would enhance control system security. (79) Similar efforts areunderway in other technical societies, including the Institute of Electrical and Electronics Engineersand the International Electrotechnical Commission, where working groups on process controlsystems and their security are established. Some industry groups have focused on developing near-term solutions to the legacy equipment security vulnerabilities. For example, the Gas Technology Institute has focused on developingcryptographic protection of SCADA communications and developing a mechanism for retrofittinglegacy equipment to handle these encrypted signals. (80) Other groups have increased outreach effortsto improve understanding of security issues relating to cybersecurity and process control systems. (81) The vulnerability of industrial control systems may be reduced through a range of federalactions. These include the development of standards, either voluntary or mandatory, forcybersecurity of control systems; identifying and addressing critical infrastructure interdependencies;developing encryption methods for control systems; identifying and establishing technologies toaddress existing vulnerabilities; funding long-term research into secure SCADA systems; providingfor free exchange of risk information between the federal government, private industry, and othercritical infrastructure sectors; and assessing federal activities in this area. The federal government could mandate and enforce a uniform security standard for cybersecurity of industrial control systems, or support the development of industry developed andbased standards. Because of the national importance of critical infrastructure systems, a uniformstandard might be developed, with the input of advocates, industries and the federal government,which would include the functionality necessary to protect industrial control systems, whileproviding for more secure operation. A voluntary, standards-based approach has been developed forserver operating systems with some success, and a similar mechanism might be used to developstandards for commercial off-the-shelf control systems. (82) Alternately, processes and specificationscurrently being developed through industry-led programs might be generalized across criticalinfrastructure industries and established as a voluntary standard. Critics of this approach cite themany different uses of industrial control systems in different industry sectors as making such astandard unwieldy. Some experts have expressed concerns that a mandated standard would be lesseffective than a voluntary standard, as solutions to new problems could not be implementedimmediately, but would wait for changes to the standard, and that such a standard may not beuniformly applicable across industry sectors. Others have stated that there is a need for federalrequirements to assure that appropriate attention is focused on process control system security. Identifying the dependencies between critical infrastructure sectors, the vulnerabilities that are present in information technologies in these sectors, and the possible cross-sectoral impacts of acontrol system attack may lead to a greater understanding of the scale of the control system threat. As shown by the August 2003 blackout, the loss of a single infrastructure sector, here the energysector, may have serious effects in other critical infrastructures, such as public health andtransportation. Both the Department of Homeland Security, in its role of protecting infrastructure,and the Department of Energy, in its role of ensuring a robust and reliable energy infrastructure,perform activities in determining sectoral dependencies and commonalities. Policymakers may wishto enhance current funding into SCADA security research, test bed modeling, or criticalinfrastructure vulnerability assessment to further clarify the current vulnerability. Another option would involve supporting encryption research to protect industrial control system data transfer. Encrypting the information transmitted between remote units and theircontrollers would inhibit inclusion of false information to and from industrial control systems. Current encryption technology may not be compatible due to the time required to process theencrypted data and the level of technology built into control system components. Industrial controlsystems have stringent timing requirements and tend to be built out of less computationally robustcomponents, which complicate the use of current encryption technologies. (83) While a prototypeencryption method for industrial control systems has been developed, it is still in the validationprocess (84) and is only recently being evaluated forimplementation in industry. (85) Further researchintoencryption techniques for these processes could provide efficient, market-driven technology forsecuring industrial control systems information. Some experts highlight that securing data transferdoes not assure the security of the control system itself. They assert that other routes of attack existthat do not rely on the security of the control system communications. Thus, securing thosecommunications, while lowering system vulnerability, may not be addressing the most likely threat. Further research and development into methods for retrofitting existing SCADA systems with more secure components or communications may be another method to reduce system vulnerability. This approach has been taken by researchers in both industry and federal government laboratories. While potentially addressing short term needs to reduce vulnerability, retrofit solutions are not likelyto solve inherent shortfalls in SCADA security especially with respect to the inclusion of COTSequipment potentially vulnerable to cyber attack. Critics of retrofit solutions cite high costs andpotential compatibility concerns as barriers to easy implementation of such solutions. A long term approach to limiting the vulnerability of SCADA systems is to provide further targeted investment into developing "next-generation" secure control systems. Development of asecure SCADA architecture may provide incentives to replace components in a secure manner duringthe normal replacement cycle, incrementally reducing the present vulnerability. While some arguesuch product research and development is a responsibility of private industry, others may assert thatcontrol system security is of national import, requiring enhanced federal investment. Several National Laboratories have developed complementary testbed facilities to investigate potential vulnerabilities and solutions to SCADA systems. Such testbed facilities could be used toevaluate and validate the security of commercial SCADA systems, act as a proving ground for newtechnologies, or be dedicated to the development of federal efforts in secure process control systems. The new FOIA exemptions created in the Homeland Security Act of 2002 ( P.L. 107-296 ) may provide a higher volume, freer exchange of information between the federal government andindustry, as industry may become more forthcoming about potential vulnerabilities. The CriticalEnergy Infrastructure Information category for electrical infrastructure information may provide amodel for how regulatory agencies might craft regulations protecting critical infrastructureinformation within a sector. Comments from various groups on the proposed implementation of theHomeland Security FOIA exemption have indicated that industry concern still remains over thepotential release of information given to the federal government by private industry. (86) Policymakersmay wish to inquire into whether vulnerabilities transmitted to the federal government are eventuallyreduced, and how the information being provided to the federal government is used. Policymakers may also wish to assess the effectiveness of the Department of Homeland Security in coordinating security enhancements to control systems, promoting government/industrypartnerships, and performing risk and vulnerability assessments. With the concentration ofpreviously existing agencies into the Directorate of Information Analysis and InfrastructureProtection, previous duplication of effort may be removed, but critics have suggested that difficultiesin integrating these agencies may lead to a reduction in effectiveness. Some policymakers haveexpressed concern that the priorities DHS have placed on physical and cyber-security are notappropriate for the risks involved. (87) Oversightof DHS's efforts to rectify this potential homelandsecurity vulnerability may provide insight into successful models used within critical infrastructuresectors which might be used across multiple sectors.
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Much of the U.S. critical infrastructure is potentially vulnerable to cyber-attack. Industrial control computer systems involved in this infrastructure are specific points of vulnerability, as cyber-security forthese systems has not been previously perceived as a high priority. Industry sectorspotentially affected by a cyber-attack on process control systems include the electrical, telephone,water, chemical, and energy sectors. The federal government has issued warnings regarding increases in terrorist interest in the cyber-security of industrial control systems, citing international terrorist organization interest incritical infrastructure and increases in cyber-attacks on critical infrastructure computer systems. Thepotential consequences of a successful cyber-attack on critical infrastructure industrial controlsystems range from a temporary loss of service to catastrophic infrastructure failure affectingmultiple states for an extended duration. The National Strategy for Securing Cyberspace , released in February 2003, contains a number of suggestions regarding security measures for control systems. A focus on the further integrationof public/private partnerships and information sharing is described, along with suggestions thatstandards for securing control systems be developed and implemented. The Homeland Security Act of 2002 ( P.L. 107-296 ) transferred and integrated several federal entities that play a role in cyber-security of control systems into the Department of HomelandSecurity. These entities include the Critical Infrastructure Assurance Office, the NationalInfrastructure Protection Center, the National Infrastructure Simulation and Analysis Center, andparts of the Department of Energy's Office of Energy Assurance. Additionally, the HomelandSecurity Act of 2002 created a new class of information, critical infrastructure information, whichcan be withheld from the public by the federal government. Efforts in increasing the cyber-security of control systems occur both at federal government facilities and, in critical infrastructure sectors, through industry groups. The Department of EnergyNational Laboratories, the Department of Defense, and the National Institute of Standards andTechnology all have programs to assess and ameliorate the cyber-vulnerabilities of control systems. Industry-based research into standards, best practices, and control system encryption is ongoing inthe natural gas and electricity sector. Possible policy options for congressional consideration include further development of uniform standards for infrastructure cyber-protection; growth in research into security methods for industrialcontrol systems; assessing the effectiveness of the new exemptions to the Freedom of InformationAct; and the integration of previous offices in the new Department of Homeland Security. This report will be updated as events warrant.
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The federal government is the largest buyer of goods and services in the world, and executive branch agencies—particularly the Department of Defense—make most of these purchases. Many (although not all) acquisitions by executive branch agencies are subject to the Federal Acquisition Regulation (FAR), which can make the FAR a topic of interest to Members and committees of Congress and their staff. In particular, Members, committees, and staff may find themselves considering or drafting legislation that would prompt amendment of the FAR to save money, promote transparency, or further other public policies; conducting oversight of executive agencies' performance in procuring goods and services, including their compliance with the FAR; and responding to questions from constituents regarding executive branch procurement activities. In addition, in 2012, the Defense Business Board recommended "zero-bas[ing]" the entire acquisition system, apparently including the FAR, to "restor[e] the management of the requirements, acquisition, and budget processes back to the state envisioned by the Packard Commission." The Packard Commission is the name commonly given to President Reagan's 1986 Blue Ribbon Commission on Defense. The commission is generally credited with seeking to "link and streamline" the requirements, acquisition, and budget processes, thereby "reducing complexities, regulations, and processes, and enhancing accountability as well as recruiting experienced personnel with strong management credentials." This report provides answers to 25 frequently asked questions regarding the FAR. These questions and their answers are organized into six broad categories, including (1) what the FAR is and what it covers; (2) promulgation of the FAR; (3) the relationship between the FAR and other authorities governing federal procurement (e.g., statutes, agency FAR supplements, other regulations, policies); (4) the FAR in relation to Congress and judicial and other tribunals; (5) the relationship between the FAR and federal procurement contracts; and (6) other topics. This section includes questions and answers that broadly address what the FAR is and what it covers, including where the text of the FAR can be found; what agencies are subject to the FAR; what purchases are subject to the FAR; and what transactions fall outside the FAR's coverage. The FAR is a regulation, codified in Parts 1 through 53 of Title 48 of the Code of Federal Regulations (C.F.R.). As is discussed in more detail below (see " What Does the FAR Cover? "), each part of the FAR, such as Part 37—Service Contracting, is divided into subparts (e.g., Subpart 37.1, Service Contracts—General). Subparts are divided into sections (FAR 37.113, Severance payments to foreign nationals), which may be divided into subsections (Section 37.113-2, Solicitation provision and contract clause). The FAR also contains standard solicitation provisions and contract clauses (Part 52) and forms (Part 53). The various agency FAR supplements, codified in Chapters 2 through 63 of Title 48, and the Cost Accounting Standards (CAS), codified in Chapter 99 of Title 48, are not part of the FAR, although they can play a significant role in the acquisition process. " What Is the Relationship Between the FAR and Agency FAR Supplements? ," below, discusses in more detail the relationship between the FAR and agency FAR supplements, such as the Defense Federal Acquisition Regulation Supplement (DFARS). The FAR is available in print from the Government Printing Office as part of the Code of Federal Regulations , or from private publishers. However, it is arguably most conveniently accessed online, where it is available in either PDF or HTML format, at https://www.acquisition.gov/?q=browsefar , or as Title 48 of the C.F.R. at http://ecfr.gpoaccess.gov/ , or at http://www.gpo.gov/fdsys/browse/collectionCfr.action?collectionCode=CFR . The FAR applies to certain purchases, discussed below (see " What Purchases Are Subject to the FAR? "), by executive branch agencies, which the FAR defines to mean executive department[s], ... military department[s], or any independent establishment[s] within the meaning of 5 U.S.C. 101, 102, and 104(1), respectively, and any wholly owned Government corporation within the meaning of 31 U.S.C. 9101. However, although the FAR applies to executive branch agencies, it does not necessarily apply to all executive branch agencies, or to all organizational components of a particular executive branch agency. Exceptions include, for example, the Federal Aviation Administration (FAA), which Congress has authorized to establish its own acquisition system, and the U.S. Mint. The FAR does not apply to legislative branch agencies or judicial branch agencies, although agencies in the other branches of government (or otherwise not subject to the FAR) may adopt the FAR as a matter of policy, or promulgate or otherwise be subject to requirements like those in the FAR. For example, the Library of Congress, a legislative branch agency, has stated that it is Library policy to follow the FAR, unless it is determined that a deviation would "be in the best interest of the Library." See also " Could an Agency or Transaction Not Subject to the FAR Be Subject to Requirements Like Those in the FAR? ," below. The FAR does not directly regulate federal contractors or would-be federal contractors, although such vendors are affected by the application of the FAR's definitions, policies, procedures, and requirements by contracting officers. For example, the FAR provides policies and procedures related to types of contracts, subcontracting, contract termination, and payments to contractors. See also " What Is the Relationship Between the FAR and a Federal Contract? " and " What Happens If Required Contract Clauses Are Not Included in a Particular Contract? ," below. As noted previously (see " What Agencies Are Subject to the FAR? "), executive branch agencies are generally subject to the FAR when making certain purchases. Namely, the FAR applies to "acquisitions" of "supplies" (or goods) and "services" with appropriated funds by most (although not all) executive branch agencies. Each of these terms—acquisitions, appropriated funds, supplies, and services—has a specific meaning for purposes of the FAR, which can influence whether the FAR is applicable to particular transactions. For purposes of the FAR, "acquisition" means: the acquiring by contract with appropriated funds of supplies or services (including construction) by and for the use of the Federal Government through purchase or lease, whether the supplies or services are already in existence or must be created, developed, demonstrated, and evaluated. Acquisition begins at the point when agency needs are established and includes the description of requirements to satisfy agency needs, solicitation and selection of sources, award of contracts, contract financing, contract performance, contract administration, and those technical and management functions directly related to the process of fulfilling agency needs by contract. Appropriated funds are "funds paid out of the United States Treasury" that are charged "to an appropriation provided by or derived from an act of Congress." An appropriation is "[a]uthority given to federal agencies to incur obligations and to make payments from Treasury for specified purposes." "Supplies" means: all property except land or interest in land. It includes (but is not limited to) public works, buildings, and facilities; ships, floating equipment, and vessels of every character, type, and description, together with parts and accessories; aircraft and aircraft parts, accessories, and equipment; machine tools; and the alteration or installation of any of the foregoing. Other examples of supplies include office furniture, cameras and audio-visual equipment, information technology and communications equipment, cleaning products and tools, uniforms, and musical instruments. Generally, "services" refers to tasks performed by a contractor. More specifically, a "service contract" means "a contract that directly engages the time and effort of a contractor whose primary purpose is to perform an identifiable task rather than to furnish an end item of supply." The FAR identifies the following as examples of areas in which service contracts may be found: (1) [m]aintenance, overhaul, repair, servicing, rehabilitation, salvage, modernization, or modification of supplies, systems, or equipment. (2) [r]outine recurring maintenance of real property. (3) [h]ousekeeping and base services. (4) [a]dvisory and assistance services. (5) [o]peration of Government-owned equipment, real property, and systems. (6) [c]ommunications services. (7) [a]rchitect-[e]ngineering …. (8) [t]ransportation and related services …. (9) [r]esearch and development. Certain transactions, by their nature, are not subject to the FAR. Notable examples of such transactions are any agency contract or agreement that is not a procurement contract (i.e., not a contract that uses appropriated funds to acquire property or services for the direct use of the United States), including "other transactions" (i.e., non-procurement contracts that authorized agencies may use for research and/or development of prototypes); grants and cooperative agreements; contracts with third parties entered into by persons using federal funds from a grant, cooperative agreement, or other federal financial assistance; purchases or leases of real property; and transactions where Congress has authorized a government entity to acquire goods or services "notwithstanding any other provision of law." Subcontracts under federal contracts (i.e., contracts with third parties entered into by federal contractors) are also not subject to the FAR. In some cases, the FAR requires agencies to include terms in their prime contracts obligating their contractors to "flow down" certain requirements to subcontractors, so that subcontractors may be subject to certain requirements like those in the FAR as terms of their contracts. However, not all requirements flow down, and certain FAR provisions that pertain primarily to the conduct of procurements by executive branch agencies are inapplicable to subcontractors. For example, although federal agencies are generally required to provide for "full and open competition" in the selection of contractors, agency contractors are generally not required to provide for "full and open competition" in the selection of subcontractors. The various parts of the FAR contain somewhat different types of information, as illustrated below. In particular, Parts 1 through 51 establish policies, requirements, exceptions, practices, and procedures to guide members of the acquisition workforce in performing their responsibilities, while Parts 52 and 53 provide standard solicitation and contract clauses and forms. In addition, while much of the FAR is arguably process oriented (e.g., specifying how agencies may obtain full and open competition), the opening sections of the FAR articulate "guiding principles" for the federal acquisition system that arguably inform all other sections of the FAR and federal procurement generally (e.g., satisfying the customer, minimizing administrative operating costs). Contracting officers and other members of the acquisition workforce rely on the FAR for guidance on a wide range of topics, including acquisition planning, publicizing contract actions, required sources of supplies and services, and types of contracts. Additionally, the FAR provides definitions of words and terms used in government procurement. Depending upon the topic, the FAR may provide contracting officers with the government's basic policy, any requirements that agencies must meet, and any exceptions to these requirements. For example, Subpart 6.1 of the FAR articulates that, as a matter of policy, "contracting officers shall promote and provide for full and open competition in soliciting offers and awarding Government contracts," and identifies acceptable procedures for full and open competition (e.g., sealed bidding, competitive proposals). Subpart 6.3, in turn, identifies the circumstances in which other than full and open competition is permitted (e.g., only one responsible source, urgent and compelling circumstances). It also specifies the procedures and requirements for using other than full and open competition (e.g., contracting officers are generally required to justify their decision to use other than full and open competition, and obtain approval from a higher-ranking agency official). In other cases, the FAR articulates general standards that agencies are to consider in making certain determinations, or the grounds upon which agencies may take certain actions. Thus, Part 9 of the FAR—which addresses "contractor qualifications"—specifies the "general standards" that contracting officers must consider when determining whether prospective contractors are responsible. It similarly describes the grounds upon which agency suspension and debarment officials may exclude persons from federal contracting for a temporary or fixed period. Other provisions of Part 9 describe how contracting officers may (or, in some cases, must) obtain information for use in making determinations regarding contractor qualifications (e.g., preaward surveys, the Federal Awardee Performance and Integrity Information System [FAPIIS], and the System for Award Management [SAM]). Yet other provisions articulate the responsibilities of various agency personnel in administering the contract. Contract administration may include a variety of tasks and responsibilities depending on, for example, the type of contract and the goods or services acquired. Part 42 of the FAR provides guidance for contracting officers and other members of the acquisition team regarding audits, postaward orientations for contractors, production surveillance and reporting, and collection of contractor performance information, among other things. Additionally, a detailed list of 71 specific contract administration functions may be found in Section 42.302(a), which is to be used by the contract administration officer (CAO). Parts 52 and 53 differ from the other parts of the FAR in that they provide agencies with standard provisions and clauses to be included, or incorporated by reference, in the solicitation or contract, as well as forms for use during the acquisition process. Part 52 contains solicitation provisions and contract clauses prescribed elsewhere in the FAR. Each provision and clause has its own unique identification number. For example, the following provision is included in solicitations that involve an Office of Management and Budget (OMB) Circular A-76 standard competition: (a) This solicitation is part of a standard competition under Office of Management and Budget Circular No. A-76 (Revised), Performance of Commercial Activities, dated May 29, 2003 (hereafter "the Circular"), to determine whether to accomplish the specified work under contract or by Government performance. (b) The Government will evaluate private sector offers, the agency tender, and public reimbursable tenders, as provided in this solicitation and the Circular. (c) A performance decision resulting from this standard competition will be publicly announced in accordance with the Circular. If the performance decision favors a private sector offeror, a contract will be awarded. If the performance decision favors an agency or a public reimbursable tender, the Contracting Officer shall establish, respectively, either a Most Efficient Organization letter of obligation or a fee-for-service agreement, as those terms are defined in the Circular. (d) As provided in the Circular, directly interested parties may file contests, which are governed by the procedures in Federal Acquisition Regulation 33.103. Until resolution of any contest, or the expiration of the time for filing a contest, only legal agents for directly interested parties shall have access to the certified standard competition form, the agency tender, and public reimbursable tenders. Part 53 contains standard, optional, and agency-prescribed acquisition forms, such as Standard Form 30, "Amendment of Solicitation/Modification of Contract"; Optional Form 17, "Offer Label"; and DOD Form DD 254, "Contract Security Classification Specification." In addition to providing procedures and requirements that, collectively, make up the procurement process, discussed above, the FAR also articulates guiding principles for the federal acquisition system (which includes performance standards), and describes the federal acquisition team and its roles and responsibilities. According to the FAR, the overarching vision of the acquisition system "is to deliver on a timely basis the best value product or service to the customer, while maintaining the public's trust and fulfilling public policy objectives." In brief, the four performance standards are: (a) [s]atisfy the customer in terms of cost, quality, and timeliness of the delivered product or service ...; (b) [m]inimize administrative operating costs; (c) [c]onduct business with integrity, fairness, and openness; and (d) [f]ulfill public policy objectives. Agency personnel—including "representatives of the technical, supply, and procurement communities" and "the customers they serve"—and contractors make up the acquisition team. Government members of the team "must be empowered to make acquisition decisions within their areas of responsibility … [possess] the authority to make decisions … and be prepared to perform the functions and duties assigned." The contractor is also encouraged to be prepared for performance of the contract. The questions and answers in this section address the promulgation of the FAR, including the origins of the FAR; the process by which the FAR is amended; who typically promulgates regulations amending the FAR; the roles of the Office of Federal Procurement Policy (OFPP) and the Office of Management and Budget (OMB) in revising and implementing the FAR; and how long it generally takes to amend the FAR. Prior to the establishment of the FAR system and the initial publication of the FAR, two primary procurement regulations existed: the Federal Procurement Regulations (FPR) and the Defense Acquisition Regulation (DAR). Generally, the FPR applied to civilian agencies and the DAR applied to the Department of Defense (DOD) and its components, although the then-Atomic Energy Commission (AEC), Central Intelligence Agency (CIA), National Aeronautics and Space Administration (NASA), Tennessee Valley Authority (TVA), and Bonneville Power Administration, among others, each had "semiautonomous procurement regulations." The proliferation of agency procurement regulations was such that, in its 1972 report, the Commission on Government Procurement stated that it had found "a burdensome mass and maze of procurement and procurement-related regulations" within the federal government, and "no effective overall system for coordinating, controlling, and standardizing regulations." The commission's report provided an impetus for bringing order to the "mass and maze" of procurement regulations. Notably, Congress enacted the Office of Federal Procurement Policy Act Amendments of 1979 ( P.L. 96-83 ), which amended the Office of Federal Procurement Policy Act ( P.L. 93-400 ) to authorize the Administrator of the Office of Federal Procurement Policy (OFPP), with the concurrence of the Director of the Office of Management and Budget (OMB), to "issue policy directives … for the purpose of promoting the development and implementation of the uniform procurement system." Subsequently, OFPP released Policy Letter 80-5. This document effectively established the "Federal Acquisition Regulation System" and stated that the system would include, among other things, "[a] single Federal Acquisition Regulation (FAR), to be issued jointly by the General Services Administration, the Department of Defense, and the National Aeronautics and Space Administration, pursuant to their respective authorities" under the Federal Property and Administrative Services Act, the Armed Services Procurement Act, and the National Aeronautics and Space Act. The FAR was published initially on September 19, 1983, and took effect on October 1, 1984. It has been periodically amended since then, as discussed below (see " Who Typically Promulgates Regulations Amending the FAR? " and " How Is the FAR Amended? "). The FAR was initially promulgated—and has subsequently been amended—using the same rulemaking procedures used in promulgating other regulations. In short, the Department of Defense (DOD), the General Services Administration (GSA), and the National Aeronautics and Space Administration (NASA), acting on behalf of the Federal Acquisition Regulatory Council (FAR Council), or the Administrator of the Office of Federal Procurement Policy (OFPP), as discussed below (see " Who Typically Promulgates Regulations Amending the FAR? "), issue proposed and final rules amending the FAR under the "notice-and-comment" procedures of the Administrative Procedure Act (APA). The APA established four basic requirements agencies must follow when issuing rules using notice-and-comment, or informal, rulemaking. These four steps are 1. the publication of a proposed rule in the Federal Register ; 2. the opportunity for interested persons to submit comments on the proposed rule; 3. publication of a final rule that includes a "concise general statement" of the "basis and purpose" of the rule; and 4. a 30-day waiting period after the final rule is published in the Federal Register before the rule can take effect. If necessary, agencies can invoke a "good cause" exception to some of these requirements. One particular application of the "good cause" exception is the use of interim final rulemaking. If an agency finds that notice and comment would be "impracticable, unnecessary, or contrary to the public interest," the agency may issue a rule without prior notice and comment and instead take post-promulgation comments. The agency may choose to revise the rule in light of the post-promulgation comments it receives. In addition to the APA, there are a number of executive orders and other statutes that may be applicable to the rulemaking process (for example, Executive Order 12866, the Regulatory Flexibility Act, the Paperwork Reduction Act, the Unfunded Mandates Act, and the Congressional Review Act all have additional requirements agencies must follow when promulgating rules). The Federal Register notices proposing or announcing amendments to the FAR are jointly issued by the Department of Defense (DOD), the General Services Administration (GSA), and the National Aeronautics and Space Administration (NASA). These three agencies issue the Federal Register notices, in part, because federal statutes and regulations task the heads of these agencies with "jointly issu[ing] and maintain[ing] … a single Government-wide procurement regulation, to be known as the Federal Acquisition Regulation." However, the amendments proposed and announced by DOD, GSA, and NASA have been arrived at by means of and with the concurrence of the Federal Acquisition Regulatory Council (FAR Council). This council—which consists of the Administrator of OFPP, the Secretary of Defense, the Administrator of National Aeronautics and Space, and the Administrator of General Services, or their designees (see " What Roles Do OFPP and OMB Play in Revising and Implementing the FAR? ") —is also tasked by statute with certain responsibilities as to the FAR. Specifically, the council is to "assist in the direction and coordination of Government-wide procurement policy and Government-wide procurement regulatory activities in the Federal Government," as well as "manage, coordinate, control, and monitor the maintenance of, issuance of, and changes in, the Federal Acquisition Regulation." In practice, the FAR Council operates by referring potential changes to the FAR to one or more standing "FAR teams," each of which is responsible for maintaining specific parts of the FAR. Each team is created by the FAR Council, and is composed of representatives from military and civilian agencies and advisory representatives from OFPP. The FAR teams are directed by the Civilian Agency Acquisition Council (CAAC) and the Defense Acquisition Regulations Council (DAR Council), and their activities are coordinated to ensure agreement and cooperation between civilian and defense acquisition personnel. The relevant FAR team drafts and submits potential FAR amendments to the CAAC and the DAR Council for review. After the councils have reviewed a potential FAR amendment, they submit it to OFPP and OIRA for additional review. These are then sent to the FAR signatories within GSA, DOD, and NASA for approval before being published as proposed, interim final, or final rules in the Federal Register . The Administrator of OFPP is also authorized to amend the FAR on his or her own if he or she determines that GSA, DOD, and NASA "are unable to agree on or fail to issue Government-wide regulations." In practice, the Administrator of OFPP appears to have seldom exercised this authority after the initial promulgation of the FAR. However, the Administrator has periodically issued policy letters and notices pertaining to federal procurement, as discussed below (see " Does the FAR Include All the Government's Procurement Policies? "). Congress does not itself amend the FAR, although it could enact legislation that could prompt the executive branch to amend the FAR. See " What Can Congress Do to Prompt Amendment of the FAR? ," below. The Office of Federal Procurement Policy (OFPP) provides overall direction for the government-wide procurement policies, regulations, procedures, and forms for executive agency acquisitions that make up the FAR. The Administrator for Federal Procurement Policy is responsible for directing the development of the procurement policies that are implemented, in part, by the FAR. The Administrator also establishes procedures to ensure that executive agencies are complying with the FAR. In addition, the Administrator serves as the chair of the Federal Acquisition Regulatory Council (FAR Council), which "assist[s] in the direction and coordination of Government-wide procurement policy and Government-wide procurement regulatory activities." The Secretary of Defense, Administrator of the National Aeronautics and Space Administration (NASA), and Administrator of the General Services Administration (GSA) are the other members of the FAR Council. In the event that these three members are unable to reach agreement regarding revisions to the FAR, the Administrator of OFPP has the authority to prescribe certain revisions without their concurrence, as discussed above (see " Who Typically Promulgates Regulations Amending the FAR? "). The Office of Management and Budget (OMB) provides oversight and review of proposed changes and amendments to the FAR. These responsibilities are largely carried out by OMB's Office of Information and Regulatory Affairs (OIRA). Rules amending the FAR are subject to the same rulemaking requirements that are applicable to executive agencies, which typically include review by OIRA. Both OFPP and OIRA review proposed changes to the FAR to ensure that they are consistent with the law and policies of the Administration. The Administrator of OFPP, in concurrence with the Director of OMB, may also deny or rescind any government-wide regulation or final rule of any executive agency relating to procurement if the Administrator determines that the regulation or rule is inconsistent with the policies, regulations, or procedures issued pursuant to the FAR. Depending upon how the regulation is promulgated (see " How Is the FAR Amended? "), the number of comments received upon a proposed change, and other factors, the process of amending the FAR can take anywhere from months to years (and, in some cases, a change is proposed, but not finalized). The FAR amendment could potentially take longer than any period prescribed in statute for the amendment, where amendment is required by statute. However, rules generally have the force of law even if they are enacted after any statutory deadline for their promulgation. Moreover, while agencies could potentially be compelled to take action in certain circumstances if they have "unreasonably delayed," they have seldom, if ever, been compelled to issue procurement regulations. This is, in part, because congressional indications of how quickly an agency should proceed are only one factor in determining whether a delay in rulemaking is unreasonable and agency action should be compelled. Other factors include (1) whether a danger to human health is implicated by the delay; (2) the agency's competing priorities; (3) the interests prejudiced by the delay; and (4) whether the agency has treated the present party disparately from others. Certain of these factors (e.g., danger to human health, disparate treatment) would seldom be implicated in a procurement context. This section addresses the relationship between the FAR and other authorities governing federal procurement, including statutes, agency FAR supplements, other regulations, and executive branch policies and guidance. In addition to the FAR, there are a number of statutes that, directly or indirectly, address the acquisition of goods and services by executive branch agencies. The primary statutes governing federal procurement are the codifications in Titles 10 and 41 of the United States Code of the Armed Services Procurement Act and the Federal Property and Administrative Services Act, which, respectively, govern the procurements of defense and civilian agencies. However, a number of other statutes also apply, including the Anti-Kickback Act; Brooks Act of 1972, as amended; Buy American Act; Buy Indian Act; Contract Disputes Act; Contract Work Hours and Safety Standards Act; Davis-Bacon Act; Defense Production Act; Economy Act; Federal Activities Inventory Reform (FAIR) Act; Miller Act; Office of Federal Procurement Policy Act; Prompt Payment Act; Service Contract Act; Small Business Act; Trade Agreements Act; Truth in Negotiations Act; and Walsh-Healy Public Contracts Act. In addition, there are a number of provisions within other statutes (e.g., national defense authorizations acts, appropriations acts) that address procurement. The FAR implements many such statutory provisions, although, in some cases, other agency regulations may also implement particular statutory provisions (e.g., the Small Business Act), and the FAR must "conform" to the non-procurement regulations of other agencies (see below " What Is the Relationship Between the FAR and Other Regulations (i.e., Non-FAR Supplements)? "). However, there are some procurement-related provisions in statute—especially in permanent provisions of appropriations laws —that are not reflected in the FAR or the agency FAR supplements discussed below (see " What Is the Relationship Between the FAR and Agency FAR Supplements? "). These include, for example, statutory grounds for debarment, authorization to enter noncompetitive contracts related to hazardous fuels reduction activities, and certain restrictions upon the purchase of incandescent lamps. On the other hand, because certain statutes grant the executive branch broad discretion to regulate federal contracting, there are provisions in the FAR that do not have a direct counterpart in federal statute. Examples include the grounds for administrative debarment and suspension, the requirement that contractors disclose "credible evidence" of certain offenses to federal officials, and the procedures surrounding the government's termination of contracts for convenience or default. Often the FAR provisions without direct statutory counterparts have developed in response to executive orders; judicial or other decisions; or policy recommendations. The FAR expressly authorizes agency heads to issue agency-specific procurement regulations that implement or supplement the FAR. These agency-specific regulations are codified in Title 48 of the Code of Federal Regulations , immediately following the FAR. A well-known example is the Department of Defense's (DOD's) Defense Federal Acquisition Regulation Supplement (DFARS), which is found in chapter 2 of Title 48, Code of Federal Regulations . There is a common misperception that agency FAR supplements differ significantly from the FAR and essentially create agency-unique procurement structures. This is generally not the case, particularly when a statute does not impose or authorize unique procurement requirements for an agency. Rather, absent agency-specific statutory requirements, agency-specific regulations may only be issued when necessary to implement FAR policies and procedures, or to supplement the FAR to meet the agency's specific needs. Further, the regulations may not conflict or be inconsistent with the FAR, except as required by law or if the agency has used an authorized deviation (see " May Agencies Deviate from the FAR? "). The FAR contains requirements that agencies must follow when promulgating agency-specific regulations. They include providing notice and comment in the Federal Register when required (e.g., if the regulations have a significant cost or administrative impact on contractors or offerors). Additionally, agencies must comply with such federal laws as the Paperwork Reduction Act and Regulatory Flexibility Act. See " How Is the FAR Amended? ," above. Although the FAR and any agency FAR supplements, discussed above (see " What Is the Relationship Between the FAR and Agency FAR Supplements? "), are intended to guide executive agencies in acquiring goods and services, they may not be the only regulations to address particular procurement-related topics. For example, regulations promulgated by the Department of Energy codified in Title 10 of the Code of Federal Regulations discuss the award and administration of energy savings performance contracts by federal agencies. These long-term contracts—which provide for the contractor to incur the costs of implementing energy savings measures in exchange for a share of any energy savings directly resulting from the measures—are also discussed in certain agency FAR supplements. However, Title 10 expressly provides that: [t]he provisions of this subpart are controlling with regard to energy savings performance contracts notwithstanding any conflicting provisions of the Federal Acquisition Regulation and related Federal agency regulations. Other agency regulations directly or indirectly pertaining to federal procurement include those in Titles 13, 28, 29, and 41 of the Code of Federal Regulations , which, respectively, discuss contracting with small businesses; Federal Prison Industries/UNICOR; the Davis-Bacon and Service Contract Acts, and certain other labor provisions; and AbilityOne and contractors' anti-discrimination and affirmative action obligations. Depending upon the requirements of the underlying statute and, particularly, whom this statute charges with its implementation, the FAR provisions may need to "conform" to the provisions of another agency's regulations, or the FAR and any agency regulations may be issued with the "concurrence" of all agencies involved. Various procurement policies, requirements, and guidance are issued by OFPP or OMB as circulars, guides, memoranda, and policy letters. Some of these documents supplement material found in the FAR, while others cover subjects or issues not found in the FAR. For example, Policy Letter 11-01, "Performance of Inherently Governmental and Critical Functions," addresses a topic also addressed in the FAR. Policy Letter 11-01 provides specific guidance regarding how agencies are to manage the performance of inherently governmental and other functions, while Subpart 7.5 of the FAR lists examples of functions that are considered to be inherently governmental, or that "may approach being in that category because of the nature of the function, the manner in which the contractor performs the contract, or the manner in which the Government administers contractor performance." In contrast, other procurement topics are addressed by OFPP memoranda, but not covered in the FAR. Examples include Federal Activities Inventory Reform (FAIR) Act inventories, service contract inventories, and the quality of federal procurement data. This section includes questions and answers that address what Congress can do to prompt amendment of the FAR; what Congress can do if it disapproves of a potential amendment to the FAR; and the deference given to FAR provisions by judicial and other tribunals. As noted previously (see " Who Typically Promulgates Regulations Amending the FAR? "), Congress does not itself amend the FAR. However, Congress may prompt the executive branch to amend the FAR by doing one of two things. In some cases, Congress effectively prompts amendment of the FAR by enacting or amending a law implemented, in part, through the FAR. This law need not mention the FAR, or amendment of the FAR, for an amendment to ensue. In other cases, Congress explicitly directs that the FAR be amended. Sometimes, Congress also specifies that the FAR Council should make this amendment, or the time frame within which the amendment should be made (although not all FAR amendments required by Congress are made within the prescribed time frame, as discussed above, " How Long Does It Take to Amend the FAR? "). The first approach appears to be more common in situations where procurement or other statutes directly address the topic of the legislation, while the second approach tends to be used in situations where the FAR addresses topics not directly addressed in statute (see " What Is the Relationship Between the FAR and Procurement or Other Statutes? "). However, as discussed previously (see " Who Typically Promulgates Regulations Amending the FAR? "), the FAR Council and OFPP may also amend the FAR without the enactment of procurement-related legislation or a congressional directive to do so. Some FAR amendments are initiated by the FAR Council, in particular, in response to policy concerns or litigation. In other cases, the FAR Council amends the FAR in response to an executive order directing the amendment of the FAR, or otherwise addressing procurement matters. Thus, committees and Members of Congress could also encourage the FAR Council or OFPP to use its authority to amend the FAR, or encourage the President to issue an executive order, provided that the proposed changes are within their authority. In certain circumstances, Congress may have concerns about a proposed or final amendment to the FAR, particularly one which may have resulted from executive branch action without express statutory authorization. Members of Congress may make such concerns known to the executive branch informally (e.g., via letters), or through the exercise of oversight, in the hope of prompting the abandonment or modification of the provisions in question. In some cases, however, Congress may also enact legislation that effectively or expressly forecloses certain amendments to the FAR. For example, Congress could enact legislation whose requirements would be inconsistent with certain potential amendments to the FAR, as happened in 2008, when Congress required that contracts for commercial items or performed overseas be subject to any "mandatory disclosure rule" promulgated by the FAR Council. Congress could also enact legislation that bars agencies from imposing certain requirements on contractors, or from using appropriated funds to implement specific rules, regulations, or executive orders pertaining to contract-related matters. In addition, the Congressional Review Act (CRA) (5 U.S.C. §§801-808) provides Congress with the opportunity to overturn a final rule, including a rule that would amend the FAR, through the enactment of a joint resolution of disapproval. If passed by Congress and signed into law by the President, a joint resolution of disapproval results in the rule having no "force or effect." Enacted in March 1996 as part of the Small Business Regulatory Enforcement Fairness Act (SBREFA) ( P.L. 104-121 ), the CRA contains expedited procedures for congressional consideration of such joint resolutions of disapproval. Like other regulations, FAR provisions represent agencies' constructions of the statutes which they implement. As such, judicial and other tribunals generally review the provisions of the FAR in light of Chevron, USA v. Natural Resources Defense Council in determining whether these interpretations are entitled to deference (commonly known as "Chevron deference"). In Chevron , the Supreme Court articulated a two-part test for review of an agency's construction of a statute which it administers: (1) Has Congress directly spoken to the precise question at issue, and (2) If not, is the agency's reasonable interpretation of the statute consistent with the purposes of the statute? "[I]f the statute speaks clearly 'to the precise question at issue,'" the tribunal "must give effect to the unambiguously expressed intent of Congress," regardless of what the agency regulation provides. However, where "the statute is silent or ambiguous with respect to the specific issue," the tribunal "must sustain the [a]gency's interpretation if it is 'based on a permissible construction' of the Act." Over the years, certain FAR provisions have been upheld under Chevron on the grounds that Congress has not spoken directly to the precise question at issue, and the agency's interpretation is reasonable and consistent with the purposes of the underlying statute. However, other provisions have been found either to be contrary to the intent of Congress, as "unambiguously expressed" in statute; or to be based on an impermissible construction of the underlying statute. These provisions tend to be amended to conform to the underlying statute (although in some cases, the underlying statute has been amended to support a long-standing agency interpretation). In contrast, individual agency interpretations of the FAR, issued in guidance or other documents, are not entitled to Chevron deference, although they may receive a lesser degree of deference. The extent of such deference is generally "understood to vary with circumstances," such as "the degree of the agency's care, its consistency, formality, and relative expertness, and … the persuasiveness of the agency's position," as well as the "writer's thoroughness, logic, and expertise, its fit with prior interpretations, and any other source of weight." This section includes questions and answers addressing the relationship between the FAR and a federal contract; whether FAR amendments apply to pre-existing contracts; and what happens if a contract clause which is required by the FAR is not included in a particular contract. The FAR applies only to federal agencies, while the contract applies to both the agency and the contractor. Thus, it is the provisions in the contract, not those in the FAR, that bind the contractor, although contract terms required by the FAR may be read into contracts which lack them in certain circumstances (see " What Happens If Required Contract Clauses Are Not Included in a Particular Contract? "). While the FAR contains many standard terms and clauses, the details and specifics are left to the individual contract. For this reason, the drafting that occurs for each contract can be highly important. The interaction between the FAR and the contract is exemplified by the treatment of economic price adjustments. An economic price adjustment provides for the upward or downward revision of prices in a contract if certain conditions occur. The FAR provides that there are three general types of economic price adjustments: those based on established prices; those based on actual costs of labor or material; and those based on cost indexes of labor or material. When one of these price adjustments is to be used, the contract will then be drafted to address the specifics, such as identifying the events that will trigger the price adjustment, identifying the applicable indexes or established prices, and establishing the base levels. Importantly, while courts and other tribunals will generally interpret a statute or regulation, such as the FAR, by looking to its plain meaning, and not the drafters' intent, the intent of the parties to a contract could be found to prevail over its plain text in certain cases (e.g., other provisions of the contract evidence that the contract's language on a particular issue does not reflect their intentions). In addition, the enforcement of specific provisions of a contract could potentially be waived—or relinquished—by a party to the contract. Amendments to the FAR generally apply only to contracts entered into on or after the date of the amendment, not to pre-existing contracts (i.e., contracts whose terms have already been agreed upon). The FAR itself characterizes this as a "convention." However, this convention is intended to shield the government from liability for breach of contract, which it could potentially incur were it to unilaterally amend the terms of an existing contract. Moreover, when the FAR change is prompted by a statute, this convention also reflects the fundamental canon of statutory interpretation that laws will not be given retroactive effect unless there is clear congressional intent to the contrary. A procurement-related statute could potentially be found to have retroactive effect if it purported to alter the parties' obligations under a contract whose terms had been agreed upon prior to the statute's enactment. Because the standard contract clauses are designed, in part, to protect the government's interests in the performance of the contract, the FAR generally requires that some variant of these clauses be either included or incorporated by reference in agency contracts. However, agencies have sometimes awarded contracts that lack a required clause, prompting questions about whether the requirements governed by that clause apply. In certain circumstances, the courts and boards of contract appeals will "read" required clauses into contracts which lack them, treating the clause as a term of the contract despite its absence. The currently prevailing grounds for "reading in" clauses is that articulated by the former Court of Claims (here acting as a predecessor to the current U.S. Court of Appeals for the Federal Circuit) in G.L. Christian & Associates v. United States , wherein the court found that certain required contract terms allowing the government to terminate contracts for its convenience were to be read into contracts which lacked them because (1) the terms represented a "deeply ingrained strand of public procurement policy," and (2) federal regulations can "fairly be read" as permitting the clause to be read into the contract since they require agencies to incorporate the clause. Other required FAR clauses that have been read into government contracts under the " Christian doctrine" have included those allowing the government to terminate contracts for default; addressing protests after award; and governing contractors' use of government property. However, courts have declined to read in other clauses, often when the contractor (as opposed to the government) seeks to rely upon the missing, but required, clause. In other cases, courts have relied upon other grounds to read certain terms into government contracts, such as the theory that the government has an "inherent right" to terminate contracts for its convenience. This section addresses agency deviations from the FAR; the ability of third parties to enforce the terms of the FAR against a government contractor; the use of procurement techniques not expressly mentioned in the FAR; and whether agencies or transactions not subject to the FAR could be subject to requirements like those in the FAR. Agencies are authorized to deviate from the FAR under certain circumstances. A deviation involves agency noncompliance with a mandatory procurement regulation (e.g., using a solicitation provision or contract clause that is inconsistent with the FAR), in the absence of a statute expressly requiring or authorizing such noncompliance. Only those deviations authorized by the FAR are permitted. Contracting officers must use the Authorized Deviations in Provisions clause and the Authorized Deviations in Clauses clause to notify offerors and contractors when a solicitation or contract contains a deviation. Deviations may be granted (as discussed below) when necessary to meet the agency's specific needs and requirements, so long as not precluded by law, executive order, or regulation. The FAR recognizes two types of deviations: individual and class. Individual deviations affect only individual contract actions. They may generally be authorized by the agency head, with the contracting officer required to document the justification and agency approval in the contract file. Class deviations affect multiple contract actions. For civilian agencies (other than NASA), deviations may generally be authorized by agency heads or their designees after consultation with the Civilian Agency Acquisition Council (CAAC). Additionally, a copy of each class deviation must be provided to the FAR Secretariat. For DOD, the FAR provides that class deviations will be done in accordance with DFARS, which generally grants the Director of Defense Procurement and Acquisition Policy the authority to issue them. If any agency requires a permanent class deviation, then it should propose a FAR revision when appropriate. An example of a recent notable class deviation was the one that DOD issued regarding the System for Award Management (SAM) shortly after this database came into use. In anticipation of SAM's completion, the FAR and DFARS were amended to require contractors to use the database to meet initial registration and annual certification requirements. However, once SAM began to be used, people reported "performance issues ... [that] affected the timely processing of awards." These issues prompted DOD to issue a class deviation permitting contractors to use alternative measures to meet their registration and certification requirements until the problems with SAM were resolved. DOD rescinded this deviation once SAM's "performance issues ... [had] been corrected." The FAR authorizes acquisition team members to use any "specific strategy, policy, or procedure" not addressed by the FAR so long as the strategy, policy, or procedure is in the best interests of the government, and is not prohibited by statute, regulation, executive order, or case law. This means that agencies are not necessarily limited to the strategies or procedures expressly mentioned in the FAR, but rather may exercise some discretion in structuring procurements to meet agency circumstances and needs. For example, although the FAR nowhere mentions the use of reverse auctions, agencies' use of reverse auctions in source selection has been upheld on the grounds that "a procurement procedure is permissible where not specifically prohibited." The ability of third parties to enforce the requirements of the FAR—or the terms of a government contract—against a contractor is generally limited, particularly if the third party is not a subcontractor under the federal contract. In some cases, persons harmed by the actions (or inaction) of a government contractor have alleged that the harm would not have occurred had the contractor complied with the requirements of the FAR (as incorporated in the contract, or otherwise), or that they should be entitled to recover for this harm because of the provisions of the FAR. For example, the plaintiffs in one case seeking to hold a federal contractor liable for the death of a third party, Baragona v. Kuwait & Gulf Link Transportation Company , alleged that they were "third party beneficiaries" of a FAR provision requiring government contractors to obtain insurance against certain liability claims by third parties, and that this clause "effectively waive[d] a [foreign] contractor's ability to assert a personal jurisdiction defense." However, such allegations generally fail, as they did in Baragona , because plaintiffs who are not parties to a contract are generally seen to lack standing to enforce the contract's terms. Agencies and/or transactions that are not themselves subject to the FAR could potentially be subject to requirements like those in the FAR for several reasons. In some cases, the FAR implements, in part, a more broadly applicable statute, and the requirements of this underlying statute could be found to pertain to agencies and/or transactions that are not themselves subject to the FAR. For example, in a 2012 decision, the Government Accountability Office (GAO) found that Historically Underutilized Business Zone (HUBZone) small businesses must be accorded a price evaluation preference when the General Services Administration (GSA) acquires certain leasehold interests in real property even though such acquisitions are not subject to the FAR (see " What Purchases Are Subject to the FAR? "). GAO reached this conclusion because the Small Business Act, which governs price evaluation and other preferences for HUBZone small businesses, "does not limit the type of contract to which it applies" (unlike the FAR, which applies only to procurement contracts). Because the Small Business Act "broadly applies to all federal contracts that involve full and open competition," and a lease of real property is a contract, GAO rejected GSA's assertion that price evaluation preferences for HUBZone small businesses are required only in procurements of goods and services (i.e., procurements subject to the FAR). In other cases, statutes impose requirements like those implemented, in part, by the FAR on entities or transactions that are not subject to the FAR. The American Recovery and Reinvestment Act (ARRA) of 2009, for example, imposed "Buy American" requirements upon certain grant recipients, and "Davis Bacon" requirements upon certain loan recipients, who would not have been subject to these requirements pursuant to the FAR or the statutes that the FAR, in part, implements. In yet other cases, an agency adopts regulations or guidance with provisions modeled on or akin to those in the FAR, as noted previously (see " What Agencies Are Subject to the FAR? "). For example, GSA has adopted certain FAR provisions "as a matter of policy" in its regulations regarding leases of real property. Similarly, the procurement guidelines of the U.S. Postal Service include a "Suspensions and Delay" clause like that in the FAR, while the Senate Procurement Regulations include provisions on the ratification of unauthorized commitments like those in the FAR.
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The federal government is the largest buyer of goods and services in the world, and executive branch agencies—particularly the Department of Defense—make most of these purchases. Many (although not all) acquisitions by executive branch agencies are subject to the Federal Acquisition Regulation (FAR), which can make the FAR a topic of interest to Members and committees of Congress and their staff. In particular, Members, committees, and staff may find themselves (1) considering or drafting legislation that would amend the FAR to save money, promote transparency, or further other public policies; (2) conducting oversight of executive agencies' performance in procuring goods and services; and (3) responding to questions from constituents regarding executive branch procurement activities. In addition, certain commentators have recently suggested that some or all FAR provisions should be withdrawn. The FAR is a regulation, codified in Parts 1 through 53 of Title 48 of the Code of Federal Regulations, which generally governs acquisitions of goods and services by executive branch agencies. It addresses various aspects of the acquisition process, from acquisition planning to contract formation, to contract management. Depending upon the topic, the FAR may provide contracting officers with (1) the government's basic policy (e.g., small businesses are to be given the "maximum practicable opportunity" to participate in acquisitions); (2) any requirements agencies must meet (e.g., obtain full and open competition through the use of competitive procedures); (3) any exceptions to the requirements (e.g., when and how agencies may waive a contractor's exclusion); and (4) any required or optional clauses to be included, or incorporated by reference, in the solicitation or contract (e.g., termination for convenience). The FAR also articulates the guiding principles for the federal acquisition system, which include satisfying the customer in terms of cost, quality, and timeliness of the delivered goods and services; minimizing operating costs; conducting business with integrity, fairness, and openness; and fulfilling public policy objectives. In addition, the FAR identifies members and roles of the "acquisition team." The FAR is the result of a 1979 statute directing the Office of Federal Procurement Policy (OFPP) within the Office of Management and Budget (OMB) to "issue polic[ies] … for the purpose of promoting the development and implementation of [a] uniform procurement system." Partly in response to this directive, the FAR was issued in 1983, and took effect in 1984. It has been revised frequently since then, in response to legislation, executive orders, litigation, and policy considerations. These revisions are generally made by the Administrator of General Services, the Secretary of Defense, and the Administrator of National Aeronautics and Space, acting on behalf of the Federal Acquisition Regulatory Council. However, the Administrator of OFPP also has the authority to amend the FAR in certain circumstances. FAR amendments generally apply only to contracts awarded after the effective date of the amendment. While the FAR contains the principal rules of the federal acquisition system, it is not the only authority governing acquisitions of goods and services by executive branch agencies. Statutes, agency FAR supplements, other agency regulations, and guidance documents may also apply. In some cases, these sources cover topics not covered in the FAR, and sometimes the FAR addresses topics not expressly addressed in statute or elsewhere. In addition, it is the contract (not the FAR) that binds the contractor, although judicial and other tribunals may read terms required by the FAR into contracts which lack them. Agencies subject to the FAR may deviate from it in certain circumstances, and agencies or transactions not subject to the FAR may be subject to similar requirements under other authority.
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Insurance is regulated almost exclusively at a state level, unlike the other primary sectors of the financial services industry, banking and securities. Although the Supreme Court has ruled that Congress has the power to regulate insurance, the 1945 McCarran-Ferguson Act devolved this power to the individual states, and this was specifically reaffirmed in the 1999 Gramm-Leach-Bliley Act. It has long been recognized that some uniformity in insurance regulation is desirable as it allows greater efficiencies in the insurance market. This argument has grown stronger as insurers compete more with banks and securities firms, who do have uniform regulation, and as capital markets have become more globalized. Insurers rely increasingly on global capital markets both as a place to invest premiums that are not quickly paid out in claims and as a source of funding, particularly after a catastrophe that causes large losses. Recognizing the need for relatively standardized regulation, the individual states have developed model rules and regulations through the National Association of Insurance Commissioners (NAIC) and the National Conference of Insurance Legislators (NCOIL). Harmonization efforts by the states, however, have been hampered by the lack of authority invested in either the NAIC or NCOIL. Although both are made up of public officials, the organizations themselves are voluntary, non-governmental associations and cannot require that any states enact their models. As a consequence, there is significant variation in how different states regulate insurance and there have been various calls for Congress to act through a federal charter or some other kind of federal intervention. The recent financial crisis added an additional argument for increased federal attention to the regulation of insurance, particularly with the failure of AIG, a company that happened to be the largest surplus lines insurer in the United States. Surplus lines insurance regulation differs from other insurance regulation both in substance and in the primary focus. In regulating regular insurance transactions, much of the state's focus is on the insurer itself. States have specific requirements for financial solvency, including how much capital an insurer must hold, and how the insurer can invest this capital. In cases of insolvency, states have established guaranty funds, funded by the rest of the insurers in the marketplace, to pay off the insolvent insurer's claims. The states also regulate both the substance of an insurance policy and the price of that policy, with many states requiring specific state approval before policy terms or prices can be changed. In surplus lines insurance, states have some oversight on the solvency of insurers, generally requiring that financial information be filed by surplus lines insurers to judge whether the insurers are sufficiently capitalized. There is, however, no participation in state guaranty funds by surplus lines insurers, nor state oversight of policy terms and prices charged. Most surplus lines transactions revolve around an intermediary, typically an insurance broker, who may specialize in the unusual risks that require such coverage. Because they have relatively little oversight on surplus lines insurers themselves, the states generally focus their attention on these intermediaries in regulating surplus lines insurance. To operate as a surplus lines broker, most states require an additional license on top of the license required for insurance brokers in general. To retain this license, surplus lines brokers are required to take various steps with surplus lines transactions that are not required in regular insurance. The first step in a surplus lines transaction is generally a state-required "diligent search" of the regular insurance marketplace to establish that there is no licensed insurer available to offer the required coverage. Typically, this requirement is satisfied by having some number, usually three to five, licensed insurers decline to offer coverage with the broker being responsible for an affidavit describing the search and certifying that no coverage is available in the licensed market. In some cases, states have established lists of coverages that are almost always placed in the surplus lines market and thus are exempt from the diligent search requirements. Once the consumer's eligibility to use the surplus lines marketplace is established following whatever state rules are in place, the broker would then approach various surplus lines insurers seeking the desired coverage at a suitable price. At this point, while the consumer is outside of the regular insurance market, the states generally continue to establish standards to protect consumers against surplus lines insurers who might be unable to pay claims that are made. Some states establish a list of eligible surplus lines insurers, and state-licensed brokers are only allowed to transact with insurers on that list. Others take the opposite approach and issue a list of ineligible insurers that may not be used by state-licensed brokers. A third approach is to make the brokers responsible if a surplus lines insurer refuses or is unable to pay legitimate claims; this is seen as causing the broker to be more cautious as to which insurance companies are used. States also generally require that brokers provide specific disclosure statements to clients purchasing surplus lines insurance detailing that the insurance is not subject to the same regulatory oversight as insurance bought from state licensed insurers. All states levy specific premium taxes on insurance and generally require a licensed insurer to collect and remit these taxes as a condition of licensure. With the absence of licensure requirements on surplus lines insurers, the requirement to remit taxes is placed on the state-licensed broker. The precise amount of the tax depends on individual state laws. The situation becomes somewhat unclear, however, when the consumer, the broker, or the insured property are in different states. Such a multi-state situation requires apportioning the premium taxes among the different states. State laws, however, differ significantly not only on the amount of such taxes but also on what exactly is to be taxed and how that tax should be apportioned among the multiple states. The property/casualty insurance market has been marked by the so-called insurance cycle, a tendency to have alternating periods of high prices and short supply ("hard markets") with periods of low prices and plentiful supply ("soft markets"). The size of the surplus lines market has been significantly affected by these cycles, with surplus lines growing faster than the entire market in hard markets and more slowly in soft markets. In the past 30 years, there have been generally hard markets in four periods: the late 1970s, the middle 1980s, the early 1990s, and the early 2000s. Growth in net premiums for U.S. professional surplus lines insurers in three of these four periods has reached 70% at the peak and then dropped to nearly zero or below within a few years afterwards. In 2008, surplus lines direct premiums totaled $34.4 billion, 13.8% of the total commercial lines premiums of $249.3 billion. The surplus lines market in the United States has two large groups, AIG and Lloyd's of London, which had 23.5% and 19.7% of the market respectively. The next largest is Zurich Financial with 5.0% market share, which was followed by a number of companies in the 2% to 4% range. The 10 th -largest company had a 2.1% share, whereas the 20 th had a 1.1% market share. Senators John Sununu and Tim Johnson introduced S. 2509 on April 5, 2006, and it was referred to the Senate Banking, Housing, and Urban Affairs Committee. The committee held two hearings on general insurance regulation in July 2006 where the bill was discussed, but it did not take other action on S. 2509 . Although not directly addressing surplus lines insurance, the bill could potentially have had a significant impact on the operation of the current surplus lines market. S. 2509 would have created a federal charter for insurers and insurance intermediaries and given them the choice of operating under the federal system instead of the state system. Holders of a federal license would have been able to operate throughout the United States without separate state insurance licenses. In addition, the National Insurance Act would have preempted state laws requiring product and price approvals for federally chartered insurers. A federal charter as envisioned in S. 2509 would thus offer many of the same freedoms currently enjoyed by surplus lines insurers, namely, the ability to sell insurance across the country without individual state licenses and with product and rate flexibility. At the same time, S. 2509 would have offered the possibility of avoiding the conflicting state regulatory system that surplus lines insurers currently point to as a significant burden. Representative Ed Royce introduced H.R. 6225 on September 28, 2006. It was jointly referred to the House Committees on Financial Services and on the Judiciary. Although not identical to S. 2509 , the bill was essentially similar and would have created the same dual regulatory system with both federal and state charters available for insurers and insurance intermediaries. No committee hearings were held on H.R. 6225 . Passage of either version of the National Insurance Act of 2006, however, would not have offered a uniformly positive federal option from the viewpoint of surplus lines insurers. Unlike current state laws for surplus lines insurers, insurers with a federal charter would have been required to participate in state guaranty funds. In addition, federally chartered insurers would likely have had more stringent financial oversight than the states currently undertake with surplus lines insurers. It is difficult to predict whether large numbers of surplus lines insurers would actually opt out of the state system until the details of a federal chartering system were put in place. The largest surplus lines insurer, AIG, would seem very likely to become a national insurer, as its then-chairman testified before Congress supporting an optional federal charter in 2002. A.M. Best's 2006 survey of the surplus lines industry concluded, however, that "whether or not the National Insurance Act becomes a reality, surplus lines insurers will continue to play a major role in providing specialty coverage to commercial insurance consumers." Representative Ginny Brown-Waite, along with 16 cosponsors, introduced H.R. 5637 on June 19, 2006. It was referred to the House Financial Services Committee where hearings were held and the bill amended and reported on to the full House ( H.Rept. 109-649 ). H.R. 5637 was jointly referred to the House Judiciary Committee which held a subcommittee hearing on the bill, but took no further action. On September 27, 2006, the full House took up the bill under Suspension of the Rules and passed it 417-0. The Senate received the bill and referred it to the Banking, Housing, and Urban Affairs Committee, but took no further action. H.R. 5637 was a relatively narrow bill, aimed directly at streamlining and addressing inconsistencies in state regulation in the surplus lines insurance market. It would have done this primarily through preempting various state laws. It generally would not, however, have replaced the preempted state laws with federal standards, but instead would have done so with laws from other states or model laws of the NAIC. The bill's first two sections would have given preeminent regulatory and tax authority to the home state of the insured, preempting the tax and regulatory laws of other states who might have a claim on the insurance transaction such as the home state of the broker or the location of some of the insured risk. Thus, for example, if a company in one state were purchasing a surplus lines policy that covered some risks in another state, the only state that could collect taxes on that transaction would be the home state of that company. The bill would, however, have allowed states to require reports detailing risks that may be covered by policies from other states as well as encouraged the creation of an interstate compact to develop a uniform formula to allocate surplus lines taxes among the states. H.R. 5637 also would have preempted state laws on eligibility requirements. In general, it would have preempted any state laws that are different from the NAIC's model law on nonadmitted insurance and required states to follow the NAIC's listing of alien insurers in allowing brokers to place insurance with companies from outside of the United States. It also specifically would have preempted state diligent search requirements for surplus lines purchases by "exempt commercial purchasers" as defined in the bill. H.R. 5637 addressed reinsurance as well as surplus lines insurance. As with the surplus lines provisions, the reinsurance provisions had a similar "home state" approach to addressing inconsistencies of state regulation of reinsurance. The bill would have given preeminence to the home state of the insurer purchasing reinsurance with regard to the regulation of credit for reinsurance and other aspects of the reinsurance contract, while the home state of the reinsurer was given authority for the regulation of solvency of the reinsurer. In order for the home state to be given this primacy, the bill would have required the home state to follow NAIC standards with regard to reinsurance credit and reinsurer solvency. Representative Dennis Moore, along with 43 cosponsors, introduced H.R. 1065 on February 15, 2007; Representative Moore was a lead cosponsor of H.R. 5637 in the 109 th Congress. Representative Ginny Brown-Waite, the sponsor of H.R. 5637 , was a lead cosponsor of the H.R. 1065 . H.R. 1065 was nearly identical to the bill that passed the House in the previous Congress. The only change was to the credentials necessary to be considered a "Qualified Risk Manager," which would be required for a company to be considered an "exempt commercial purchaser." The bill was considered under Suspension of the Rules on June 25, 2007, and passed the House by voice vote. S. 929 also entitled the Nonadmitted and Reinsurance Reform Act of 2007, was introduced in the Senate on March 20, 2007, by Senators Mel Martinez and Bill Nelson. S. 929 was identical to H.R. 5637 as passed by the House during the 109 th Congress. It was referred to the Senate Banking, Housing, and Urban Affairs Committee as was H.R. 1065 once it was received in the Senate. Neither bill was acted on by the Senate in the 110 th Congress. Senators John Sununu and Tim Johnson introduced S. 40 on May 24, 2007, whereas Representative Melissa Bean and Ed Royce introduced H.R. 3200 on July 26, 2007. S. 40 / H.R. 3200 were substantially similar to S. 2509 / H.R. 6225 from the 109 th Congress. They would have created an optional federal charter for the insurance industry, potentially offering surplus lines insurers the choice of continuing to operate under the state system or to do so under the new federal system. Although S. 2509 / H.R. 6225 did not specifically address surplus lines insurance, S. 40 / H.R. 3200 included provisions doing so. In particular, S. 40 / H.R. 3200 included surplus lines insurance under the definition of an "insurance producer" and would have allowed a national agency to sell surplus lines insurance. Thus, under S. 40 / H.R. 3200 , an individual surplus lines broker or an agency specializing in surplus insurance could hold a national license and be exempt from the various requirements, such as diligent search, placed by the states on surplus lines brokers or agencies. In addition, S. 40 / H.R. 3200 would have allowed only the state in which an insured resides or maintains its principal place of business to tax a surplus lines transaction. S. 40 / H.R. 3200 would have also specifically exempted surplus lines insurers from a national guaranty fund should one be created. These bills were referred to committee, but no action was taken on them. Representative Dennis Moore introduced H.R. 2571 on May 21, 2009, along with 20 cosponsors, including lead cosponsor Representative Scott Garrett. H.R. 2571 is substantially similar to H.R. 1065 , which passed the House in the 110 th Congress. It was referred to the House Financial Services Committee and Judiciary Committee. Although neither committee marked up the bill, the House took up H.R. 2571 on September 9, 2009, under suspension of the rules and passed the bill by voice vote. Representatives Moore and Garrett also offered the language of H.R. 2571 as a floor amendment to the Wall Street Reform and Consumer Protection Act of 2009 ( H.R. 4173 ). This language was included in an en bloc amendment by Representative Barney Frank ( H.Amdt. 529 ) that passed by voice vote on December 10, 2009. H.R. 4173 passed the House on a vote of 223-202 on December 11, 2009, with the language included as Title IX. S. 1363 , which is identical to H.R. 2571 , was introduced in the Senate on June 25, 2009, by Senator Mel Martinez with three cosponsors. It was referred to the Senate Banking, Housing, and Urban Affairs Committee, which has not acted on this bill. The committee did, however, markup and order reported the Restoring America's Financial Stability Act of 2010 on March 22, 2010. Title V, Subtitle B of this bill is entitled the Nonadmitted and Reinsurance Reform Act of 2010 and contains language nearly identical to S. 1363 . The bill was reported as S. 3217 on April 15, 2010; after various floor amendments, none of which altered Title V, Subtitle B, the Senate inserted the language of S. 3217 into H.R. 4173 and passed the amended bill on a vote of 59-39. The conference report on H.R. 4173 , now titled the Dodd-Frank Wall Street Reform and Consumer Protection Act, included the Nonadmitted and Reinsurance Reform Act as Title V, Subtitle B. The House agreed to the conference report on June 30, 2010, by a vote of 237-192 and the Senate agreed to the conference report on July 15, 2010, by a vote of 60-39. President Obama signed the legislation into law as P.L. 111-203 on July 21, 2010. H.R. 1880 was introduced by Representatives Melissa Bean and Edward Royce on April 2, 2009. It was referred to the House Financial Services Committee, Judiciary Committee, and Energy and Commerce Committee. This bill includes language similar to the previous National Insurance Act of 2007 that would (1) include surplus lines insurance under the definition of an "insurance producer" and allow a national agency to sell surplus lines insurance and (2) allow only the state in which an insured party resides or maintains its principal place of business to tax a surplus lines transaction. Like previous bills, H.R. 1880 allows for the federal chartering of insurers and insurance producers and loosens some restrictions on insurance rate and form regulation, so it might have an impact on surplus lines insurance as some insurers and producers may choose to become federally chartered, rather than remaining state-chartered surplus lines insurers. The specific provisions of H.R. 1880 , however, are different than the previous National Insurance Acts, including the creation of a systemic risk regulation and the provision that some insurers might be required to become federally chartered if judged to be systemically significant.
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In general, insurance is a highly regulated financial product. Every state requires licenses for insurance companies, and most states closely regulate both company conduct and the details of the particular insurance products sold in the state. This regulation is usually seen as important for consumer protection; however, it also creates barriers to entry in the insurance market and typically reduces to some degree the supply of insurance that is available to consumers. Rather than requiring consumers who may be unable to find insurance from a licensed insurer to simply go without insurance, states have allowed consumers to purchase insurance from non-licensed insurers, commonly called nonadmitted or surplus lines insurers. Although any sort of insurance could be sold by a surplus lines insurer, most such transactions tend to be for rarer and more exceptional property and casualty risks, such as art and antiques, hazardous materials, natural disasters, amusement parks, and environmental or pollution risks. Although surplus lines insurance is sold by insurers who do not hold a regular state insurance license, it is not unregulated. The sale of this insurance is regulated and taxed by the states largely through requirements placed on the brokers who usually facilitate the insurance transactions. The varying state requirements for surplus lines insurance have led to calls for greater harmonization between the states' laws and for federal intervention to promote uniformity. Such federal intervention is the central focus of the Nonadmitted and Reinsurance Reform Act of 2009 (H.R. 2571/S. 1363), which passed the House by voice vote on September 9, 2009. This act was also added as an amendment to the Wall Street Reform and Consumer Protection Act of 2009 (H.R. 4173) when it was considered on the House floor. H.R. 4173 passed the House on December 11, 2009. The Restoring America's Financial Stability Act of 2010 (S. 3217) included nearly identical language as well. This legislation was reported by the Senate Committee on Banking, Housing, and Urban Affairs on April 15, 2010, and subsequently brought to the Senate floor for consideration. On May 20, 2010, the Senate finished consideration, inserting the amended text of S. 3217 into H.R. 4173 and passing the amended H.R. 4173. The Nonadmitted and Reinsurance Reform Act language was included in the H.R. 4173 conference report, which was agreed to by the House on June 30, 2010, and by the Senate on July 15, 2010. President Obama signed the legislation, now P.L. 111-203, on July 21, 2010. Provisions aimed at harmonizing state laws regarding surplus lines insurance were also included in the National Insurance Consumer Protection Act (H.R. 1880), whose central focus is the creation of a federal charter for the insurance industry when this bill was introduced on April 2, 2009. Past Congresses have also taken up legislation on surplus lines insurance. Versions of the Nonadmitted and Reinsurance Reform Act were passed by the House in both the 109th and 110th Congresses, but the Senate did not act on surplus lines legislation in either case. Provisions on surplus lines insurance similar to those in H.R. 1880 were included in the National Insurance Act of 2007, but that bill was not acted on in the 110th Congress. This report will be updated as warranted by legislative events.
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RS21055 -- NATO Enlargement Updated May 5, 2003 Congress is now considering enlargement of NATO, an issue addressed at the allied summit in Prague, in November 2002. During the last round of enlargement, the Senate voted 80-19 on April 30, 1998, in favor of admitting Poland, theCzechRepublic, and Hungary to NATO. (A two-thirds Senate majority is necessary to admit new states becauseenlargement isconsidered an amendment to the original North Atlantic Treaty.) Other members of the alliance followed suit, andthe threecountries became members in March 1999. It was the fourth time that NATO had admitted new states, withmembershipincreasing from the original 12 to 19 today. At the previous NATO summit in April 1999, the allies underscored that they were open to further enlargement. Theycreated a Membership Action Plan (MAP), outlining structured goals for candidates, such as ending the danger ofethnicconflict, developing a democratic society with transparent political and economic processes and civilian control ofthemilitary, and pledging commitment to defense budgets to build military forces able to contribute to missions fromcollectivedefense to peacekeeping. (1) At Prague, on November 21, 2002, the current members' heads of state designated the three Baltic states (Latvia, Lithuania,and Estonia), Slovenia, Slovakia, Bulgaria, and Romania, as prospective members. In 1998, the congressional debate over NATO enlargement covered such issues as costs, mission, and qualifications of thecandidates. The issue of costs has now seemingly been put to rest because entry of Poland, the Czech Republic, andHungary does not appear to have required extra U.S. funds. Most observers believe that the three countries havecontributedto stability in Europe, and have made significant political contributions to the alliance in such matters as enhancingNATO'sunderstanding of central and eastern Europe, Russia, and the Balkans, given the history of the new members'involvementwith these regions. Militarily, their contribution is less apparent; each of the three contributes forces to theNATO-led peaceoperations in the Balkans, and is building forces to defend its borders. Pentagon officials believe that Poland hasmade thegreatest strides in restructuring and modernizing its military, and that the Czech Republic and Hungary have madeconsiderably less progress. (2) It should be noted thata period of years is normally necessary to rebuild a military that has hadan authoritarian tradition and convert it to one having civilian control, purge it of old-guard elements, reform itstraining,and purchase equipment compatible with a new set of allies. There has been some sentiment that NATO should delay invitations to candidate states until democratic processes are firmlyentrenched. For example, the recent Hungarian government of Victor Orban was criticized for an ethnic "status law"thatsome interpreted as cloaking Hungarian aspirations for territory from neighboring states having Hungarianminorities. (3) Others reject such sentiments, noting that Orban was freely elected, and dismissing the status law as nothing morethan apassing example of nationalist politics before a close election. Nonetheless, it is possible that the period betweennamingcandidate states for accession negotiations at Prague in November 2002 and the moment when current NATOmembergovernments decide whether to admit those candidates (such as the vote in the U.S. Senate), could see debates overwhethereach candidate continues to meet criteria for democracy, particularly if there is an election bringing in a governmentthatmember states view as extremist. The North Atlantic Treaty does not contain a provision for expelling ordisciplining amember state. Another factor for consideration could prove to be a prospective member's efforts to persuade its people that NATOmembership is desirable. Slovenia held a referendum on March 23, 2003; 66% of those voting, 66% supportedNATOmembership, despite popular opposition to the war in Iraq that approaches 80%. No other candidate state intendsto hold areferendum on NATO membership. The essence of the current enlargement debate is over qualifications, with no apparent consensus. Of an original ninecandidates, two candidates, Albania and Macedonia, did not receive invitations at Prague. (4) Each of these countries issmall, with comparably small militaries potentially capable of specialized functions, such as transport or medicalcare, forexample, but only minimally capable of building forces able to contribute to high-intensity conflict. In the view ofsomeobservers, to adhere to the letter of the military qualifications outlined in the 1999 summit communiqué,requiring newmembers to contribute to missions from peacekeeping to collective defense, would be tantamount to excluding theirentry. Many participants in the debate favor different standards that, in their view, reflect the current political situation in Europe,where Russia is no longer a military threat but ethnic conflict, nationalism, and terrorism are a danger. In suchcircumstances, they contend, political stability and a modernized military at least able to contribute to border defenseand topeace operations are an appropriate standard. Secretary of State Powell seemed to suggest such a standard in hisconfirmation hearing when he stressed a need for candidates to modernize their militaries, and to strengthen theirdemocratic structures. (5) An opposing view is that NATO should first clearly define its mission, above all with an agreement on what types ofout-of-area threats, such as terrorism, proliferation, or a disruption of the flow of oil, should be met with a possiblemilitaryresponse. At that point, enlargement should be considered, with a determination about which prospective membersmightcontribute to the mission. Some observers, also hesitant about enlargement, note that the United States flew over60 percentof combat missions in the Kosovo conflict. They prefer prospective members that could relieve the U.S. burden. Yet another view is that there is no clear dichotomy between collective defense (high-intensity conflict undertaken inresponse, for example, to the attacks of September 11, 2001) and collective security (peace operations andhumanitarianassistance). In this view, countries contributing to peace operations assist in building stable societies and preventing"blackholes," such as Bosnia or Afghanistan, where terrorism may take root. Countries involved in peace operations, then,arecontributing to the prevention of terrorism, and thereby to collective defense. The terrorist attacks against the United States on September 11, 2001, are affecting the enlargement debate. A likely part ofthe enlargement debate will be how prospective members might contribute to the conflict against terrorism or actto stem theflow of weapons of mass destruction. NATO seemed partially to settle one aspect of the debate over its missionshortlyafter the attacks when member states invoked Article V, the alliance's collective defense clause, to come to the aidof theUnited States in the conflict against terrorism. Previously, the European allies had resisted any statement that ArticleVshould be invoked in an out-of-area action against terrorism. At a NATO ministerial meeting in Reykjavik in May2002, theallies agreed that they must be able "to carry out the full range of... missions, ... to field forces wherever they areneeded,sustain operations over distance and time, and achieve their objectives." (6) However, not all member states have sufficiently mobile or appropriately trained forces for the current tasks in Afghanistanand Iraq, for example. Few allies besides the United States have special forces or mobile, large-formation combatforceswith the potential to contribute meaningfully to such conflicts. At the same time, a number of allies have anintelligencecapability, transport, medical units, and political influence that might assist in such conflicts. As the terrorism conflict unfolds, current members may examine how prospective members might be able to contribute.Contributions might include political influence and support, for example in the United Nations or with Russia orMuslimstates, and not necessarily military potential. They might also examine the level of internal security in the candidatecountries and ability to control borders, disrupt terrorist financial networks or apprehend terrorist suspects on theirsoil.Elements of the MAP that emphasize an end to corruption may be increasingly underscored, given thepost-September 11importance of preventing money-laundering, and combating a black economy. The alliance experienced sharp divisions over whether to use military force against Iraq. In January 2003, Bush Administration officials applauded the decision of the 7 candidate states (and others) to sign a letter that, in general,endorsed the U.S. position on Iraq; some candidates state representatives complained that they had been bullied bytheAdministration into signing the letter. Six of the seven candidate states joined the coalition. Slovenia was theexception,but allowed overflight by U.S. and UK forces. The failure to achieve consensus in the North Atlantic Council overhow andwhether to aid Turkey in the event of an attack by Iraq exposed serious divisions in the alliance. (7) The fractious debate inthe NAC led some Administration officials and Members of Congress to raise the issue of changing NATOdecision-makingprocedures. (8) The debate over enlargement is quite different in 2001 than it was in 1998. In 1998, several European allies stronglysupported enlargement. Today, most member states couch discussion of enlargement in careful terms. Most member states agree that Slovenia is politically qualified for membership; in addition, Hungary urges Slovenia'smembership, once NATO criteria for entry are met, for strategic reasons. Hungary is not contiguous with any otherNATOstate. Slovenia's entry into the alliance would provide Hungary with a land bridge to Italy, a clear advantage givenneutralAustria's refusal during the Kosovo war to permit NATO overflights to Hungary. Slovakia is a credible candidatein someNATO capitals, given the return in September 2002 elections of key elements of its reform government. SomenorthernEuropean allies, such as Poland, strongly support membership for the Baltic states; they contend that the Baltic stateshavemet OSCE and EU political guidelines for democracy, and cite the three countries' work to build stability in theregion andto establish better relations with Russia. U.S. officials state that the Baltic states have made the most progress inmeetingMAP requirements, although there is some criticism of how Latvia has handled sensitive documents. Italy, Greece, and Turkey are strong supporters of Bulgaria's and Romania's entry. They contend that these two countriescan contribute to stability in the Balkans, where Europe's greatest security needs lie. Critics counter that RomaniaandBulgaria continue to suffer from corruption in their governing structures, and that each must make stronger effortstomodernize its military. Bulgaria has also had a succession of governments that have followed an uncertain coursetowardspolitical and economic reform. The views of the Russian government play a role in the debate. Putin's softer rhetoric against NATO enlargement since theSeptember 11 terrorist attacks has allayed concerns that his government would strongly oppose enlargement. It ispossiblethat Putin now views a unified front against terrorism, in part due to Moscow's ongoing conflict in Chechnya, asmoreimportant than potential divisions with the allies over enlargement. The Duma and much of Russia's military andintelligence bureaucracy remain adamantly opposed to enlargement, which they view as a U.S.-led effort to movea militaryalliance closer to their territory. Officials from allied states often counter such an argument by underscoring thatenlargement's purpose in large part is to ensure stability in Europe, and that the addition of new member statesprovidesstability, and therefore security, to Russia's west. Putin may also view the entry of Estonia and Latvia into NATO(and theEU, in 2004) as a means to protect Russian minorities in those countries, given NATO and EU strictures over thetreatmentof ethnic minorities. In the spring of 2003, both the Senate Foreign Relations Committee and the Senate Armed Services Committee beganhearings on enlargement. Some individual Members have expressed their views, and relevant legislation has beenintroduced. The Senate Foreign Relations Committee produced a report on enlargement, together with theResolution ofRatification (Executive Report 108-6), the instrument on which the Senate will vote to give its advice and consenttorevision of the North Atlantic Treaty. In the 107th Congress, Rep. Shimkus and others introduced H.Con.Res. 116 , which calls for NATO invitationsto the Baltic states for membership at the 2002 summit, as long as they satisfy the alliance's qualifications. It passedbyvoice vote on October 7, 2002. On October 24, 2001, legislation was introduced in both Houses supporting further enlargement. Representative Bereuterintroduced H.R. 3167 , the Freedom Consolidation Act of 2001; Speaker Hastert and others cosponsored thebill. An identical Senate bill, S. 1572 , with cosponsors including Senators Durbin, Lieberman, Lott, Lugar,andMcCain, was also introduced. The bill recalled and approved legislation of the four previous Congresses that urgedenlargement and provided funding for particular candidates. The bill designated Slovakia as eligible to receive U.S.assistance under section 203(a) of the NATO Participation Act of 1994 (title II of P.L. 103-447 ). This section givesthePresident authority to establish a program of assistance with a government if he finds that it meets the requirementsofNATO membership. In the 107th Congress, Representative Gallegly introduced H.Res. 468 , which described NATO as key to U.S.interests in Europe and encourages a continued path of improving relations with Russia. It strongly urged invitationstomembership for the 7 countries ultimately invited at Prague. It passed the House 358-9 on October 7, 2002. The Senate Foreign Relations Committee marked up the Resolution of Ratification on April 30, 2003. The Resolution isthe instrument on which the Senate will vote to give its advice and consent to admission of the candidate states. TheCommittee's report accompanying the Resolution reviews the strengths and weaknesses of the candidate states,assessingtheir political, economic, and military policies. It also reviews NATO's mission and capabilities, relations withRussia, rolein the Balkan wars, and the Prague NATO summit. Secretary of Defense Rumsfeld has stirred NATO waters by suggesting the presence of an "old" and "new" Europe, theformer consisting of such countries as France and Germany, the latter consisting of recent new members andcandidatestates. Secretary Rumsfeld has suggested that the alliance's future belongs to the United States and the "new"Europe, withthe "old" Europe increasingly marginalized. European critics, some of them in the candidate states, oppose suchacategorization, noting that Germany has the largest economy in Europe, and that only France, with Britain, has amilitaryable to move its forces considerable distances for engagement in combat. These critics express concern that adividedNATO will not be effective in confronting threats that face each member state. (9) Accession negotiations between NATO and the candidate states were completed on March 26, 2003, and the candidate stategovernments signed protocols that have been sent to the 19 member states, each of which will follow itsconstitutionalprocedures to amend the North Atlantic Treaty to admit new members. All 19 members must agree on a prospectivemember's qualifications for it to enter NATO. The Bush Administration would like for the Senate to vote onenlargementbefore that August 2003 recess. NATO hopes to admit the successful candidates in May 2004.
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This report provides a brief summary of the last round of NATO enlargement. The report analyzes the key military and political issues in the debate over seven prospective members named atNATO'sPrague summit. It then provides an overview of the positions of the allies and of Russia on enlargement, citing theeffectsof the terrorist attacks of September 11, 2001, on the United States. It concludes with a discussion of recentlegislation onenlargement. This report will be updated as needed. See also CRS Report RS21354, The NATO Summit atPrague, 2002,CRS Report RL30168, NATO Applicant States: A Status Report, and CRS Report RS21510,NATO's Decision-MakingProcedure.
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Electric power generation in the United States is currently dominated by the use of fossil fuels. Coal is the major fuel used to produce electricity from steam turbine-generators employing basic principles in use since the Industrial Revolution. However, burning coal results in environmental costs as emissions of nitrogen and sulfur oxides contribute to formation of smog and acid rain. Today, carbon dioxide emissions from the burning of coal and other fossil fuels are also widely believed to be contributing to global climate change and its potentially damaging effects. Renewable energy has been used since long before the Industrial Revolution, but not on the scale of steam power generation. Renewable energy technologies use the power of the sun, wind, water, and heat from the earth, offering the possibility of producing electricity on a large scale without many of the environmental and climate consequences of electric power generation using fossil fuels. If harnessed by the right technologies, renewable energy offers the possibility for achieving inexpensive, almost limitless electricity with minimal adverse environmental impacts. Much of the modern impetus for renewable energy development in the United States came from the Arab oil embargo of the 1970s, and the resulting energy crisis. A focus on national security and energy independence emerged with a goal of reducing dependence on foreign supplies of oil. While petroleum is not a major fuel source for electric power generation, the importance of energy to the national economy was underscored. Energy security and independence concerns, combined with growing reliability and environmental concerns led to the development of the renewable energy research and development programs at the U.S. Department of Energy (DOE). Today, added concerns over the global impacts of anthropogenic climate change and a desire for a lasting recovery from the recent recession have increased calls for a comprehensive national strategy making renewable energy a cornerstone of a policy for continuing U.S. economic development and jobs growth. Congress is currently considering legislation to address these concerns. This report discusses current ideas for a federal Renewable Electricity (or Energy) Standard (RES) and a broader Clean Energy Standard (CES). The RES concept would require certain retail electric providers to obtain a minimum percentage of the power they sell from renewable energy sources or energy efficiency. The CES concept would extend the eligible technologies meeting the requirement to include advanced coal and nuclear energy, while also targeting retirement of existing polluting fossil generation. This report refers generally to both concepts as an RES unless otherwise stated. The goal of this report is to explore how such policies could potentially increase the amounts of renewable electricity generated in the United States, discussing other related public policy goals and rationales for renewable energy development, and the challenges/drawbacks of RES policy. The choice of power generation technology in the United States is heavily influenced by the cost of fuel. Historically, the use of fossil fuels has provided some of the lowest prices for generating electricity. Figure 1 shows that, as of 2009, coal accounts for approximately 45% of net generation by the electric power sector, followed by natural gas at 23%, and nuclear power at 20%. Electric power generation is responsible for 37% of U.S. domestic carbon dioxide emissions (the primary anthropogenic greenhouse gas (GHG)), and over one-third of all U.S. GHG emissions. Growing concerns over GHG emissions, other environmental costs associated with burning fossil fuels, and existing or anticipated state and federal policies addressing these issues are leading some utilities and energy providers to deploy more renewable energy technologies to meet power demands. As of 2009, hydropower represented 7% of all U.S. electric power industry net generation with all other renewable energy accounting for a further combined total of 4%. A summary of the status of current major renewable energy technologies follows, using figures for domestic estimated growth based on projections in the DOE's Energy Information Administration's (EIA's) Annual Energy Outlook for 2010 . Renewable energy technologies are at different stages of maturity in the technology development cycle, and are still being optimized from an engineering viewpoint. Some of the major perceived barriers the technologies must overcome to achieve a greater share of the electricity generation market are presented. Biomass for electric power is arguably the most conventional of all renewable electricity technologies and has a potentially large future. Biomass is currently the largest non-hydropower source of renewable energy consumed in the United States. Approximately 53% of all renewable energy used comes from biomass represented by biofuels, landfill gas, biogenic municipal solid waste, wood, wood-derived fuels, and other biomass such as switchgrass and poplar trees. Agricultural wastes (such as corn stover) are another potential feedstock. With wood and biomass net summer capacity reported at 7 Gigawatts (GW) for 2009, DOE estimates that 29 GW of domestic biomass generation could be available by 2030. Sustainable management of biomass resources, especially forests, will be critical to this future. Biomass combustion is a relatively mature technology, but it is not widely used and is generally most efficient from a heat input-to-energy produced perspective when used in a combined heat-and-power application. Large scale co-firing of biomass with coal is a higher efficiency, lower per unit cost option. Technologies for biomass gasification could potentially result in higher efficiencies when used to produce synthesis gas or hydrogen for heat and/or power production. Demonstration and deployment of newer industrial gasification technologies is needed to scale-up plants and provide economical designs with high degrees of availability. Huge potential exists for the biomass category, as it is generally regarded as a carbon-neutral source of energy. With about 10 GW of capacity installed, wind power was second only to natural gas in U.S. capacity additions in 2009. The total installed and grid-connected wind power capacity as of 2009 in the United States reached approximately 35 GW. DOE estimates that domestic wind power could reach a capacity of 68 GW by 2030 in its baseline scenario. Wind turbines are increasing in generating capacity, with domestic turbines in 2009 averaging 1.74 Megawatts (MW) in capacity. When the wind is blowing at speeds which can be harnessed, electricity can be generated at prices nearly competitive with conventional fossil fuels. Since the wind doesn't blow all the time and varies in strength, average costs are higher and integration of large amounts of wind into an electricity grid has often been raised as an issue. Backup generation in the form of natural gas combustion turbines has been the standby choice in some instances. Energy storage (using batteries or other means) is often suggested as a potential answer to deal with intermittency concerns. Since many of the best wind resource areas in the United States are far from population centers where the electricity will be used, the development of transmission facilities to carry power to population centers has been discussed as a prerequisite for wider development. Given these factors, DOE projects (with a deliberate and sustained national effort) that as much as 20% of the nation's electrical supply could be provided by wind energy by 2030. This would require wind power capacity to reach 300 GW, or a growth of over 280 GW over the next 21 years. Achieving such a prodigious goal would mean addressing significant challenges in technology, manufacturing, employment, transmission and grid integration, markets, and siting strategies. Offshore wind power in the United States is a fledgling industry, having just received federal authority in 2010 to go ahead with the first U.S. offshore wind farm in Nantucket Sound, off the Massachusetts coast. Known as the Cape Wind project, it is designed to operate 130 turbines from the German firm Siemens AG with a total capacity of 420 MW. Permits for more than 2,476 MW capacity for offshore projects are pending as of 2009. The overall potential for U.S. offshore wind power production capacity was estimated at 908 GW in 2005. Another renewable resource with enormous potential is sunlight. Sunlight is converted directly into electricity using solar photovoltaic (PV) cells which today are largely made from crystalline silicon. Research is underway to reduce the cost of PV cells using base materials other than silicon (such as cadmium telluride) and to improve manufacturing techniques which may increase the efficiency of solar cells. Technologies to increase or concentrate the amount of sunlight in PV cells could raise the efficiency of the light-to-electricity conversion. Solar PV is widely used in a number of off-grid applications where distributed energy resources are useful, and in peaking power applications to reduce power usage from the electric utility grid. Battery storage is important to off-grid usage to extend hours of usage past peak daylight. While solar PV installations only represented 1.37 GW of cumulative capacity in 2009, DOE estimates generating capacity from solar PV could reach almost 12 GW by 2030 in the United States. Since the amount of electricity that can be produced from solar PV generally depends on the intensity of sunshine (and the angle at which PV panels face the sun), the best potential exists for applications in sunny regions and lower latitudes. But the relative success of solar PV installations in Germany (with a total capacity of 8.9 GW in 2009) prove the wider applicability of the technology in less-than-optimal climes. Integration of PV cells and materials into building structures and designs could be a major step for the technology. Concentrating solar thermal technologies use mirrors to concentrate sunlight and generate heat usually for steam production. This steam is then used to generate electricity or provide high-temperature hot water for industrial or other process uses such as heating and cooling. Fairly large areas of land are needed, plus access to water since it is used for steam generation and cooling. Some novel applications heat air directly to generate thermal gradients which are harnessed to produce electricity. Solar thermal technologies are currently used for utility-scale power generation, but costs in the United States are considerably higher than prices for fossil-fuel power generation. Advances in the designs and materials of absorbers, reflectors and heat transfer fluids in next-generation solar thermal systems could potentially reduce costs to six cents per kilowatt-hour (kwh) by 2015. Solar power, like wind power, is considered a variable resource but solar power technologies can generate the most power when demand is highest—when the weather is hot and sunny. Concentrating solar power thermal plants with heat storage capacity are being increasingly considered for large central station generating plants in the sun-rich areas of the western United States, which could make such plants a base load option. Improved energy storage schemes would benefit both conventional power generation and off-grid applications in particular. New utility-scale solar thermal facilities will likely be located mostly in the southwestern region of the United States, an area where water resources may be under stress. As such, EIA projects slow growth in domestic power generation from solar thermal technologies from 0.61 GW capacity in 2007 to 0.93 GW by 2030. Applications in residential and smaller industrial/commercial facilities are another area of potential solar thermal use. Solar hot water heaters are growing in use in the United States, but have seen much wider applications in parts of Europe and Asia. Additional research and development (R&D) investment may be needed to increase energy conversion efficiencies and bring down energy costs if smaller solar thermal systems are to become mainstream choices domestically. Steam or hot water extracted from geothermal reservoirs in the Earth's crust can be used to generate electricity, or to provide thermal energy for heating or thermal processes. EIA projects this hydrothermal capacity could reach almost 4 GW by 2030, up from 2.44 GW in 2009. Geothermal energy may no longer depend upon the availability of suitable naturally occurring geothermal resources. Enhanced Geothermal Systems (EGS) are man-made geothermal reservoirs. By drilling into the Earth's crust and injecting water to create steam, EGS offers the potential to produce geothermal energy almost anywhere, not just in areas where steam or hot water occur naturally, and offers the possibility for large scale generation of clean energy. Improvements in drilling technology can lower costs, and better fluid flow techniques can increase the amount of power generated. Ground Source Heat Pumps (GSHP) are used mostly in residential applications and take advantage of the temperature difference between the ground and air. GSHP require a piping network to be buried underground to serve the customer's heating and cooling needs. Energy efficiency standards focused on home heating and cooling could lead to improved technologies and wider deployment of GSHP in new construction. Only 2,400 of the 80,000 dams in the United States produce electricity. Building a new hydroelectric power plant is expensive, and can face considerable opposition based on environmental concerns if a large dam is to be built. As such, with most of the better sites already developed, DOE does not expect much growth in large conventional hydroelectric capacity. As of 2009, EIA reported conventional hydropower electric capacity at 77.2 GW. However, DOE has identified approximately another 5,677 sites with the potential to generate about 30 GW of capacity using small and "low head" hydroelectric technologies. Other hydroelectric technologies are less mature. Opportunities to generate power with small elevation differences and low flow applications may need further R&D to optimize the hydroelectric generation potential. Hydrokinetic energy technologies generate power from the movement of water. Electricity can be generated from the flow of water in rivers, or additionally from the flow of released water at existing dams. Wave energy and tidal flow demonstrations of the various technologies to tap the power potential of coastal waters and estuaries are just beginning. As described in the preceding sections, renewable energy technologies are designed to harness a variety of renewable energy resources with very different physical characteristics, such as the wind and the sun. Different technologies have seen different levels of investment over the years based upon various evaluations of potential and economic readiness to serve current markets or applications. The timeframe under consideration is important in any discussion of the potential for renewable energy technologies, for the technologies are at different stages in their development cycles and have attributes suited to different applications and locations. Consequently, the costs of generating electricity varies by type and maturity level of each renewable energy technology. The potential for deployment often depends upon local incentives and the quality of the renewable resource. The cost of producing electricity from renewable energy sources is generally higher than electricity generated from fossil fuels when capacity factor and operations and maintenance (O&M) costs are considered. The variable nature of some renewable energy sources generally results in lower capacity factors. However, the fuel component of O&M for most renewable energy sources is zero. Transmission costs vary for renewable energy and conventional generation technologies alike, depending on the distance from the generating power plant to where the power is consumed. EIA recently estimated the average levelized cost (in 2008 dollars) of power generation for new power plants entering service in 2016 for a variety of energy technologies. As shown in Figure 2 , a levelized cost per megawatt-hour (mwh) of $100.4 was estimated for conventional coal power generation, $83.1 for natural gas-fired conventional combined cycle, $119 for advanced nuclear, $119 for onshore wind, $191.1 for offshore wind, $396.1 for solar PV, $256.6 for solar thermal, $115.7 for geothermal, $111 for biomass, and $119.9 for hydropower. These estimates appear to show that some renewable energy technologies are competitive in cost and approaching parity with some fossil fuel power generation options. Others, however, are quite high-cost, suggesting the need for significant improvement in technology to become cost competitive. Many states are essentially picking up where federal research and development dollars left off, using a Renewable Portfolio Standard (RPS) to create a market for renewable energy via mandatory requirements or voluntary goals. Through August 2010, RPS requirements or goals have been established in 29 states plus the District of Columbia. RPS requirements generally oblige electric utilities to provide electricity from renewable energy sources in increasing amounts over a specified period of years. The requirement can be for a portion of the electricity provider's installed capacity, but most states specify a percentage of sales. Nineteen states and the District of Columbia have mandatory renewable energy requirements. Six states have renewable goals without financial penalties, and Virginia has incentives for utilities to meet renewable energy goals, and three power authorities have renewable energy goals. It should be noted that RPS and related policies in these states were designed to address various state objectives. EIA expects most states to meet existing RPS goals for renewable energy deployment. But as is illustrated in Figure 3 , about 12 states have existing provisions expiring by 2015, and approximately 14 states and the District of Columbia have existing RPS or related provisions scheduled to expire by 2020. The minimum amounts of renewable energy required in these RPS programs varies considerably, as does the timeframe for implementation and the eligible technologies. The United States has traditionally relied on market forces and tax incentives to encourage the development and deployment of new technologies. This strategy is the "business as usual" model. However, several other forces are in play that call into question the "business as usual" model for innovation and deployment of renewable energy technologies. For example, investment dollars are relatively scarce at this time, as the nation struggles to emerge from a recession. Also, certain other nations, including Germany and China, have employed a different approach. They have aggressively used governmental policies to channel government resources into renewable energy programs that have permitted them to establish renewable energy industries whose products and productivity often exceed those of the United States. The need for wide deployment of renewable energy technologies on a national scale is at the heart of policy discussion for a RES. Advocates of a federal RES say it offers an opportunity to drive renewable energy market growth by creating a compliance requirement nationally, bridging the gap of expiring or lesser state RPS standards into future years. Legislation can impact energy markets by mandating change directly, i.e., through specific compliance requirements, or through incentives to encourage change. Such policy initiatives can be described as "market drivers" since they can cause changes affecting decisions regarding energy supply and demand. Many believe that the United States' existing (mostly non-renewable) low-cost energy system limits market opportunities in the short term, despite potential opportunities in the longer term both domestically and abroad. Some believe that energy policies based on temporary tax incentives are not true drivers of markets, since their effects may not last much past the expiration date of the incentive. Tax credits and other tax incentives can thus be seen as enablers of projects because they can add to a decision to go forward on a project. However, power projects still go forward without tax incentives if there is a market demand. Recent policies shifting certain renewable energy tax credits to cash grants have helped many new energy projects to be deployed, but how long these taxpayer-subsidized facilities will continue to operate absent continued support over the long term remains to be seen. Even with generous tax incentives and resource growth potential, non-hydro renewable electricity constituted approximately 4% of U.S. electric power industry production as of 2009. If renewable electricity is to play a larger role in the electricity future of the United States, many maintain that federal action may be necessary. As a result, some observers have argued for governmental action to bolster and accelerate U.S. activities relating to renewable energy. Renewable energy sources are seen as contributing to U.S. goals for energy security and energy independence by reducing dependence on petroleum imports with renewable electricity providing energy for electric vehicles. In addition, renewable biofuels can be used to generate electricity directly or power fuel cells used in electric or hydrogen-powered vehicles. Renewable energy sources can also improve the reliability of electric power systems by increasing the diversity of electricity generation resources, and can potentially lower electricity prices by replacing more volatile fossil fuels. Opponents of a national RES base their arguments largely on cost. Electric power generation decisions in the past have largely been based upon the cost of generating electricity (excluding externalities—environmental costs to society not considered in energy prices). The cheapest fuel for many years has been coal, when economies of scale are considered. Coal currently accounts for almost 45% of net electricity generation in the United States, and replacing even a portion of that generation with renewable energy would not be a small undertaking. Renewable energy sources are naturally occurring but variable, and harnessing the forces of nature is not easy or very efficient given the current state of technologies. Most of the best large-scale hydropower resources have already been developed, and the best areas for wind power and solar energy are often far from population centers where the electricity produced would be consumed. Even if energy efficiency and energy conservation measures were to lessen the need for building future power generation, replacing large centralized power stations with renewable energy would be a massive task. Deployment of wind power (the fastest growing U.S. renewable energy segment) on a large scale would likely require considerable investments to upgrade electric transmission line capacity and install back-up power due to the intermittency of wind. Much of that back-up capacity would likely come from natural gas-fired combustion turbines, a fossil fuel with half the carbon intensity of coal but that comes with a history of price volatility. The key factors in the design of a RES policy include the final target level of the requirement (e.g., 5% or 25% of electricity sales), the time span over which the requirements are applicable, and the technologies being advanced by RES. The level of the RES requirement can be a reflection of the rationale for the legislation, with deference to other considerations such as the relative quality of renewable energy resources in various regions of the United States. Recent RES proposals have been related to general goals to lower GHG emissions. The time span over which the RES proposal would be applicable reflects general goals for the legislation (for example, job creation or economic development). Similarly, RES proposals have traditionally advanced renewable energy technologies which harness naturally replenished energy sources with a reduced or near zero GHG footprint. With GHG emissions reduction being a key feature of past RES proposal, recent legislative proposals have sought to expand the eligible technologies to include selected "clean energy" technologies such as mine-mouth methane or clean coal technologies. The following paragraphs discuss both major and ancillary issues related to the implementation of a national RES policy on states, regions, and customers' income levels. The quality (as defined by availability, magnitude and variability) of renewable energy resources differs in geographic regions across the United States. As a result, certain states and regions may be considered to be in a better position to comply with RES requirements at a lower cost than others, given the attributes of various renewable energy technologies. Some electric utilities in the southeastern United States contend that renewable energy resources available in the region are insufficient to meet RES goals, potentially forcing the purchase of renewable energy from other regions with the result of higher prices for electricity. Forest-based biomass is seen as the most likely source for renewable energy development in the southeast, but competing uses for biomass raise questions regarding the sustainability of resource supplies. Similarly, concerns have been expressed in western states with good solar energy quality that large-scale development of solar thermal plants could stress constrained water resources. These plants can consume as much water as comparable generating plants fueled by coal, if alternatives are not employed to reduce water used for steam production and cooling. Plans for developing solar thermal plants are therefore being viewed with water conservation in mind. Governors in the eastern United States have voiced their own concerns regarding plans being discussed nationally for building high-voltage transmission lines to import wind power from the midwestern states. The central issue is who will pay for the transmission lines. Eastern states are wary of being assessed the entire cost of building such projects, and increased development of local renewable energy resources is seen by some as a better alternative. Compliance with an RES will likely require decisions on how goals for development of the electricity network should proceed to use renewable resources cost-effectively. RES requirements for energy efficiency could also lead to demand-side management technology being incorporated into plans for infrastructure development. Such issues could impact how much new renewable generation will be required and where the generation will be located. Most communities in the United States are served by a local electric utility which brings power to businesses and residences via electric transmission lines from steam-electric power generating facilities located miles away from large population centers. In fact, a network of power plants generally connects to a grid of higher voltage transmission lines which then distribute electric power over smaller lower voltage lines for customer use. Most of these plants burn coal or natural gas (i.e., fossil fuels) to generate electricity in base load operations. Efficiency of operation (the ratio of fuel input to energy produced) has been achieved from economies of scale, resulting in electrical power being generated fairly cheaply, but with a consequence of commensurately large GHG and other emissions. Nuclear power, though largely free of GHG emissions, is also drawn from large, centralized plants. This central station concept allows for a number of power plants to cost-effectively serve multiple communities, providing reliable power, and allowing different generating options to be incorporated into networks, including renewable electricity. Some renewable electricity technologies are also capable of serving as base load capacity, notably geothermal, biomass, and hydroelectric dams. Wind power is considered intermittent because the wind doesn't blow all the time, and wind predictability is a concern especially for electricity dispatchers in organized markets (such as regional transmission organizations). Similarly, solar facilities depend on sunlight. Storage schemes may provide an answer for variability of power generation issues thus improving dispatchability, i.e., the capability to generate power to meet system loads. Distributed generation schemes allow electric power to be generated at or near the point of consumption. Wind power and solar PV are well-suited to distributed generation, serving as back-up or main power supplies for single customers or communities. Similarly, on-site or local generation may be seen as an option, and combined heat and power generation has long been used by industry to provide some or all of its electricity needs. Communities or consumers seeking back-up or independent power supplies using stand-alone generation may find this their best cost option. Renewable electricity technologies can take advantage of these opportunities. The Smart Grid is one of the options being discussed for the future of U.S. electricity networks and would build interactive intelligence into electricity transmission and distribution systems across the United States. Energy efficiency and energy conservation could be enhanced by demand-side management programs enabled by the wide scale deployment of smart meters. Energy storage projects could enhance such a system, providing options for peak load management and potentially allowing for even greater cost savings. As such, aggressive deployment of a Smart Grid may even be able to reduce GHG emissions 18% by 2020. The electricity transmission infrastructure of the United States is aging, and in many places is not keeping up with current uses, let alone future needs. Power interruptions and congestion problems cost the U.S. economy an estimated $100 billion a year in damages and lost business. A study funded by the electric utility industry estimated that modernization of the grid may cost as much as $1.5 trillion to $2 trillion if the electric system is to address projected future needs, potential national cyber security and other grid vulnerabilities, and reliability concerns. Another recent study has looked at just the cost of upgrading the national transmission system to accommodate expected new renewable electricity generation through 2025. The study concluded that incremental transmission to accommodate existing state RPS requirements will cost approximately $40 billion to $70 billion. To meet the higher target of either an existing state RPS or a 20% federal RES requirement, the study estimates incremental transmission costs of $80 billion to $130 billion. Renewable energy projects in the western and southwestern United States are often located in areas far removed from large population centers where the power would be consumed. The process of selecting a route and siting a transmission line can take years even when only a single jurisdiction is involved. Building transmission lines across multiple states can be a very complicated and contentious process. The Energy Policy Act of 2005 established a process to identify and locate national interest energy transmission corridors (NIETCs) where transmission constraints or congestion may affect consumers. The American Recovery and Reinvestment Act of 2009 (ARRA) later modified DOE's mission for NIETCs, directing DOE to include areas where renewable energy may be hampered by lack of access to the grid. Some concepts for development of the Smart Grid could also allow for greater integration of intermittent or peaking renewable electricity generation. For example, advanced sensors built into an upgraded transmission system could monitor where such resources are generating electricity, and shift this power across the grid when and where it is needed. The North American Electric Reliability Council has a mission to ensure reliability and is aware of the issues which lie ahead, describing the challenges of integrating renewable energy sources as requiring "significant changes to traditional methods for system planning and operation." Jobs growth from renewable and clean energy development is one of the greater goals of RES policy development. An RES could provide a market driver for growth of renewable energy nationally, bridging the gap of expiring RPS standards and providing a driver for clean energy growth into future years. But modest RES requirements that slowly increase over the longer term may not provide a strong enough market driver in the short term to create domestic manufacturing opportunities on its own. Embedded energy efficiency requirements could also act to reduce the need for new renewable electricity generation facilities. The domestic design and manufacture of renewable energy major equipment and components is the key to maximizing green jobs growth in the United States. Providing incentives to encourage manufacturers to locate production in the United States is therefore crucial to this intended future. Factories producing renewable energy equipment will likely require the development of supply chains, which in turn may spur expansion of a services sector to support the industry. Emergence of such supply chains and services could potentially result in a range of employment possibilities for both salaried and hourly wage workers. National government investment on an enormous scale could be required to build a clean energy manufacturing future. Governments in Asia are investing amounts that are proportionally significantly greater than those spent by the United States to develop clean energy manufacturing clusters. Direct investments by governments in the Asia-Pacific region are aimed at replicating the success of the Silicon Valley cluster in Northern California where inventors, investors, manufacturers, suppliers, universities, and others established a "dense network of relationships." The goal of such clusters is to produce competitive, long-term cost and innovation advantages for participating firms and nations. Supporters of a cluster development option believe that the United States cannot simply rely on an enhanced research, development, and deployment program to commercialize innovations needed to quickly expand its role in an international clean energy race. Many believe that ideally, these manufacturing clusters could be formed as public-private partnerships with state governments, businesses, and academic institutions as core members. One potential model could see federal funds competitively awarded to public-private partnerships seeking to establish such clusters around the United States, coordinated with such like-minded state government programs. Longer-term, a focus of the Advanced Projects Research Agency-Energy program is aimed at the next generation of clean energy technologies. Projects should aim for leap-frog advances in the renewable technologies developed if the goal is market share, for incremental improvements may not dislodge current market leaders. For example, if we assume a 25-year lifespan for today's utility scale wind power turbines and solar farms, this provides a target horizon for timing a roll-out of innovative clean energy technologies to replace the old technologies. The performance of these new technologies will need to be sufficiently "disruptive," so that decommissioning and replacement of the old technology will be seen as the most cost-effective decision. The future global clean energy market has been estimated by 2020 to have sales as high as $2.3 trillion, and, as such, would be one of the world's biggest industries. Many nations are moving to secure a share of the expected rewards. There are no guarantees that the commitment of resources by the United States to a clean energy manufacturing strategy will bring the desired results in future jobs or market share. Companies choosing to serve global markets have a variety of drivers in the decision about where to locate manufacturing facilities. Often, the potential size of the local market is a key consideration, and the countries which established (and those establishing) competitive clean energy industries began by serving a strong, often protected, domestic market. Trade policies will undoubtedly be a major factor in determining whether U.S. products can enter some of these global markets. Establishing incentives attractive enough for manufacturing to locate in the United States could help to create a strong export-focused industry. While specific strategies used by electricity retailers to comply with RES requirements would vary, a recent study suggests that an RES could result in dramatically higher costs to consumers. The study asserts that if wind power and solar energy were to replace cheaper coal-fired electric generation, the additional costs of building transmission and replacement capacity to balance fluctuations when energy from intermittent renewable sources is unavailable could increase customer rates. Current RES and CES proposals contain provisions for "Ratepayer Protection" which are intended to limit the incremental cost of compliance with an RES. However, any potential electricity rate increases would result in a relatively higher proportional impact on lower income customers. While both RES and CES proposals allow states the option of using "alternative compliance payments" to offset potential increases in consumer bills caused by a RES, there is no provision directing states to use such funds specifically to relieve incremental cost impacts on lower income consumers. According to the National Renewable Energy Laboratory's report, "Feed-in Tariff Policy: Design, Implementation, and RPS Policy Interactions," feed-in tariffs (FITs) are the "most widely used policy in the world" to promote renewable energy deployment. FITs are an incentive policy to drive renewable energy growth via a mandatory purchase requirement by electric utilities, thus guaranteeing payments to renewable energy developers producing electricity. The NREL study suggests that an FIT can be a complementary strategy to an RES by focusing incentives on specific technologies. Feed-in tariff concepts are not new to the United States, as programs have been initiated by states such as Vermont, Oregon, and Washington, and by local municipalities such as Gainesville, FL, and Sacramento, CA. Many of these existing programs seek to provide incentives to a particular technology (most often solar PV), or seek to nurture domestic renewable energy industries. A national FIT might seem unlikely for the United States quite simply due to the variability of renewable energy resources across the United States, and adoption of a FIT for one technology would inevitably favor specific regions. While the Federal Energy Regulatory Commission (FERC) holds sway over interstate energy transactions and commerce, there are 50 state governments involved with local electricity issues and regional energy markets. FERC issued a ruling in July 2010 that sets the stage for how FIT concepts may be considered under current U.S. law. The California Public Utilities Commission (CPUC) wanted to implement a program under California state law establishing a FIT specifically for cogeneration systems under 20 MW. Several investor-owned utilities objected, maintaining that FERC alone had the authority to institute such a program. The CPUC asked FERC to clarify whether the Federal Power Act prevented the state from implementing the program. FERC concluded that the plan as proposed set wholesale rates in interstate commerce, which, as such, fell under federal jurisdiction. However, FERC went on to say that as long as cogenerators in this instance obtain "qualifying status" under the Public Utility Regulatory Policies Act of 1978 (PURPA , P.L. 96-617 ), and the rates set by the CPUC do not exceed the "avoided cost" of the utility purchasing the power, the proposal would not be preempted by PURPA or FERC regulations. California subsequently revised its FIT plans and proposed a new pilot program seeking to support 1 GW of renewable electric capacity. The plan requires the state's three investor-owned utilities to purchase power from renewable energy projects ranging from 1 MW to 20 MW through competitive auctions. Utilities are then required to award contracts with preference given to the lowest cost "viable" project, and then make subsequent awards to the next lowest cost project until MW requirements are reached. FERC's decision suggests that FIT policies can be applied to qualifying facilities (over 20 MW capacity) under PURPA , and still be subject to FERC and avoided cost pricing requirements. The price of renewable electricity appears to be falling to levels more competitive with conventional fossil generation. If FIT rates can be set at attractive price levels (within avoided cost requirements) allowing renewable energy developers to establish long-term contracts with electric utilities, then FITs may still be an option under current federal law. Given the major goals for an RES such as creating green jobs and reducing environmental impacts from traditional power generation using fossil fuels, enacting a clean energy strategy employing an RES or similar policy is an important option in the nation's energy strategy. Many argue what still appears to be missing is a long-term national energy policy which has fully considered the current and future energy needs of the United States, balanced by a deliberate evaluation of the costs (including externalities) and benefits (including employment). With recent technological developments raising the potential for natural gas to be produced from tight shale gas formations, the outlook for renewable electricity development could be affected if these unconventional natural gas sources can be developed and economically produced in an environmentally acceptable manner. The vision and clarity of a plan of action coming out of a well-defined U.S. national energy policy may provide the transparency and regulatory certainty the investment community has long claimed as necessary to help finance the modernization of the U.S. electricity sector. Several bills were introduced in the 111 th Congress to establish a requirement for electric utilities to provide a fixed percentage of the electricity they sell to customers from renewable or clean energy sources. Two stand-alone proposals for a Renewable Electricity Standard (RES) and the similar proposal for a Clean Energy Standard (CES) are summarized in the following sections. CRS analysis of previous RES provisions in legislation pending before the 111 th Congress is contained in the Appendix . S. 3813 , the Renewable Electricity Promotion Act of 2010, would amend PURPA, adding a federal RES based on integrated renewable electricity and energy efficiency requirements. Under S. 3813 , each retail electric supplier with annual sales to electric consumers of 4 million megawatt-hours (mwh) or more would be required to earn or acquire renewable electricity or energy efficiency credits (RECs) for a portion of its annual retail sales. Electric utility companies in Hawaii would be exempt from the RES. Renewable energy from facilities on Indian Lands would be eligible to receive double RECs. Renewable energy from small distributed generation (less than 1 MW) and energy from algae would be eligible to receive triple RECs. DOE would be required to establish a federal REC trading program to certify utility compliance with the RES. A REC could be traded, or held (carried forward) for up to three years from the date it was issued. One REC would be issued for each associated kwh of renewable energy or energy efficiency, and could be used only once for RES compliance. DOE could delegate its authority for the REC market function to a "market-making entity." Renewable energy technologies qualifying under the RES included solar, wind, geothermal, ocean energy, biomass, landfill gas, qualified hydropower, marine and hydrokinetic energy, incremental geothermal production, "coal-mined methane", qualified waste-to-energy, or other innovative renewable energy sources. S. 3813 excludes from the base qualification calculation (i.e., the amount of annual electricity supply that the renewable energy and energy efficiency percentages would be applied to) the annual retail electricity sales power generation from hydroelectric facilities, nuclear power, and fossil electric power generation proportional to its GHG emissions captured and geologically sequestered. The minimum required total annual renewable electricity and energy efficiency percentages for the specified calendar year are: Energy efficiency would be limited to account for no more than 26.67% of the annual compliance requirement. Qualifying energy efficiency improvements would include customer facility energy savings, distribution system electricity savings, and incremental electric output from new combined heat and power systems compared to output from separate electric and thermal components. DOE would be required to issue regulations for measurement and verification of electricity savings. Compliance with other energy efficiency standards (whether federal, state or local) would not count toward the RES requirements. An "alternative compliance payment" (ACP) of 2.1 cents per kwh (adjusted for inflation) would be allowed to meet RES requirements, with 75% of ACP being paid into individual state funds for a renewable energy escrow account. These funds would be designed to help states develop new renewable energy resources, energy efficiency, or promote the development, deployment, and use of electric vehicles and their batteries. States may also use the funds to offset increases in customer bills caused by the RES. A civil penalty for non-compliance with RES requirements would apply, and would be calculated as the product of the number of kwhs sold to electric consumers in violation of requirements, multiplied by 200% of the ACP. Utilities may petition DOE annually to waive compliance with RES requirements (in whole or part) for reasons of "Rate Payer Protection" to limit the rate impact of the incremental cost of compliance "to not more than 4% per retail customer" in any year. States may also petition DOE to seek a variance from compliance for "one or more years" due to "transmission constraints preventing delivery of service." States may require higher renewable energy or energy efficiency levels, but all states must comply with RES requirements at a minimum. DOE would be required to facilitate cooperation between federal and state renewable energy and energy efficiency programs to the maximum extent practicable. DOE may make loans to electric utilities for qualifying projects to facilitate RES compliance, or reduce the impact of RES requirements on customer electricity rates. Beginning in 2017, and every five years thereafter, DOE would review and report to Congress on whether the program established by S. 3813 contributes to an "economically harmful" increase in electric rates in regions of the United States, analyze whether the program has resulted in "net economic benefits for the United States," and analyze whether new technologies and clean renewable sources would "advance the purposes of the section." DOE is to make recommendations on whether the percentages of energy efficiency and renewable electricity required should be increased or decreased, and whether the definition of renewable energy should be expanded to reflect changes in technology or whether previously unavailable resources of clean or renewable electricity should be increased or decreased. The definition of biomass would be modified and renewable energy would be defined for purposes of the federal renewable energy purchase requirement. Sustainability would also be added as a focus for biomass harvesting, with a mandatory interagency (i.e., Department of Agriculture, Department of the Interior, and Environmental Protection Agency) report to Congress that assesses the impacts of biomass harvesting for energy production. For the base qualification calculation of annual retail electricity sales power generation, S. 3813 would exclude fossil electric power generation in proportion to the GHG emissions captured and geologically sequestered. However, it is possible that captured GHG emissions may find other market-worthy applications if, for example, captured carbon dioxide can be economically converted to fuels or other useful products. The bill does not address whether captured, non-sequestered but usefully applied GHGs may also be eligible for the same exemption. Many municipal utilities and electric cooperatives fall below the threshold of 4 million mwh electricity sales. These entities would not have to comply with the RES. Energy from algae would be eligible to receive triple RECs. The RES is focused on producing electrical energy. While most current algal biomass research seems to be leading to biofuels development, the opportunity to make a biofuel for producing electricity may exist (for example, to produce a "synthetic" natural gas or fuel for combustion turbines). Transmission access could be a key issue in future renewable energy development. Under S. 3813 , states may also petition DOE to seek a variance from compliance for "one or more years" due to "transmission constraints preventing delivery of service." There is no mention of how such a transmission constraint would be determined. For example, it does not specify whether the FERC would be involved in making the determination. "Clean" energy is mentioned in the title of the legislation and with regard to future technologies eligible for the RES. Clean energy is differentiated from renewable energy in the bill as clean or renewable energy, but is not defined in the legislation. Nuclear and advanced coal technology projects are eligible as beneficiaries of ACP funds set up by states. S. 1462 , the American Clean Energy Leadership Act of 2009 (ACELA), proposed an RES provision which served as the model for the provisions in S. 3813 . Differences between the two proposals include: The base quantity of electricity in ACELA would exclude electricity from incinerated municipal solid waste (MSW) owned by an electric utility or sold to an electric utility under a contract or rate order to meet the needs of its retail customers. In S. 3813 , MSW qualifies only as a renewable energy resource under "qualified waste-to-energy." ACELA returns all of the ACP to the state in which the electric utility is located, as opposed to S. 3813 in which 75% of the ACP is returned. S. 3813 does not specify whether amounts from civil penalties for non-compliance also go to state ACP funds. The start date for RES minimum targets for annual renewable electricity or energy efficiency in S. 3813 would be 2012 instead of 2011. Required annual percentages of sale to be met by renewable energy or energy efficiency are the same. The stated goal of the CES in the Clean Energy Standard Act of 2010 in S. 20 is to support and expand the use of clean energy and energy efficiency, reduce GHG emissions, and reduce dependence on foreign oil. The bill would amend PURPA by adding requirements for a federal CES. In S. 20 , the base qualification of retail sales to electricity consumers excludes power produced from existing electric utility-owned hydroelectric facilities, and power generated from incineration of municipal solid waste facilities owned by electric utilities. Clean energy has a broad definition in S. 20 . In addition to the renewable energy technologies qualifying in S. 3813 , several additional "clean energy" technologies would qualify for the CES including qualified nuclear energy, advanced coal generation, eligible retired fossil fuel generation, or other innovative clean energy sources as determined by the DOE Secretary in rulemaking. Clean energy credits in S. 20 would be issued for compliance with CES requirements, and could be banked for use in any future year or traded in a trading program to be established by DOE, with generally one credit being issued per kwh of associated clean energy generation or energy efficiency. In S. 20 , power from "eligible retired fossil fuel generation" is included in the clean energy definition as a mechanism to encourage the retirement of these facilities. Eligible fossil fuel power generation can be derived from any fossil fuel. The bill considers the quantity of electricity generated in the three years prior to retirement with average carbon dioxide emissions in excess of 2,250 pounds per mwh. Once a plan is in place to permanently retire the power plants by 2015, these facilities would be eligible for clean energy credits. Such credits would be issued at a rate of 0.25 credits per kwh for the three-year period beginning on the date of retirement of the facility, and the credit calculation would be based on the average annual quantity of electricity generated during in the three-year period prior to retirement. Advanced coal generation in S. 20 would be eligible for clean energy credits based on kilowatt-hours net generation exported to the grid in the prior year multiplied by the ratio of carbon dioxide captured and sequestered compared to the total carbon dioxide captured, sequestered, and emitted. Double credits would go to the first five advanced coal plants geologically sequestering at least one million tons per year of carbon dioxide. Coal plants "retrofitted" with advanced coal technology could also receive double credits for geologically sequestering the flue gas emissions equivalent to 200 MW of electric power generation. Carbon dioxide captured and used for enhanced oil recovery would receive credits reduced by a factor of 25%. The definition of eligible biomass in S. 20 differs from S. 3813 , which uses the definition from §203(b)(1) of the Energy Policy Act of 2005. The CES in S. 20 more closely follows the definition in the Food, Conservation, and Energy Act of 2008 and would include biomass removed from the National Forest System and other public lands under specific conditions generally considered to aid healthy forests or reduce the risk of forest fires. Combined heat and power facilities are rewarded in S. 20 with additional clean energy credits for higher efficiencies. One additional credit per kwh would be provided for systems that exceed a 50% efficiency improvement. Systems achieving a 90% improvement would qualify for 1.5 credits per kwh. The minimum required annual clean energy or energy efficiency percentages in S. 20 for the specified calendar year are: Energy efficiency would be allowed to count for no more than 25% of the annual compliance requirement in the CES. Potential electricity savings would be expanded to include savings from incremental nuclear and incremental fossil fuel production. Alternative compliance payments in S. 20 are allowed to meet CES requirements at a rate of 3.5 cents per kwh, with all of the payment going to the state or states in which the electric utility operates in proportion to the base quantity of retail electricity in each state. There is no amendment to federal purchase requirements in the CES. The CES in S. 20 is more "aggressive" than the RES in S. 3813 in terms of applicable technologies (extending the program to cover certain base load electric generation technologies), with higher CES annual target percentage requirements (rising to 50% of an electric utility's annual retail sales), and overall length of the period of compliance (to 2050). Embedded is a strategy to address retiring older, inefficient fossil energy plants. The desired balance in the CES between renewable electricity deployment and deployment of other clean energy technologies is not specified as is, for example, the divide between renewable electricity and energy efficiency projects. It is not clear how the goal for advanced coal retrofits (i.e., 200 MW of "equivalent" flue gas emissions) considers the power production capacity of the plant prior to the retrofit. S. 1462 (American Clean Energy Leadership Act of 2009) and H.R. 2454 (American Clean Energy and Security Act of 2009) Sec. 132 of S. 1462 would establish a federal renewable electricity standard (RES) for electric utilities that sell electricity to consumers (for purposes other than resale). Such utilities must obtain a percentage of their annual electricity supply from renewable energy sources or energy efficiency, starting at 3% in 2011 and rising incrementally to 15% by 2021. Eligible renewable sources are defined as wind, solar, geothermal, and ocean energy; biomass, landfill gas, qualified hydropower (i.e., incremental additions since 1992), marine and hydrokinetic energy, coal-bed methane, and qualified waste-to-energy. Other types of renewable energy resulting from innovative technologies may be qualified by the Secretary of Energy via a rulemaking. Under S. 1462 , RES requirements are to be met by the annual submission of federal renewable energy credits (RECs), but up to 26.67% of the requirement may be met by energy-efficiency credits (EECs) in any one year (following a petition by a state's governor). Alternative compliance payments (ACPs) of 2.1 cents per kilowatt-hour are permitted in lieu of meeting the renewable electricity standard, with these payments going directly to the state in which the electric utility is located. Trading of RECs is permitted, and banking of RECs is allowed for up to three years; RECs are retired when submitted for compliance. EECs are awarded for electricity savings verifiably achieved by the electric utility's actions. The Secretary of Energy will provide guidelines and regulations for measurements and baseline definitions in the award of EECs. No EECs will be awarded for compliance with conservation or energy-efficiency standard programs. Comparison to Similar Provisions in H.R. 2454 , American Clean Energy and Security Act of 2009 The structure and definitions of the Renewable Electricity and Energy Efficiency provisions in H.R. 2454 and S. 1462 are essentially the same with regard to eligible renewable energy technologies. Incremental hydropower added after 1992 can be considered renewable energy under the Senate version, as opposed to after 1988 in the House version. S. 1462 requires compliance with its renewable electricity standard to begin in 2011, one year earlier than the House version. The State of Hawaii is exempted from compliance in the Senate bill. The Senate requirement advances to a maximum of 15% renewable electricity (of which energy efficiency may constitute as much as 26.67%); the House requirement has a maximum of 20% renewable electricity, of which up to 25% may come from energy efficiency. The implementing agency is designated as DOE in the Senate bill, while the House version has FERC implementing the provision. Retail electric suppliers may receive RECs for complying with a state RES by generating or buying renewable electricity under the Senate bill, but not in the House bill. The Senate energy bill has no parallel provision to the House bill's recognition of renewable energy programs implemented by states which centrally purchase renewable energy. The alternative compliance payment is 2.1 cents per kilowatt-hour (kwh) in the Senate Energy bill, compared with 2.5 cents per kwh in the House version. ACP funds can be used for non-renewable energy deployment or energy efficiency under the Senate Energy bill, with generation from nuclear, coal with carbon sequestration and storage, and electric vehicle deployment being eligible. Direct grants to customers to offset higher costs from the RES are also allowed by the Senate bill from ACP funds. The House does not allow for a waiver of RES requirements, while the Senate energy bill allows for deferral due to extremes of weather or nature, to avoid utility rate incremental impacts of more than 4% in any year, or because of transmission constraints preventing delivery of service. There is no provision in the House bill for loans to help electric utilities comply with the RES. The House bill increases the federal renewable energy purchase requirement beginning in 2012 to 6%, raising it to 20% by 2020, where it would remain through 2039. The Senate energy bill version stays with the lesser requirements in the Energy Policy Act 2005. The House bill defines one renewable energy credit as representing one megawatt-hour of renewable electricity; a similar definition appears to be implicit (but is not specified) in the Senate energy version. Both renewable energy and energy-efficiency credits can be traded under the Senate bill, while only renewable electricity credits can be traded under the House legislation. Triple credits are granted when electricity is provided through distributed generation (DG). Definitions of distributed generation eligible for triple RECs differ between the two bills. The Senate energy bill defines DG systems as being at or near a customer site, providing electric energy to one or more customers for purposes other than resale to a utility through a net metering arrangement. The House version defines DG as a facility that generates renewable electricity, primarily serving one or more electric consumers at or near the facility site, which is no larger than 2 MW at the time of enactment (or 4 MW after enactment), generating electricity without combustion. This rules out biomass or municipal solid waste combustion as eligible sources of DG. Both provisions require electricity generation, thus ruling out thermal applications (for example, hot water or steam systems). While not specifying a size limit on DG systems, the Senate only gives triple RECs to DG systems smaller than 1 MW, while the House gives triple RECs to all eligible DG systems. The two bills differ in the exclusions that would be allowed from the calculation of a utility's total annual electricity supply, called the "base quantity of electricity." This is the amount of annual electricity supply that the renewable energy and efficiency percentages would be applied to. By reducing the annual base quantity, the exclusions would also reduce the total amount of renewable energy and efficiency that would be required. Both bills exclude existing hydro (except qualified hydro), nuclear capacity placed in service after the date of enactment, and the quantity of electricity in a CCS facility proportional to the amount of greenhouse gases (GHGs) sequestered. The Senate energy bill additionally excludes capacity of a municipal solid waste facility owned by, or sold under contract/rate order to, an electric utility, and nuclear power plant efficiency improvements and capacity additions made after the date of enactment. S. 1462 (American Clean Energy Leadership Act of 2009) and S. 3464 (Practical Energy and Climate Plan Act of 2010) S. 3464 would create a federal Diverse Energy Standard (DES) for electric utilities selling power to end-use customers. Utilities must obtain minimum annual percentages of the electricity they sell from energy efficiency, renewable energy or other [clean] energy sources of: These diverse energy sources can include advanced coal generation, biomass, coal mine methane, end-user energy efficiency, efficiency savings in power generation, geothermal energy, landfill and biogas, marine and hydrokinetic energy, qualified hydropower (incremental capacity or efficiency improvements made up to three years prior to enactment), qualified nuclear (placed in service on or after date of enactment), solar, waste-to-energy, wind, and any other energy source that results in at least an 80% reduction in greenhouse gas emissions compared to average emissions in the prior year from "freely emitting sources." S. 1462 would establish a federal Renewable Electricity Standard for electric utilities selling power to end-use customers. These utilities must obtain an annual percentage of their supplies from renewable energy sources or energy efficiency ranging from 3% in 2011 to 15% by 2021. Renewable sources are defined as wind, solar, geothermal, and ocean energy; biomass; landfill gas; qualified hydropower (i.e., incremental additions since 1992); marine and hydrokinetic energy; coal-bed methane; and qualified waste-to-energy. Federal Clean Energy Standards S. 1462 would establish an RES for electric utilities selling power to end-use customers, requiring energy efficiency measures or renewable energy sources to start at 3% in 2011, rising to 15% of all resources by 2021. S. 3464 would create a DES for electric utilities selling electricity to end-use customers, requiring energy efficiency or clean energy sources to start at 15% by 2015, rising to 50% of all sources by 2050. Other Renewable or Clean Energy Provisions S. 1462 excludes from the base quantity (to which RES requirements apply) electricity generated by electric utility-owned hydropower, incineration of municipal solid waste, and electricity from fossil fuel units proportional to greenhouse gas emissions captured and geologically sequestered. S. 3464 only excludes hydropower from the base quantity for the DES. S. 1462 would modify the requirement established in the Energy Policy Act of 2005 that federal agencies purchase and/or produce and use renewable electricity. The bill also promotes renewable energy development on federal lands and requires the establishment of Renewable Energy Permit Coordination Offices in field offices of the Bureau of Land Management in a pilot project to coordinate federal permits for renewable energy and electricity transmission. Only incremental hydropower, efficiency improvements or powering of non-hydroelectric dams is allowed for the definition of "qualified hydropower" in S. 1462 . The definition in S. 3464 also allows for new hydroelectric dams to be included. Alternative compliance payments for the DES would be set at a minimum 5 cents per kilowatt-hour, which would be higher than the 2.1 cents per kwh set in S. 1462 . Neither S. 1462 nor S. 3464 clearly defines the basis for issuance or award of a federal renewable energy credit or a diverse energy credit (DEC). While a REC appears to be issued for each megawatt-hour of renewable electricity in S. 1462 , both bills associate such credits with a kwh of electricity "used only once" for compliance purposes. DES alternative compliance payments also associate each DEC with a "megawatt hour of demonstrated total annual electricity savings."
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The choice of power generation technology in the United States is heavily influenced by the cost of fuel. Historically, the use of fossil fuels has provided some of the lowest prices for generating electricity. But growing concerns over greenhouse gas emissions and other environmental costs associated with burning fossil fuels are leading some utilities and energy providers to deploy more renewable energy technologies to meet power demands. State governments have generally led the way in encouraging deployment of renewable energy technologies. Many states are essentially picking up where federal research and development dollars left off, using a Renewable Portfolio Standard (RPS) to create a market for renewable energy via mandatory requirements. While most RPS goals are expected to be met, about 12 states have existing provisions expiring by 2015, and approximately 14 states and the District of Columbia have existing RPS or related provisions scheduled to expire by 2020. Wide-scale deployment of renewable energy technologies is at the heart of policy discussion for a national Renewable Electricity Standard (RES), which would require certain retail electricity suppliers to provide a minimum percentage of the electricity they sell from renewable energy sources or energy efficiency. Green jobs growth from renewable and clean energy development is one of the goals of RES policy development; however, embedded energy efficiency requirements could also act to reduce the need for new renewable electricity generation facilities. An alternative Clean Energy Standard would provide incentives to certain advanced coal and nuclear facilities while also targeting retirement of older, polluting fossil fuel generation. Most of the opposition to an RES concerns the potentially higher cost to consumers of compliance using renewable electricity technologies. The United States has traditionally relied primarily on market forces and temporary tax incentives to encourage the development and deployment of new technologies. This strategy is the "business as usual" model. However, several other forces are in play that call into question the "business as usual" model for innovation and deployment of renewable energy technologies. Even with generous tax incentives, non-hydro renewable electricity constituted approximately 4% of U.S. electric power industry capacity as of 2009. If renewable electricity is to play a larger role in the electricity future of the United States, many maintain that federal action may be necessary. As a result, some observers have argued for governmental intervention to bolster and accelerate U.S. activities relating to renewable energy. A federal RES could offer an opportunity to drive renewable energy market growth by creating a compliance requirement nationally, bridging the gap of expiring or lower state RPS standards into future years. A Feed-in Tariff (FIT) is an alternative incentive concept to drive renewable energy growth via a mandatory purchase requirement by electric utilities. However, current U.S. law limits options for a national FIT. The future global clean energy market has been estimated by 2020 to have sales as high as $2.3 trillion, and, as such, would be one of the world's biggest industries. Many nations are moving to secure a share of the expected rewards. Many argue what still appears to be missing is a long-term U.S. national energy policy that fully considers the costs and benefits of paths forward. The vision and clarity of a U.S. plan of action coming out of a well-defined national energy policy could provide the transparency and regulatory certainty the investment community has long claimed as necessary to help finance the modernization of the U.S. electricity sector.
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U.S. scientists and engineers who are working at the molecular level, or nanoscale, are developing novel materials and derivative products at a rapid pace. The unique physical, chemical, and biological properties of engineered nanoscale materials lend themselves to a huge array of applications that, some analysts believe, will transform industries, foster sustainable economic growth, deliver more effective treatments for chronic diseases, and vastly improve energy efficiency. Many nations, including the United States, are eager to lead this nanotechnology revolution, and to reap its benefits. The European Union has been particularly active, but there also is intense activity in Japan, China, and other nations. In the United States and some other nations, enthusiasm and investment in nanotechnology are somewhat restrained, however, by questions about the possible environmental, human health, and safety (EHS) risks associated with this new technology. Does nanotechnology pose risks to human health or the environment that are not being adequately controlled? If so, how will consumers here and abroad react if possible hazards are identified? Should commerce in nanomaterials or associated products be subjected to some level of government regulation? If so, do federal agencies have sufficient statutory authority, expertise, and resources to regulate potential EHS risks of engineered nanoscale materials and derivative products? The answers to such questions may determine the nature, timing, distribution, and extent of the social and economic costs and benefits associated with nanotechnology. Some groups are calling on Congress to regulate engineered nanoscale materials and derivative products to control potential EHS risks, arguing that lack of federal regulation might increase the risks of unanticipated adverse consequences. The cost of such consequences would depend on their actual, as well as publicly perceived, severity, frequency, and reversibility. The cost to the nanotechnology industry also could be great, if consumers responded by indiscriminately rejecting all products of nanotechnology, rather than the offending nanomaterial or an individual application. Others oppose federal regulatory requirements, arguing that they might unnecessarily delay the environmental, health, and economic rewards expected from nanotechnology. Questions about the need for, and ideal form of, regulation for nanotechnology are exceedingly difficult to address, given the current state of scientific understanding of engineered nanoscale materials. The purpose of this report is to consider certain challenges faced by federal EHS risk assessors, risk managers, and policy makers, and to discuss possible legislative approaches to address those challenges. For more information about the national nanotechnology research agenda, appropriations, and authorizing legislation, see CRS Report RL34401, The National Nanotechnology Initiative: Overview, Reauthorization, and Appropriations Issues , by [author name scrubbed] "Nanotechnology" encompasses a broad range of techniques for producing and manipulating tiny particles, thin films, and other materials at such minute dimensions that quantum effects have a measurable influence on the constituent atoms. At this scale, the basic chemical, physical, and biological properties of materials can vary with slight increases and decreases in dimensions between 1 and 100 billionths of a meter. For example, slightly smaller or larger nanomaterials may be more or less magnetic or able to conduct electric currents, or they may absorb and reflect different wavelengths of light. Thus, for example, nanoparticles of gold can be red, yellow, or blue, depending on size and shape. Even when the properties of nanoscale and bulk materials are similar, they may be enhanced at the nanoscale because of the very high surface area of nanoparticles relative to their total volume. Thus, for example, relatively small doses of therapeutic drugs contained in nanoparticles may be more effective than larger doses of the same drugs contained in larger particles. The ability to manipulate molecules to exploit particular properties promises a wealth of potential applications. The United States is a leader in the field, with many patents for commercial applications of nanotechnology granted and pending and hundreds of products incorporating nanoengineered materials being marketed. Currently available products that incorporate nanomaterials include certain cosmetics, sunscreen, tennis balls, food additives, clothes washers, and odor-free clothing. According to experts, anticipated products of nanotechnology range "from faster-burning rocket fuel additives to new cancer treatments, filters to assist in cleaning the environment, and remarkably accurate and simple-to-use detectors for biological toxins such as anthrax." To encourage and coordinate nanotechnology research and development in the United States, the President established the interagency National Nanotechnology Initiative (NNI). Launched in the President's FY2001 budget request, the NNI was codified and further defined when Congress enacted the 21 st Century Nanotechnology Research and Development Act ( P.L. 108-153 ) in December 2003. In accordance with the act, the President's National Science and Technology Council, through its Subcommittee on Nanoscale Science Engineering and Technology (NSET), oversees planning, coordination, and management of the National Nanotechnology Program (NNP). The law requires the NNP to set goals, priorities, and means of measuring progress for nanotechnology research, and to authorize and coordinate funding by federal agencies that promotes nanotechnology research and development (R&D). The NSET does not have budget authority or appropriations for the NNP. Rather, each agency allocates part of its budget to nanotechnology and reports its efforts to the NSET. According to the NNI, "Twenty-six federal agencies participate in the [National Nanotechnology] Initiative, 13 of which have an R&D budget for nanotechnology. Other Federal organizations contribute with studies, applications of the results from those agencies performing R&D, and other collaborations." The distribution of the actual FY2007 total and EHS R&D budget among agencies and departments of the NNI is shown in Table 1 . The Environmental Protection Agency (EPA), the Food and Drug Administration (FDA, within the Department of Health and Human Services), the Consumer Product Safety Commission (CPSC), and the Occupational Safety and Health Administration (OSHA, within the Department of Labor), are actively exploring the EHS implications and possible risks of nanotechnology and the possible need for regulations. Later sections of this report refer to these four agencies as the regulatory agencies. While the potential economic gains and beneficial uses for nanotechnology are exciting prospects, the potential risks associated with nanoparticles are an issue for some scientists, policy makers, and consumer and environmental groups. Congress directed the NNP to ensure that such concerns would be considered as nanotechnology develops. Scientific concern is based in part on some of the very properties that researchers hope to exploit. For example, scientists hope to use certain nanoparticles to deliver medicine to infected tissues where it can best fight disease with a minimum of unintended side effects. The small size of nanoparticles may allow them to pass easily through the skin and internal membranes. This raises questions, however, of whether exposure to nanoparticles can be effectively confined to targeted tissues, or whether environmental releases could be captured, removed from environmental media, or rendered harmless. Similarly, while high surface-area-to-mass ratio may allow nanoparticles to deliver potent doses of medicine in tiny packages, it also might amplify any toxicity of particles inadvertently encountered. It is too soon to know whether such questions are serious cause for concern, but there is scientific evidence that some nanoparticles may be hazardous. For example, certain nanoparticles are known to be toxic to microbes, and EPA has reported some studies that have found nanoparticles generally (but not always) are more toxic than larger particles of identical chemical composition. Other studies indicate that some nanoparticles are toxic in a way that cannot be explained by differences in particle size alone. Yet, such studies are rare, and nanoparticles are diverse, so that one study with one kind of particle may not be informative with respect to the properties of other kinds of particles. Moreover, scientists have demonstrated that toxic nanoparticles may sometimes be made nontoxic by changing the surface chemistry of the particles—for example, by oxidizing the exposed atoms. The unknown potential of individual nanomaterials to harm the environment or human health might lead to consumer rejection of the entire range of consumer products incorporating nanotechnology, especially if consumers perceive that there is inadequate federal oversight. As explained by one witness who testified before the House Committee on Science, "The perception that nanotechnology will cause environmental devastation or human disease could itself turn the dream of a trillion-dollar industry into a nightmare of public backlash." To prevent a loss of consumer confidence, academic researchers, policy analysts, and some entrepreneurs in nanotechnology have been working with federal agencies that have responsibility for protecting the environment, workers, and consumers. The remainder of this report describes some of the challenges faced by these groups as they strive to define the characteristics of nanomaterials, the risks they might pose, and how possible risks might be addressed under existing statutory authorities. The Environmental Protection Agency (EPA), Food and Drug Administration (FDA), Consumer Product Safety Commission (CPSC), and Occupational Safety and Health Administration (OSHA) are actively exploring the health and safety implications of nanotechnology and the possible need for regulations. Other federal agencies also are doing research on environmental, health, and safety applications or implications of nanotechnology. They face many challenges, including those discussed below. Nanomaterials vary widely in size, structure, properties, and atomic or molecular identities (that is, chemical composition). Some are relatively simple materials, composed primarily of a single element in a particular crystal form, such as carbon nanotubes. But, even carbon nanotubes may be of various lengths and thicknesses, and may be relatively pure, containing few unneeded elements, or contaminated by unknown substances. The properties being explored or exploited by researchers and developers of products may result from any combination of these features, which may vary from batch to batch supplied by carbon nanotube manufacturers or distributors. For example, carbon nanotubes may be "doped" to deliberately include other substances to obtain a particular electric charge or other property. Alternatively, a core nanomaterial may be coated or covered by a nanoscale film, embedded in plastic, or otherwise modified. Some carbon nanotubes are specifically treated to prevent agglomeration into larger particles. Many other elements and compounds may be used to produce materials through nanoengineering, and some are considerably more complex than carbon nanotubes. Currently, most commercial products fall into four categories: nanotubes (which may be carbon, silicon, or another substance); metal oxides; quantum dots; and naturally occurring clays. The physical, electrical, magnetic, and other properties of these different materials vary due to chemical composition, but also due to overall dimensions and shapes of particles. Some products of nanoengineering do not even consist of nanoscale materials, but rather incorporate spaces that are nanoscale. The risk associated with these diverse materials may depend more on the application than on the material, and the potential uses of nanomaterials are countless. For example, because risk varies with degree of exposure, risk posed by nanomaterial is likely to vary depending on whether it is embedded in plastic or some other substance that might reduce exposure, is free-standing and easily dispersed through air or water, or is coated with a more biologically active organic molecule in order to enhance exposure. Moreover, risks would be expected to vary throughout the life cycle of a product, from manufacture through use, recycling, treatment, or disposal. Thus, the potential risk from nanomaterial in cosmetics may be greater or less than the risk of the same material washed into swimming pools or lakes. In addition to the potential risks of routine manufacture, use, and disposal, risks associated with accidental, even potentially catastrophic, releases should be considered. This diversity means that traditional regulatory toxicology and risk assessment, which typically proceed chemical by chemical, would be prohibitively time-consuming and expensive. Thus, Vicki Colvin, Executive Director of the International Council on Nanotechnology (ICON) at Rice University, proposes a different approach, which proceeds by correlating material properties with effects on the environment and human health to determine the general factors that affect toxicity. Colvin calls this risk forecasting. The structure and chemical composition of a small sample of nanomaterials produced in a laboratory can be well understood and defined, at least for relatively simple materials like buckyballs. However, the consistency of structure and chemical composition within and between batches of manufactured nanomaterials varies widely. It is possible to measure the numerous properties of nanomaterials, but it is difficult and expensive, so properties other than the ones of particular interest are not known. For example, researchers generally do not investigate a nanomaterial to determine the temperature at which it will melt or boil, or the degree to which it is soluble in water or any other solvent. Even among researchers whose interest focuses on toxicity, there is no agreement about which data might be useful, and therefore few data are collected. Scientists have not yet determined which physical-chemical properties (for example, size, shape, composition, stability, or electric charge) will be most important in determining ecological and toxicological properties. For example, at a recent meeting of researchers interested in studying toxicity, they agreed only that it is probably most important to determine a material's surface reactivity (a rather vague notion of how readily surface molecules combine with other substances to which they are exposed, that would be measured in various ways depending on the material). In addition, they generated a long list of properties of possible interest and a shorter list of properties that definitely should be investigated before toxicity is assessed. Until data are routinely collected on a basic set of physical and chemical properties, there will be no basis for hypothesizing about relationships between size, structure, chemical composition, and toxicity, or for predicting toxicity of similar, newly created substances. A major obstacle to data collection is the absence of consensus on how the materials should be named, how scientific tests should be conducted, or even what constitutes a sample of a particular material. Naming conventions; standard, validated scientific methods; and standard samples of materials must be developed and made available to researchers, before the results of scientific tests will be accepted by others as valid measures and comparable across researchers and materials. If such standards were internationally accepted, it might permit international collaboration and data sharing, and speed development of an adequate data set for generalizing about nanomaterials. The U.S. approach to standards development is voluntary. The National Institute of Standards and Technology (NIST), a non-regulatory federal agency within the U.S. Department of Commerce, is facilitating the development of a measurement system and nomenclature for use by nanotechnology scientists and engineers. The NIST Center for Nanoscale Science and Technology (CNST) is dedicated to partnering with interested parties from industry, academia, and government to achieve common goals.... By offering collaborative opportunities, the research program also offers access to nanoscale measurement and fabrication capabilities not elsewhere available. The CNST also offers access to the CNST Nanofab, operated by professionals dedicated to serving users and offering access to state-of-the-art tools within an economical cost-sharing model. EPA, the National Institute for Occupational Safety and Health, and other U.S. agencies participating in the NNP also are working with the American National Standards Institute (ANSI); ASTM International (an international organization that uses a consensus approach to developing voluntary standards); the Nanotechnology Characterization Laboratory (established by the National Cancer Institute (NCI), NIST, and the U.S. Food and Drug Administration (FDA), to characterize nanoparticles intended for cancer therapies and diagnostics); the International Organization for Standardization (ISO); and other groups on these basic issues of nomenclature, characterization, and measurement, which must be resolved prior to toxicity data development. The U.S. government is cooperating with its trading partners in the Organization for Economic Cooperation and Development to ensure development of standards that are consistent internationally. Among the highest priorities for EHS risk assessment is development of physical standards, that is, reference materials for each nanomaterial of interest. Physical reference standards are needed to allow identification of materials being examined. Without standard samples of materials for comparison, materials being studied cannot be identified with precision, making research results impossible to interpret. Vicki Colvin, executive director of ICON, has argued that experts repeatedly identify the development of standards for conducting and reporting research as the critical first step in EHS research for nanotechnology. They need protocols that specify, for example, what constitutes a toxicologically relevant dose, or whether chemical purity is a critical property, so that research reports will provide information useful to EHS risk analysts. Such standards could be developed through workshops, but there is no federal funding for such workshops, she contends. Others have suggested that funding is necessary to permit travel to workshops by academics and federal employees. This concern is addressed in bills to reauthorize the NNI ( H.R. 5940 , as passed by the House, and S. 3274 , as introduced). Much of the on-going research and development of nanomaterials is being conducted by private entities with an economic interest in protecting information about their work. These entities generally will not voluntarily reveal details about production processes or even the chemical composition or physical structure of their nanomaterials, due to concerns about competition, potential effect of regulatory decisions, and potential liability. Furthermore, due to the very technical and often resource-intensive nature of nanotechnology development, scientists working for private entities generally are familiar with a limited set of nanomaterials: while one laboratory studies carbon nanotubes, another might focus exclusively on metal oxides, or even on a single metal oxide. This means that scientists generally do not have access to data that are needed to detect patterns in the relationships between toxicity and other characteristics of various nanomaterials. Without such data, there is no basis for building theoretical models for hypothesis testing. In short, the proprietary nature of nanotechnology arguably impedes the scientific study of nanoscale matter, and nanotoxicology in particular, by discouraging data sharing. Only a few laboratories have been able to generate data for diverse categories of nanomaterials, and none has access to information about the full spectrum of materials in development. There is some hope, however, that scientific understanding of nanomaterials might be advanced by augmenting data on synthesized materials with available data on naturally occurring or incidentally produced nanomaterials, such as those found in dust or diesel exhaust. A few years ago, more than 500 peer-reviewed publications were available on naturally occurring nanoparticles. In addition, there were more than 10,000 peer-reviewed articles on incidental nanoparticles that result largely as byproducts of human activities such as mining, cooking, and metal working. On the other hand, synthesized nanomaterials vary in many ways from those that are naturally occurring. Accessing data is one problem, but understanding the meaning of data across academic disciplines is another. At an EPA workshop on characterizing nanoparticles, toxicologists and physicists struggled to express their concerns to one another, and admitted frankly their ignorance of the others' areas. Agreement on common terminology is likely to help, but the lack of commonality is deeper than terminology. Perhaps in time, scientists collaborating routinely at interdisciplinary research centers (and occasionally at workshops) may help to bridge the gap. There are limited federal resources available to evaluate EHS implications and regulate nanomaterials, because the overall budgets of the executive agencies that are responsible for monitoring and regulating potential risks to human health and the environment have been steady or declining in recent years, while the agencies' areas of responsibility have grown. For example, according to an analysis by the Congressional Research Service of data provided by the President's Office of Management and Budget, EPA's overall budget authority has remained relatively flat for the past 20 years, and has declined slightly since 2003. During the same period, Congress enacted legislation that expanded the agency's duties, and the Superfund tax authority expired. As the Superfund was depleted, EPA's budget absorbed the costs of cleaning up hazardous waste sites on the National Priority List. Recent hearing testimony reveals an equally constrained budget situation at the Consumer Product Safety Commission (CPSC). "While the CPSC has thus far been successful at facing these new and evolving challenges with diminishing resources, the 2008 funding level will challenge the Commission's ability to maintain its existing level of standards development, enforcement, public information, and international activities." The Food and Drug Administration (FDA) also faces resource constraints. Its funding issues have been summarized in the proceedings of a workshop addressing FDA challenges generally that was convened by the Institute of Medicine. Workshop participants agreed that "the Administration should request and Congress should approve substantially increased resources in both funds and personnel" for FDA. Two organizations were formed in 2006 to advocate for more FDA funding across the board (that is, not just for nanotechnology). A recent report by the Subcommittee on Science and Technology of FDA's Science Board concluded with respect to all FDA programs (again, not just nanotechnology) "that science at the FDA is in a precarious position: the Agency suffers from serious scientific deficiencies and is not positioned to meet current or emerging regulatory responsibilities." According to the Subcommittee, those deficiencies stem from the growth in demands on the agency without commensurate growth in resources. The report states: The demands on the FDA have soared due to the extraordinary advance of scientific discoveries, the complexity of the new products and claims submitted to FDA for pre-market review and approval, the emergence of challenging safety problems, and the globalization of the industries that FDA regulates. The resources have not increased in proportion to the demands. The result is that the scientific demands on the Agency far exceed its capacity to respond. This imbalance is imposing a significant risk to the integrity of the food, drug, cosmetic and device regulatory system, and hence the safety of the public. On the other hand, within the constraints of the overall federal budget and overall budgets of the 26 National Nanotechnology Initiative (NNI) agencies, the President's Office of Management and Budget and the Congress have been encouraging agencies to allocate increasing portions of their budgetary authorities to research related to nanotechnologies. A total of $1.3512 billion was appropriated for these programs in FY2006, according to the President's Office of Management and Budget. However, less than three percent of that funding was allocated to research on the potential "applications and implications of nanotechnology" for the environment and human health and safety (EHS). The regulatory agencies are responsible for a small fraction of this EHS research funding. EPA's EHS budget for nanotechnology in FY2006 was $3.7 million, and some of this funding was directed toward development of environmentally beneficial applications of nanotechnology, for example, to remove arsenic from surface water, rather than research relevant to evaluating potential toxicity. EPA was the only regulatory agency identified as a contributor to NNI funding in the President's budget. However, it should be noted that given the rudimentary understanding of nanomaterials, it is not surprising that a relatively large portion of research funding goes to basic scientific studies. Such research is funded by the National Science Foundation, which receives the bulk of the EHS research budget, some $21 million in FY2006. In addition, substantial research is conducted to develop standardized tools and measures of nanomaterials and to understand their interactions with living things. A final potential obstacle to federal risk management for nanotechnology is a lack of clear statutory directives or appropriate regulatory frameworks to guide federal risk managers. Although the Bush Administration and several legal reviews of existing environmental, health, and safety statutes have concluded that they probably provide adequate authority for federal regulators over nanotechnology, such laws were not written with nanomaterials in mind. As a result, agencies would have to develop new policies, produce guidance, and possibly issue regulations to translate statutory requirements with respect to nanomaterials. These tasks almost certainly would be controversial, because agencies would be making decisions that might, on the one hand, delay or restrict commerce or, on the other hand, allow entrepreneurs to market products whose effects on health or the environment are unknown or uncertain. One concern about existing environmental, health, and safety statutes is that most apply to a specific category of chemical products intended for a particular application, for example, as a food additive, drug, cosmetic, pesticide, or consumer product. This might lead to redundant or inconsistent regulation of a nanomaterial under more than one federal law. For example, under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), EPA must evaluate and regulate commerce in, and use of, all products that are intended to control pests, including bacteria. EPA already has stated its intent to regulate nanosilver under FIFRA when it is released from certain washing machines and other products for which manufacturers claim antibacterial properties. Other EPA program offices (the Offices of Air and Radiation, and of Water, for example) also have responsibilities for managing nanomaterials, including nanosilver, under certain conditions. To address this challenge, EPA's Science Policy Council, an internal policy group, formed a Nanotechnology Workgroup in December 2004 and charged it with describing "key science issues EPA should consider to ensure that society accrues the important benefits to environmental protection that nanotechnology may offer, as well as to better understand any potential risks from exposure to nanomaterials in the environment." The Toxic Substances Control Act (TSCA), which applies to all categories of chemical uses not otherwise regulated, also allows coordination to reduce any potential regulatory burden. TSCA Section 9(d) requires that the EPA Administrator achieve "the maximum enforcement of [TSCA] while imposing the least burdens of duplicative requirements on those subject to the Act." On the other hand, current laws sometimes exclude certain nanomaterials from requirements. For instance, TSCA Section 8(b)(1) clearly excludes from its requirements substances that are produced and used only in research laboratories. This exclusion might apply to most of the various nanomaterials currently in existence. Less clearly, TSCA excludes nanomaterials that are not "chemical substances" as defined in the law. TSCA Section 2 defines a "chemical substance" as "any organic or inorganic substance of a particular molecular identity" that is not a mixture. Based on this definition, it might not be clear whether certain nanoparticles consisting of a core inorganic material coated by an organic material would qualify as a TSCA "chemical substance" or a mixture. Other nanomaterials, like nanotubes or fullerenes, have clear chemical identities in terms of chemical composition and crystal structure, but have variable properties due to differences in size or shape of particular particles. Size and shape are not normally considered in identifying molecular identity, or in distinguishing one chemical substance from another. Therefore, EPA has indicated that it does not consider size a relevant feature under TSCA. But, of course, size is a central issue with nanomaterials. In some cases, it is the regulations rather than the statute itself that complicate agency decisions and actions with respect to nanomaterials. For example, laws often direct agencies to exclude from regulatory requirements small quantities of chemicals, particularly chemicals not yet in commerce. If the agencies define "small quantities" in terms of weight, as EPA does for purposes of the periodic TSCA inventory updates, nanomaterials may well be excluded, because few are produced in large quantities by weight. Another example might be the exclusion of nanomaterials from food additive regulations, if the Food and Drug Administration were to decide that they fit into a category normally exempted, such as that for substances "Generally Recognized As Safe" (GRAS). Under sections 201(s) and 409 of the Federal Food, Drug, and Cosmetic Act, this includes any substance that is "generally recognized, among qualified experts, as having been adequately shown to be safe under the conditions of its intended use." For more information on the possible limitations of existing laws, see reports issued by the Environmental Law Institute, the American Bar Association, and the Woodrow Wilson International Center for Scholars' Project on Emerging Nanotechnologies. As agencies consider the possible need for and shape of regulations, some stakeholders are voluntarily engaging in what is called "responsible development" of nanotechnologies. Professional organizations, industries, universities, environmental organizations, and government have been involved in such efforts. A few of the better known initiatives are described below. The IEEE (formerly the Institute of Electrical and Electronics Engineers) is developing standard methods needed to mass produce and market electronics and photonics products while protecting workers and addressing environmental concerns. Intel, DuPont, and other large companies voluntarily adhere to responsible principles that have served in the past to minimize EHS problems associated with production of materials that are not nanoscale. They complain, however, that the adequacy of such practices with respect to nanotechnologies is unknown, and urge the federal government to sponsor additional research to "shed more light on what the best approach to protecting health and safety should be." The National Institute for Occupational Safety and Health (NIOSH) is working with industry to gather data on exposure and worker health that should help guide the design of studies in occupational settings. In its 2007 White Paper, EPA expressed the view that partnerships with industrial sectors will ensure that responsible development is part of initial decision making. Working in partnership with producers, their suppliers, and users of nanomaterials to develop best practices and standards in the workplace, throughout the supply chain, as well as other environmental programs, would help ensure the responsible development of the production, use, and end of life management of nanomaterials. In that spirit, EPA worked with stakeholder groups to develop a voluntary Nanoscale Materials Stewardship Program (NMSP). The program, which pertains to engineered nanoscale materials that are in commerce or about to enter commerce, was launched January 28, 2008. The NMSP allows two levels of participation, basic and in-depth. Under the basic program, EPA will collect available data and information from manufacturers and processors of existing chemical nanoscale materials. In addition, EPA will ask participants to identify their risk management practices and to develop a risk management plan. Participants in the in-depth program will develop new test data needed to provide a firm scientific foundation for future work and regulatory/policy decisions. The agency intends to use the information gained from the stewardship program to guide development of its TSCA program for nanoscale materials. Another voluntary initiative produced a guidebook for responsible corporate behavior called the Nano Risk Framework . The six-point program was developed by DuPont Corporation working in partnership with Environmental Defense, an advocacy group, and was announced June 21, 2007, at a seminar sponsored by the Woodrow Wilson International Center for Scholars, Project on Emerging Nanotechnologies. The framework presents a process "for identifying, managing, and reducing potential environmental, health, and safety risks of engineered nanomaterials across all stages of a product's 'lifecycle.'" A final example of a voluntary initiative that aims to promote responsible development of nanotechnology is spearheaded by the International Council on Nanotechnology (ICON) at Rice University. As described on its website, "ICON is a technically driven organization whose activities are broadly supported by industry, non-profit foundations, and governments. Its multi-stakeholder partnerships and governance, with members that span the globe, make it uniquely positioned to ensure global coordination and cooperation in nanotechnology risk management." Its mission is "to develop and communicate information regarding potential environmental and health risks of nanotechnology, thereby fostering risk reduction while maximizing societal benefit." ICON encourages close work between developers of nanotechnology and toxicologists. As explained by Vicki Colvin, executive director of ICON, "If we understand why a material is cytotoxic [that is, toxic to cells], we should be able to make it less reactive and knock out its toxicity.... " Thus, she advises, "chemists making systematic changes in materials must work with people who can measure their biological effects. Tight collaboration between materials engineers, chemists, and toxicologists could provide the essential data that can enable us to engineer safer nanomaterials from the beginning." The regulatory challenges posed by nanomaterials and nanotechnologies may be resolved over time and to some extent without significant legislative action, as stakeholders work together, scientists learn more about processes and properties on the nanoscale, and federal regulators gradually adapt rules to implement existing statutory authorities. Congress might, therefore, continue to take a wait-and-see approach to nanotechnologies, perhaps combined with congressional oversight of agencies' activities. However, should Congress choose to intervene, a range of legislative strategies is available, as described below. The overall contribution from agencies' budgets to the National Nanotechnology Initiative (NNI) has grown substantially over the years. It is more difficult to characterize trends in the allocation of funds devoted to research on the potential EHS implications and applications of nanotechnologies, although it too appears to have grown significantly. In some cases, however, this growth arguably has been at the expense of agencies' other programs. This is particularly likely for the regulatory agencies, EPA, FDA, and the CPSC. For example, the National Research Council observed that although there had been "pockets of increased funding for EHS-related research," including a proposed $4 million increase in the FY2007 budget for nanotechnology research within EPA, "there was a 4 percent cut in EPA's overall FY2007 budget." The National Research Council has recommended an increase in funding for research relevant to evaluating the potential health and safety risks associated with nanotechnologies, including work to develop requisite definitions, protocols, and methodologies. Many companies, public interest groups, and the NanoBusiness Alliance (a trade group) also have asked Congress for additional funding for EHS-related research. According to the Chairman of the House Subcommittee on Research and Science Education of the Committee on Science, "The basic position of most outside observers from industry and non-governmental organizations is that the funding level should be on the order of 10% of the initiative's total funding, rather than the current 4%." H.R. 5940 , as passed by the House, and S. 3274 , as introduced, would reauthorize the National Nanotechnology Initiative and require an official in the Office of Science and Technology to oversee planning and budget requests for EHS research, but would not require that participating agencies allocate a set percentage of nanotechnology funding for EHS research. Congress also might wish to consider whether to change the allocation of research money among agencies. For example, it might wish to increase or decrease basic research through the National Science Foundation relative to research that might inform risk assessments at the National Institutes of Health. See Table 1 , above, for the distribution of the FY2007 actual budget among agencies and departments of the NNI. It is difficult to assess the need for additional federal funding or the adequacy of its allocation among agencies without detailed information about research priorities. Many policy analysts have argued for several years that the foremost need with respect to nanotechnology-related EHS research is a strategy or plan "to avoid duplication of research and to set priorities." The House Committee on Science asked repeatedly for the NNI to develop such a strategy. In September 2006, the NNI delivered to the Committee a general framework for EHS research, which was developed by the interagency Nanotechnology Environmental and Health Implications (NEHI) Working Group. The report identified five research categories and some specific needs within each. The five research categories include instrumentation, metrology, and analytical methods; nanomaterials and human health; nanomaterials and the environment; health and environmental surveillance; and risk management methods. Some experts who have advocated for a stronger federal role in managing the risks of nanotechnology argued that this NNI categorization provided insufficient direction for managers, researchers, and research grant authorities. They preferred a more "top-down" approach to EHS research management, in order to ensure that the information being collected is most useful for risk managers. Their priorities were published in November 2006. Some of the same individuals co-authored a paper published in November 2007 that was based on a workshop held in April 2006. That paper identified six critical information needs for evaluating and predicting the toxicity of nanoparticles: extensive physico-chemical characterization; capacity for macromolecular perturbation (for example, for interfering with repair of DNA or with proteins important to the immune system); potential for unintended carriage of toxic molecules; translocation (for example, from the surface of skin into the blood stream); agglomeration state; and chemical composition. The Director of the National Nanotechnology Coordination Office and the Co-Chair of the President's Council of Advisors on Science and Technology (PCAST) disagree that a top-down approach is needed, arguing that no single individual could have the breadth of expertise necessary to adequately oversee all aspects of nanotechnology EHS research. Rather, an interagency working group can "cast the wide net necessary to address the array of nanotechnology-related EHS issues," and this "interagency process will lead to a sound research strategy." Proponents of the top-down approach have found these arguments unconvincing, arguing instead that a top-down approach can involve many agencies and other stakeholders. Environmental Defense, a group that advocates for responsible development of nanotechnology, has suggested that NNI responsibilities are potentially in conflict, because they include EHS oversight of research and development on the one hand, and promotion of nanotechnology research and development on the other. Thus, the group argues, some portion of the NNI should be given "independent budgetary and management authority, responsibility, accountability, and sufficient resources to develop and direct the overall Federal nanomaterial risk research strategy." Environmental Defense modeled this proposal on the approach taken by the federal government with respect to nuclear power. The Senate Committee on Appropriations expressed its desire for a research strategy in S.Rept. 110 - 91 , which accompanied S. 1696 , a bill providing FY2008 appropriations for the Department of the Interior, environment, and related agencies. The Committee is committed to ensuring that all Federal environmental, health and safety research is prioritized and coordinated so that nanotechnology's potential benefits to the economy and environment are realized at the same time that human health and the environment are protected. To further these goals, the Committee urges EPA to contract or enter into a cooperative agreement with the National Academy of Sciences' Board on Environmental Studies and Toxicology within 90 days of enactment to develop and monitor implementation of a comprehensive, prioritized research roadmap for all Federal agencies on environmental, health and safety issues for nanotechnology. The Senate did not act on S. 1696 , but in accord with the explanatory statement for the Consolidated Appropriations Act, 2008, which became P.L. 110-161 , the report language for S. 1696 is being treated as approved. According to Celia Merzbacher, who formerly was co-chair of the NSTC Subcommittee on Nanoscale Science, Engineering, and Technology, therefore, the National Academy review of the NNI strategy will take place. The NAS will review the final version of the NNI strategy. The National Science and Technology Council (NSTC) released the final NNI Strategy for Nanotechnology-Related Environmental, Health, and Safety Research in mid-February 2008. The strategy builds on the five research categories described above, but also identifies and prioritizes specific research needs within each category. Research under way in FY2006 was matched to the five research categories, and timelines were developed to guide future activities. Timelines reflect the agencies' immediate needs as well as their views of research capacities and prerequisites. Research in the area of instrumentation, metrology, and analytical methods is considered cross-cutting and of highest priority. This research will be coordinated by the National Institute for Standards and Technology. The National Institutes of Health will coordinate research related to human health, and the EPA will coordinate research related to the environment. NIOSH is assigned responsibility for coordinating research related to human and environmental exposure assessment. Research related to risk management will be coordinated by the Food and Drug Administration (FDA) and EPA. Finally, NSET noted that the research strategy is expected to be reviewed and updated as research progresses and needs and priorities evolve. H.R. 5940 , as passed by the House, and S. 3274 , as introduced, would require the Director of the President's Office of Science and Technology Policy (OSTP) to designate an associate director of OSTP as Coordinator for Societal Dimensions of Nanotechnology. The Coordinator would be responsible for 1) ensuring that a research plan for environmental, health, and safety research activities is developed, updated, and implemented; 2) "encouraging and monitoring" agencies participating in the NNI "to allocate the level of resources and management attention necessary to ensure that the ethical, legal, environmental, and other appropriate societal concerns related to nanotechnology, including human health concerns, are addressed;" and 3) encouraging agencies to identify, assess, and implement suitable mechanisms for establishing public-private partnerships to support EHS research. The bill would require the plan to 1) specify near-term research objectives and long-term research objectives; 2) specify milestones, and the time and resources needed for achieving near-term objectives; 3) describe the roles of the agencies in achieving the objectives; 4) specify the funding allocated to each objective and the sources of funding by agency; and 5) estimate the funding required and the source of funding by agency for each major objective for three future years. Congress also might intervene to ensure an appropriate level of information collection by regulatory agencies. If Congress wants to ensure that information about the potential risks of nanotechnology and nanomaterials is collected and does not want to rely on voluntary programs, or conversely, if Congress wants to prevent agencies from imposing reporting requirements, legislation might be necessary. Congress could direct or constrain agency action that would require manufacturers of nanotechnology materials or products to determine physical and chemical properties, to conduct toxicity tests, or to report information that already is reasonably available and potentially relevant to EHS. Either requirements or constraints could be phased into effect in order to ensure that requirements would be commensurate with risk and investments by the regulated community. For example, increasing demands for information could be tied to the introduction or marketing of new applications, new products, or threshold quantities of products. Alternatively, agencies might be instructed to refrain from requiring long-term and costly studies, at least until a certain production threshold is attained. For some chemical substances and applications, regulatory agencies already have certain regulatory authorities. For example, under the Toxic Substances Control Act (TSCA), Section 8(d), EPA requires that manufacturers submit lists of unpublished health and safety studies known to have been conducted, and copies of such studies, on request. If that authority is not sufficient, too broad, or not clear with respect to nanomaterials, TSCA and other statutes could be amended. Alternatively, reporting and testing requirements, limitations, or prohibitions could be included in free-standing legislation. A third option might be to tie requirements for reporting or testing to legislation authorizing research funding. These options might have unintended consequences. For example, depending on the specific provisions, new reporting or testing requirements might be considered an impediment to innovation by small or medium-sized enterprises, or too burdensome for manufacturers who embed nanomaterials in hard plastics or other substances. A variety of methods are available to reduce unintended consequences. For example, to reduce the burden imposed by a testing requirement, Congress might allow manufacturers to share test data (and costs of testing), grant exclusive production or marketing rights within the United States for a number of years to manufacturers who conduct testing (to compensate them for their expenditures), or exempt particular categories of products or manufacturers from requirements. Again, existing law provides an example of how some requirements might be tailored. The Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) directs EPA to promulgate testing and reporting requirements for pesticides, mechanisms for simplifying requirements for relatively safe pesticides, and compensation rules, and grants those who conduct tests a period of exclusive data use. On the other hand, attempts to tailor requirements, limitations, or prohibitions might be viewed as unfair by some regulated entities, if they are perceived to treat manufacturers differently, conferring advantages on some but not others. Moreover, any exemptions for small or medium-sized enterprises would reduce the amount of information collected, information that might be important to risk assessors. A potential benefit of requiring testing or reporting is that useful information might become available to the regulatory agencies, allowing them to better evaluate the significance of potential EHS risks or to assess the potential value of benefits. This could lead to regulations that were more focused, reasonable, and economically efficient, because agencies could target regulations toward technologies or products posing greater relative risks (and perhaps smaller benefits). Congress also might legislate to ensure that nanotechnology would, or would not, be regulated to manage any EHS risks that might be identified. Congress could either authorize or restrict agencies' authorities to regulate any stage in the lifecycle of nanomaterials: production, sale, use, or disposal. Imposing requirements on manufacturers might delay the environmental, health, and economic rewards expected from nanotechnology. At the same time, EHS regulations might reduce any risk of adverse consequences from exposure to nanomaterials. The Bush Administration has issued guidelines for any regulations that might be imposed under existing statutes. If, on the other hand, Congress chose to prohibit or restrict agencies' authority to regulate nanotechnology or products, the potential economic benefits of the new technology might be more quickly realized, but the risks of unanticipated adverse consequences might be greater. The cost of such consequences would depend on their actual, as well as publically perceived, severity, frequency, and reversibility. The cost to companies developing nanotechnology products also could be great, if consumers responded by indiscriminately rejecting all products of nanotechnology, rather than a single offending nanomaterial or application. The need for additional research to identify the potential hazards that might be associated with nanotechnology and to evaluate risks related to the environment and human health and safety (EHS) is not in dispute. However, there is a range of views about whether there is a need for increased federal intervention at this time. The regulatory challenges posed by nanomaterials and nanotechnologies are many—the diversity of nanomaterials, lack of data characterizing the materials, lack of standardization in nomenclature and metrics, the proprietary nature of private research results, limited resources in regulatory agencies, and possibly inadequate statutory authority. These difficulties may be surmounted over time without legislative action, or Congress may choose to intervene. If it does, it might choose any of several approaches. Selected approaches include increasing funding for workshops in standardization and other EHS research, changing the allocation of research money among agencies, adopting and implementing a national and/or international research strategy, or enacting legislation that authorizes, mandates, or constrains agency actions to require information collection or to restrict production, sale, use, or disposal of nanomaterials. H.R. 4040 , as passed by the House, and S. 3274 , as introduced, would require appointment of an official who would be required to oversee development and implementation of an EHS research plan. It is noteworthy that Congress is considering its options at this early stage of technology development, when only a few nanomaterials are being manufactured on a large scale. Risk management decisions nonetheless are pressing, as the rate of nanotechnology development and commercialization is rapidly escalating.
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Scientists and engineers can now examine, design, and manipulate materials at the molecular level, termed "nanoscale," between 1 and 100 billionths of a meter. The U.S. government has invested heavily to ensure that American industry remains a global leader in the field, because the products of nanotechnology are seen to have great economic potential and offer possible solutions to national problems ranging from energy efficiency to detection of agents of biological warfare. Optimism about nanotechnology is tempered, however, by concerns about the unknown potential of nanoscale materials to harm the environment and human health. Some have called for federal regulation of potential environmental, human health, and safety (EHS) risks, arguing that the lack of federal EHS regulations increases the risks of unanticipated adverse consequences due to human or environmental exposure to engineered nanomaterials. The cost of such consequences would depend on their actual, as well as publicly perceived, severity, frequency, and reversibility. The cost to the nanotechnology industry could be great, if consumers responded to a potential threat of harm by indiscriminately rejecting all products of nanotechnology, rather than the offending nanomaterial or an individual application. Others oppose federal regulatory requirements, arguing that they might unnecessarily delay the environmental, health, and economic rewards expected from nanotechnology. Questions about the need for, and ideal form of, nanotechnology regulations are exceedingly difficult to address, given the current state of scientific understanding of engineered nanoscale materials. This report considers certain challenges faced by scientists, entrepreneurs, and government officials involved with nanotechnology research, as they strive to define the characteristics of nanomaterials, the potential EHS risks, and how they might be addressed. Challenges include the wide variety of nanomaterials and applications; lack of basic information about their properties; lack of conventions for naming, measuring and identifying nanomaterials; the proprietary nature of some critical information; the need to prioritize federal resource needs; and a possible lack of clear statutory authority or appropriate regulatory framework to anticipate or respond to any identified risks. For more information about the national nanotechnology research agenda, appropriations, and authorizing legislation, see CRS Report RL34401, The National Nanotechnology Initiative: Overview, Reauthorization, and Appropriations Issues, by [author name scrubbed] These difficulties may be surmounted over time without significant legislative action, or Congress may choose to intervene. If it does, it might choose any of several approaches. Possible approaches include increasing funding for workshops in standardization or other research relevant to identifying and possibly ameliorating any environmental or human health and safety concerns associated with nanomaterials; changing the allocation of research money among agencies or the interagency research management structure; adopting a national or international research strategy; or enacting legislation that authorizes, mandates, or constrains agency actions to require information collection or to restrict production, sale, use, or disposal of nanomaterials. Each risk management approach has potential positive and negative consequences that Congress may want to consider.
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Funding for House committees (except for the Committee on Appropriations) follows a two-step process of authorization and appropriation. Operating budgets for all standing and select committees of the House (except for the Committee on Appropriations) are authorized pursuant to a chamber funding resolution, and funding is provided by annual appropriations in the Legislative Branch Appropriations bill and other appropriations acts. On March 17, 2017, the House adopted H.Res. 173 , providing for the expenses of certain committees of the House of Representatives in the 115 th Congress, by voice vote. The resolution authorized a total of $266.3 million for committee expenses, $132.7 million for the first session and $133.6 million for the second session. The use of committee funds is subject to chamber rules, law, and regulations promulgated by the Committee on House Administration, the Commission on Congressional Mailing Standards, and the Ethics Committee, among other House entities. These regulations may be found in a wide variety of sources, including statute, House rules, committee resolutions, the Committee Handbook, the Franking Manual, the House Ethics Manual, "Dear Colleague" letters, and formal and informal guidance. Committee funds may be used only to support the conduct of official committee business. They may not be used for personal or campaign purposes, or comingled with funds appropriated to any other source of official funds, such as the Member Representational Allowance (MRA). Information on individual committee spending is published quarterly in the Statements of Disbursement of the House . This report is organized into three sections. The first provides an overview of the committee funding process in the House and analyzes funding levels since 1996. The second reviews House floor and committee action on committee funding in the 115 th Congress. The final section provides illustrations of the rules and regulations that structure the use of committee funds, and analyzes actual committee funding spending patterns during six previous years. Contemporary funding for House committees (except for the Committee on Appropriations) follows a two-step process of authorization and appropriation. Operating budgets for all standing and select committees of the House continued or created at the beginning of a new Congress (except for the Committee on Appropriations) are authorized biennially pursuant to an omnibus committee funding resolution, and appropriations are included in the Legislative Branch Appropriations bill. Pursuant to House Rule X, clause 6, the Committee on House Administration reports an omnibus resolution to authorize the expenses of each standing and select committee of the House, except the Committee on Appropriations, for each two-year Congress. For a two-year Congress, the omnibus committee funding resolution typically specifies a dollar amount limit for each committee that shall be available for its expenses (divided between the first and second sessions), in addition to a reserve fund for unanticipated expenses. This resolution does not appropriate funds; the actual appropriation for House committee expenses is provided in the annual Legislative Branch Appropriations bill. In effect, the dollar amounts specified in the omnibus committee funding resolution limit how much of the amount appropriated for committee expenses will be available for any particular committee. In preparation for the omnibus resolution, House committees (except the Appropriations Committee) are required by regulations of the Committee on House Administration to submit an operating budget request for the two years of a Congress. The chair of each committee usually introduces a House resolution with his or her committee's proposed authorization. Typically, these actions take place during late February, with committees approving their proposed budgets at a committee organizing meeting. The individual resolutions are referred to the Committee on House Administration, which may hold hearings on each committee's request. The chair and the ranking minority Member from each committee are typically the only witnesses who testify at these hearings, giving them an opportunity to explain and defend their budgets. After completion of the hearings, the chair of the Committee on House Administration introduces the omnibus funding resolution for that two-year Congress, which, after its referral to the Committee on House Administration, serves as the legislative vehicle for committee markup. The resolution is typically reported out of committee without amendment. The omnibus resolution is usually considered by the House during March of the first session of a Congress, and agreed to with little debate. Prior to this consideration, during the first three months of each new Congress, House Rule X, clause 7, authorizes interim funding for House committees based on their authorizations from the preceding Congress. Specifically, under Rule X, clause 7, between January 3 and March 31 of an odd-numbered year, a committee is authorized to spend in a single month 9% of the committee's last annual authorization. Funding for all House committees is included in the Legislative Branch Appropriations bill. Line-item appropriations are not made for individual committees, except the Committee on Appropriations. Instead, funding is provided as a single total amount for all committees (except the Committee on Appropriations), under the heading "Committee Employees" and the subheading "Standing Committees, Special and Select," within the House account "Salaries and Expenses." Since authorizations for committee funds are made on a biennial, calendar-year basis and appropriations are made annually on a fiscal-year basis, there is no one-to-one correspondence between the authorization and the appropriations in any given year. For any individual biennial funding resolution, funds may be drawn from money appropriated in three different fiscal years ; for the 115 th Congress, the overlapping timelines of fiscal years, calendar years, and committee expense authorization periods are visualized in Figure 1 . Finally, although appropriations are made annually for House committee funding, the language typically states that the funding shall remain available until the end of the second calendar year of the current Congress. For example, in both FY2015 and FY2016, committee funds were appropriated to remain available until December 31, 2016. Clause 6(d) of House Rule X requires that "the minority party [be] treated fairly in the appointment" of committee staff employed pursuant to such expense resolutions. In recent years, the House majority leadership has encouraged its committee leaders to provide the minority with one-third of the committee staff and resources authorized in the biennial funding resolutions. Statements made by the chair and ranking Member of the Committee on House Administration at the beginning of its committee funding review in recent Congresses indicate a general consensus that all House committees should provide at least one-third minority staffing. Figure 2 shows the aggregate committee funding authorization level from 1996 to 2018, in both nominal and real dollars. Since 1996, aggregate committee funding has increased by slightly more than 68%, from $79.4 million in 1996 to $133.6 million in 2018, for an average annual increase of 3.1%. In constant dollars, however, aggregate funding has increased only 8.0% between 1996 and 2017, for an annual average real increase of less than four-tenths of 1%. The Committee on House Administration held a hearing on committee expense requests on February 15 and 16, 2017. Chairs and ranking Members from each standing and select committee (except the Committee on Appropriations) testified on their budget requests. Representative Gregg Harper, chair of the panel, indicated that the committee had "worked to strike the right balance" in providing funds for committees while remaining conscious of costs. During the hearing, the chairman and the ranking minority Member, Representative Robert Brady, reiterated the long-standing expectation that committee resources would reflect a distribution of two-thirds of the committee staff to the majority, and one-third to the minority, and a similar distribution of nonstaff resources. In their testimony, most committee chairs and ranking minority Members explicitly acknowledged mutually satisfactory arrangements had been reached regarding the distribution of committee staff and other resources. On March 7, 2017, H.Res. 173 , providing for the expenses of certain committees of the House of Representatives in the 115 th Congress, was introduced and referred to the Committee on House Administration. On March 8, 2017, the Committee on House Administration marked up H.Res. 173 , which was reported to the House by voice vote. In the second session of the 115 th Congress, on March 7 and June 26, 2018, the Committee on House Administration considered committee resolutions 115-9 and 115-19, respectively. These resolutions allocated funds from the reserve fund for unanticipated expenses, established by H.Res. 173 . In both instances, the committee agreed to the resolution by voice vote and without amendment. On March 17, 2017, the House agreed to H.Res. 173 by voice vote. The resolution authorized a total of $266.3 million for committee expenses, $132.7 million for the first session and $133.6 million for the second session. Appropriations for House standing and select committees are typically included annually in the Legislative Branch Appropriations bill. The following amounts were appropriated for the expenses of House standing committees (except for the Committee on Appropriations) in recent appropriations bills: In FY2019, $127.9 million was appropriated in H.R. 5895 , the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019, to remain available until December 31, 2020. In FY2018, $127.1 million was appropriated in H.R. 1625 , the Consolidated Appropriations Act, 2018, to remain available until December 31, 2018. In FY2017, $127.1 million was appropriated in H.R. 244 , the Consolidated Appropriations Act, 2017, to remain available until December 31, 2018. In FY2016, $123.9 million was appropriated in H.R. 2029 , the Consolidated Appropriations Act, 2016, to remain available until December 31, 2016. In accordance with the regulations contained in the Committee Handbook, "Committee funds are provided to pay ordinary and necessary expenses incurred by committee Members and employees in the United States." Ordinary and necessary expenses are defined as "reasonable expenditures in support of official committee business that are consistent with all applicable Federal laws, Rules of the House of Representatives, and regulations of the Committee on House Administration." All expenditures of a committee are subject to review by its committee chair. Funding "may not be used to defray any personal, political or campaign-related expenses, or expenses related to a Member's personal office." Committees may employ permanent staff, consultants, detailees, fellows, interns, temporary and shared employees, and volunteers. The terms and conditions of employment for committee staff are determined by the committee chair. Total staff ceilings for each committee are set by the Speaker. Employees of a House committee are covered by the Congressional Accountability Act. Domestic travel including transportation, lodging, and meals (excluding alcohol) is reimbursable from committee funds. Travel expenses may not be for personal or political campaign events and may not exceed 60 consecutive days. Foreign travel is coordinated through the State Department Travel Office and is subject to House Rule X, clause 8(b)(3), whereby each Member and employee on foreign travel must submit an itemized report of expenses to the committee chair. To better understand how committees have used their authorized funds, the following sections provide an analysis of annual committee expenditures during several different legislative years. Specifically, committee expenditures are analyzed to determine (1) the percentage of each committee's annual authorization that is expended, and (2) major categories of committee spending. Data on yearly committee expenditures were compiled using the quarterly Statement of Disbursements of the House , which reports all individual House expenditures disbursed during the previous quarter. Because late-arriving bills for committee expenses may be paid for up to two years following the end of a fiscal year for which funds are appropriated, obligations incurred by a committee during a particular legislative year are often paid over the course of multiple calendar years. For example, H.R. 244 , the Consolidated Appropriations Act for Fiscal Year 2017, provided that appropriations for House committees remain available until December 31, 2018. This would suggest that financial obligations made by committees in 2017 may be paid with remaining FY2017 appropriations through the quarter ending December 31, 2020. Consequently, the total expenditures of a committee in any given legislative year are calculated using quarterly Statement of Disbursements reports from both the year in which the committee operated, as well as subsequent years. The following analysis calculates total disbursements made for legislative years 2010 through 2015, years for which House Statements of Disbursements are available electronically, and the bulk of late-arriving bills as described above have been received. In addition, data on disbursements from a sample of earlier legislative years—1997, 1998, 2003, and 2004—are analyzed in order to detect any longer-term trends in how committee funds have been used. As shown in Figure 3 , the majority of committees between 2010 and 2015 used almost all of the funds authorized to them. Specifically, approximately 55% of committees spent 95% or more of their authorization; approximately 77% of committees spent 90% or more of their authorization; and approximately 98% of committees spent 80% or more of their authorization. House spending is categorized by the standard budget object classes used for the federal government. These include personnel compensation; personnel benefits; travel; rent, communications, and utilities; printing and reproduction; other services; supplies and materials; transportation of things; and equipment. The disbursement volumes also contain a category for franked mail. Table 1 shows percentages for each object class. The largest category of spending, accounting for approximately 91% of total committee spending during the years analyzed, was for "Personnel compensation." Beyond these staff expenses, committees spent an aggregate of 3.4% of their expenditures on "Equipment," just over 2% on "Supplies and Materials," and less than 1% on travel. The use of most committee funds on personnel is consistently true both across time and across individual committees.
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Funding for House committees (except for the Committee on Appropriations) follows a two-step process of authorization and appropriation. Operating budgets for all standing and select committees of the House (except for the Committee on Appropriations) are authorized pursuant to a simple resolution, and funding is provided in the Legislative Branch Appropriations bill and other appropriations acts. Subsequent resolutions may change committee authorizations. On March 17, 2017, the House adopted H.Res. 173, providing for the expenses of certain committees of the House of Representatives in the 115th Congress, by voice vote. The resolution authorized a total of $266.3 million for committee expenses, $132.7 million for the first session and $133.6 million for the second session. The use of committee funds is subject to chamber rules, law, and regulations promulgated by the Committee on House Administration, the Commission on Congressional Mailing Standards, and the Ethics Committee. Committee funds may be used only to support the conduct of official business of the committee. They may not be used for personal or campaign purposes. Information on individual committee spending is published quarterly in the Statements of Disbursement of the House. This report is organized in three sections. The first provides an overview of the committee funding process in the House and analyzes funding levels since 1996. The second reviews House floor and committee action on committee funding in the 115th Congress. The final section summarizes the rules and regulations that structure the use of committee funds, and analyzes committee spending patterns during several previous years.
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The President is responsible for appointing individuals to positions throughout the federal government. In some instances, the President makes these appointments using authorities granted by law to the President alone. Other appointments are made with the advice and consent of the Senate via the nomination and confirmation of appointees. Presidential appointments with Senate confirmation are often referred to with the abbreviation PAS. This report identifies, for the 113 th Congress, all nominations to full-time positions requiring Senate confirmation in 40 organizations in the executive branch (27 independent agencies, 6 agencies in the Executive Office of the President [EOP], and 7 multilateral organizations) and 4 agencies in the legislative branch. It excludes appointments to executive departments and to regulatory and other boards and commissions, which are covered in other CRS reports. Information for this report was compiled using the Senate nominations database of the Legislative Information System (LIS) at http://www.lis.gov/nomis/ , the Congressional Record (daily edition), the Weekly Compilation of Presidential Documents , telephone discussions with agency officials, agency websites, the United States Code , and the 2012 Plum Book ( United States Government Policy and Supporting Positions ). Related Congressional Research Service (CRS) reports regarding the presidential appointments process, nomination activity for other executive branch positions, recess appointments, and other appointments-related matters may be found at http://www.crs.gov . During the 113 th Congress, President Barack Obama submitted 69 nominations to the Senate for full-time positions in independent agencies, agencies in the EOP, multilateral agencies, and legislative branch agencies. Of these nominations, 34 were confirmed, 34 were returned to the President, and 1 was withdrawn. Table 1 summarizes the appointment activity. The length of time a given nomination may be pending in the Senate varies widely. Some nominations are confirmed within a few days, others are not confirmed for several months, and some are never confirmed. For each nomination covered by this report and confirmed in the 113 th Congress, the report provides the number of days between nomination and confirmation ("days to confirm"). The mean (average) number of days elapsed between nomination and confirmation was 123.9. The median number of days elapsed was 104.0. Under Senate Rules, nominations not acted on by the Senate at the end of a session of Congress (or before a recess of 30 days) are returned to the President. The Senate, by unanimous consent, often waives this rule—although not always. This report measures the "days to confirm" from the date of receipt of the resubmitted nomination, not the original. Agency profiles in this report are organized in two parts: (1) a table listing the organization's full-time PAS positions as of the end of the 113 th Congress and (2) a table listing appointment action for vacant positions during the 113 th Congress. As mentioned earlier, data for these tables were collected from several authoritative sources. As noted, some agencies had no nomination activity during this time. In each agency profile, the first of the two tables identifies, as of the end of the 113 th Congress, each full-time PAS position in the organization and its pay level. For most presidentially appointed positions requiring Senate confirmation, pay levels fall under the Executive Schedule, which, as of January 2014, ranged from level I ($201,700) for Cabinet-level offices to level V ($147,200) for lower-ranked positions. The second table, the appointment action table, provides, in chronological order, information concerning each nomination. It shows the name of the nominee, position involved, date of nomination, date of confirmation, and number of days between receipt of a nomination and confirmation, if confirmed. It also notes actions other than confirmation (i.e., nominations returned to or withdrawn by the President). The appointment action tables with more than one nominee to a position also list statistics on the length of time between nomination and confirmation. Each nomination action table provides the average days to confirm in two ways: mean and median. Although the mean is a more familiar measure, it may be influenced by outliers, or extreme values, in the data. The median, by contrast, does not tend to be influenced by outliers. In other words, a nomination that took an extraordinarily long time might cause a significant change in the mean, but the median would be unaffected. Examining both numbers offers more information with which to assess the central tendency of the data. Appendix A provides two tables. Table A-1 relists all appointment action identified in this report and is organized alphabetically by the appointee's last name. Table entries identify the agency to which each individual was appointed, position title, nomination date, date confirmed or other final action, and duration count for confirmed nominations. In the final two rows, the table includes the mean and median values for the "days to confirm" column. Table A-2 provides summary data on the appointments identified in this report and is organized by agency type, including independent executive agencies, agencies in the EOP, multilateral organizations, and agencies in the legislative branch. The table summarizes the number of positions, nominations submitted, individual nominees, confirmations, nominations returned, and nominations withdrawn for each agency grouping. It also includes mean and median values for the number of days taken to confirm nominations in each category. Appendix B provides a list of department abbreviations. Appendix A. Summary of All Nominations and Appointments to Independent and Other Agencies Appendix B. Agency Abbreviations
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The President makes appointments to positions within the federal government, either using the authorities granted by law to the President alone or with the advice and consent of the Senate. This report identifies all nominations that were submitted to the Senate for full-time positions in 40 organizations in the executive branch (27 independent agencies, 6 agencies in the Executive Office of the President [EOP], and 7 multilateral organizations) and 4 agencies in the legislative branch. It excludes appointments to executive departments and to regulatory and other boards and commissions, which are covered in other reports. Information for each agency is presented in tables. The tables include full-time positions confirmed by the Senate, pay levels for these positions, and appointment action within each agency. Additional summary information across all agencies covered in the report appears in the appendix. During the 113th Congress, the President submitted 69 nominations to the Senate for full-time positions in independent agencies, agencies in the EOP, multilateral agencies, and legislative branch agencies. Of these 69 nominations, 34 were confirmed, 1 was withdrawn, and 34 were returned to him in accordance with Senate rules. For those nominations that were confirmed, a mean (average) of 123.9 days elapsed between nomination and confirmation. The median number of days elapsed was 104.0. Information for this report was compiled using the Senate nominations database of the Legislative Information System (LIS) at http://www.lis.gov/nomis/, the Congressional Record (daily edition), the Weekly Compilation of Presidential Documents, telephone discussions with agency officials, agency websites, the United States Code, and the 2012 Plum Book (United States Government Policy and Supporting Positions). This report will not be updated.
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December 16, 2014. The President signed into law the Consolidated and Further Continuing Appropriations Act, 2015 ( H.R. 83 / P.L. 113-235 ). The House had passed the legislation on December 11, 2014; the Senate passed it December 13, 2014. November Amendments to the Request . On November 5 and 10, 2014, the Administration submitted amendments to its FY2015 budget request to address the Ebola crisis and the threat posed by the Islamic State (IS), respectively. The Administration requested an additional $2.89 billion in emergency funding through international affairs accounts for activities related to Ebola, including a $792 million contingency fund. An additional $520 million was requested for the international affairs OCO budget to support efforts to defeat IS and address humanitarian needs related to IS attacks. Together with the June 2014 OCO amendment, these amendments increased the total FY2015 State, Foreign Operations and Related Programs request to $53.50 billion. Continuing Resolution s (CR). The House and Senate were unable to pass regular appropriations bills before the end of the fiscal year and, therefore, passed H.J.Res. 124 , Continuing Appropriations Resolution, 2015, on September 17 and 18, respectively. The President signed the CR into law ( P.L. 113-164 ) on September 19, 2014. The CR funded government agencies and programs at an across-the-board reduction of .0554% below the Consolidated Appropriations Act, 2014 ( P.L. 113-76 ), funding rate through December 11, 2014. OCO funds were not subject to the reduction. The CR included some anomalies, with one for foreign affairs: Section 145 provided the Department of State with the ability to exceed the rate for operations that would otherwise apply to funds in a number of accounts—International Broadcasting Operations, Economic Support Fund (ESF), Nonproliferation, Anti-terrorism, Demining, and Related Programs (NADR), International Narcotics Control and Law Enforcement (INCLE), and Foreign Military Financing (FMF)—to sustain assistance for Ukraine and other independent states in that region. Two additional CRs— P.L. 113-202 and H.J.Res. 131 —kept the government funded until the full-year appropriations bill was signed into law. June OCO Amendment . On June 27, the Administration amended its OCO request, asking for an additional $1.35 billion in State-Foreign Operations OCO funds (out of a total $65.8 billion OCO request, mostly for Department of Defense programs) for peacekeeping and counterterrorism activities. Committee Action. On June 19, 2014, the Senate Appropriations Committee introduced and passed S. 2499 , an SFOPS appropriation for FY2015 that totaled $47.18 billion. The House Appropriations Committee introduced and passed an FY2015 SFOPS appropriation, H.R. 5013 , on June 27, which recommended total funding of $48.45 billion. (See Appendix A for account-by-account Request, House and Senate comparisons.) 302(b) Allocations. On April 8, 2014, the House agreed to a $48.45 billion allocation for State-Foreign Operations accounts for FY2015; the Senate approved an SFOPS allocation of $48.48 billion (see Table 1 ) on May 22. Hearings. In March and April 2014, Secretary of State John Kerry and U.S. Agency for International Development (USAID) Administrator Rajiv Shah testified on the request before the House and Senate Appropriations Committees, as well as the House Foreign Affairs and the Senate Foreign Relations Committees. On July 17, 2014, Deputy Secretary of State for Management and Resources Heather Higginbottom testified before the House Budget Committee regarding the amended OCO request. On November 11, 2014, Deputy Secretary Higginbottom testified before the Senate Appropriations Committee on the State Department response to the Ebola crisis. Budget Submission. The Obama Administration submitted its original FY2015 budget request, including for International Affairs (function 150), to Congress on March 4, 2014. Of the total FY2015 foreign a ffairs request, $17.09 billion wa s for State Department Operations and related agencies, a 7.8% increase from the FY2014 funding estimate of $15.86 billion. For Foreign Op erations, the Administration requested $32.99 billion, a 2.2% decrease from the FY2014 estimate of $33.72 billion. The State, Foreign Operations, and Related Programs appropriations fund a variety of U.S. foreign affairs programs and activities. These include State Department and U.S. Agency for International Development (USAID) operations, bilateral economic and security assistance, contributions to international organizations and multilateral financial institutions, public diplomacy, such as educational and cultural exchanges and international broadcasting, and certain international commissions. The amended FY2015 foreign affairs request (about 1% of the total FY2015 budget request) would have increased overall SFOPS funding by 8.8% from the FY2014 funding estimate. It would have increased State Department and related activities (about one-third of the foreign affairs request) by 8.3% and foreign aid activities (about two-thirds of the request) by 7.7%. The amended Overseas Contingency Operations (OCO) portion of the FY2015 request was 14.6%, compared to 13.3% in FY2014, and 5% of the amended request was designated as emergency Ebola funding. In addition to its budget request, the Administration proposed a new Opportunity, Growth, and Security Initiative that, it said, was to provide funds in a budget-neutral way for furthering its other priorities. Figure 1 provides a breakout of the total FY2015 SFOPS appropriations budget request. For the FY2015 foreign affairs budget, the Administration requested $7.785 billion (as amended) for OCO—more than double the $3.8 billion requested in FY2014, and 19% more than Congress appropriated for that year (after rescissions). The Administration sought to expand OCO use in FY2015 beyond Iraq, Afghanistan, and Pakistan to include support for the Syrian opposition and Syrian refugees. The Administration also requested OCO funds for a new Peacekeeping Response Mechanism (PKRM) intended to provide more flexibility to address peacekeeping missions in Africa and other regions experiencing conflict. The House committee bill, H.R. 5013 , included $5.9 billion in OCO funds, stating that OCO funds should be phased out over time. The House Appropriations Committee included OCO funds beyond Iraq, Afghanistan, and Pakistan to include Middle East and North Africa, counterterrorism, counterinsurgency, and humanitarian crises resulting from conflict. The Senate committee proposal, S. 2499 , included $8.6 billion in OCO funds and specifically stated that OCO funds would be available beyond Iraq, Afghanistan, and Pakistan to also include Syria, Jordan, Central America, and for extraordinary costs of U.S. response for humanitarian crises in the Middle East, Africa, and South Asia, among other purposes. The final FY2015 appropriation included $9.26 billion for OCO, more than either House or Senate proposals, largely because of additional OCO funding to counter the Islamic State (IS). History of OCO in International Affairs. Congress passed emergency supplemental appropriations for international affairs each year between FY2006 and FY2010, primarily for civilian activities related to U.S. military operations in Iraq and Afghanistan. No supplementals were part of the FY2011 foreign affairs budget. In FY2012, the Administration requested foreign affairs OCO funds for the first time. That year the Administration requested $8.7 billion for OCO for the frontline states of Iraq, Afghanistan, and Pakistan. Congress appropriated $11.2 billion, however, for frontline states, as well as for other uses, such as Peacekeeping Operations in Somalia, Economic Support Funds (ESF) for Somalia and Yemen, and Nonproliferation, Anti-terrorism, Demining and Related Programs (NADR) for Kenya. The FY2015 request for OCO was about 95% of what Congress enacted in FY2012. (See Table 2 .) Since FY2012, the Administration's foreign affairs budget has distinguished between what it has interchangeably called "enduring", "base," or "ongoing" funding, and funding to support "overseas contingency operations" (OCO), described in budget documents as "extraordinary, but temporary, costs of the Department of State and USAID in Iraq, Afghanistan, and Pakistan." Congress has adopted this approach, but has defined OCO more broadly. In each of the last three years, Congress appropriated more OCO funding for foreign affairs than was requested, and for a broader range of countries and activities. Within the foreign affairs budget in FY2012, the Obama Administration requested $8.7 billion for OCO, and Congress enacted $11.2 billion. In FY2013, the Administration requested $8.2 billion for OCO, but Congress enacted $10.8 billion (net rescissions). The FY2014 request continued this pattern; the Administration requested $3.8 billion of OCO funds for foreign affairs, while Congress appropriated $6.5 billion (net rescissions). The OCO designation has significant budget implications, as OCO funds are subject to sequestration, but do not count against the spending caps established by law (see text box below). The Obama Administration added to its FY2015 budget a new government-wide proposal referred to as the Opportunity, Growth, and Security Initiative. This proposed $56 billion fund was divided equally between defense and nondefense expenditures. The cost of the initiative was to be offset largely with targeted spending cuts and closed tax loopholes, Administration officials stated. According to the Administration, this initiative, if it had passed, would have provided additional funding (over $750 million) beyond the regular international affairs request to address specific foreign affairs priorities that have been restricted by sequestration. Proposed funding for the initiative covered the following: $350 million to the Millennium Challenge Corporation (MCC), above the requested $1 billion, to develop overseas economic environments and help U.S. businesses be more competitive; $300 million within the Global Health Programs (GHP) account to encourage more funding from other donors to the Global Fund for fighting AIDS, TB, and Malaria; funds for Maternal and Child Health activities within GHP to provide extra momentum toward ending preventable maternal and child deaths; $80 million in multilateral aid for the Global Agriculture and Food Security Program; $29.9 million for the Board for International Broadcasting's satellite transmission program, estimated to provide a 31% cost savings; an unspecified amount of funding within the Development Assistance (DA) account to support bilateral and multilateral food security in the Feed the Future Initiative; and support within DA for USAID's Global Development Lab to encourage science, technology, innovation, and partnerships that would promote development. Neither bills in the House, the Senate, nor the enacted legislation included funding for this proposal. (Funding proposed through the Opportunity, Growth, and Security Initiative is not part of the FY2015 funding levels discussed elsewhere in this report.) The SFOPS 10-year funding trend indicates that total foreign affairs funding increased 48% from the low in FY2006 to the high in FY2012. The peak year for enduring funding , however, was FY2009 when it was 60% higher than in FY2006. While total foreign affairs funding declined from FY2012-FY2014, the enduring funds decreased because of the FY2013 sequestration, but increased slightly in FY2014. The decline in total foreign affairs funds after FY2012 suggests that even as the enduring funds increase there is a trade-off between enduring and OCO money in order to reduce the overall total. (Some argue, however, that enduring funding trends are a more accurate measure than totals that include temporary OCO funds.) Regardless, it is likely that the recent-year decline in foreign affairs funding can be attributed somewhat to the BCA and a scaled-down presence in Iraq and Afghanistan. The FY2015-enacted level shows a slight decrease in enduring funds and the peak funding level for OCO/emergency funds, including funds to address IS and the Ebola crisis. (See Table 2 and Figure 2 below.) The Administration's FY2015 request, as amended, sought to increase funding for the State Department and Related Accounts category by 8.3% over FY2014 estimated levels, to $17.18 billion. Both "base" (or "enduring") funding and Overseas Contingency Operations (OCO) funding would have grown under the proposal, by 5.3% and 27.3%, respectively. In addition, the FY2015 request, as amended, included $41 million in emergency funding. The overall composition of this portion of the request is shown in Figure 3 . Figure 3 shows funding levels for selected State operations accounts for FY2013, FY2014, the FY2015 amended request, House and Senate proposals, and the adopted Consolidated Appropriations Act for 2015, H.R. 83 . Under the Administration's request, Diplomatic and Consular Programs (D&CP), the department's main operating account, would have grown by 4.5%, to $8.34 billion. The State Department's second-largest administrative account is Embassy Security, Construction and Maintenance (ESCM); the FY2015 proposal called for $2.28 billion, a 14.8% decrease from the FY2014 estimated level of $2.67 billion. In addition, the "Related Programs" category would have been cut by 21% under the FY2015 request, which included significant proposed cuts to funding appropriated for the East-West Center, the Asia Foundation, and National Endowment for Democracy (cuts of 35%, 29%, and 23% respectively). The pending House and Senate bills would have fully funded the Administration's ESCM request. The House's measure would have provided a 3% increase in D&CP funds from FY2014 levels (rather than the 4.5% growth requested by the Administration), while the Senate measure would have reduced D&CP by 2%. Both H.R. 5013 and S. 2499 would have funded the "Related Programs" category at a higher level than the Administration's request, rejecting proposed reductions of funding to the National Endowment for Democracy and the Asia Foundation. While Senate appropriators would have increased funding for the East-West Center, as was enacted, the House measure had proposed to zero out the Center's funding altogether. The Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 / H.R. 83 ), reduced funding for D&CP by slightly less than 2%. The ESCM account was reduced by more than 13% from 2014 levels, although more funding was provided than was requested by the Administration. While accounts covering international peacekeeping operations and contributions to international organizations grew by 15.7% over 2014 levels under the act, the funding enacted for this category was $906 million less than the Administration requested. The following sections outline a number of elements within the State Operations account request, which the department referred to as "Diplomatic Engagement" in its FY2015 presentation to Congress. In its FY2015 budget proposal, the department sought to continue shifting operational funding for the frontline states from OCO to enduring funding accounts, contending that the likely long-term presence and activities of the department in these countries makes predictable, non-emergency funding streams essential for planning and operational purposes. In Iraq, the Department of State became the lead agency for all U.S. programs after the departure of U.S. military forces in late 2011, and an initially ambitious diplomatic presence has been dramatically curtailed in the last two years. Under the FY2015 proposal, new funding requested for State operations in Iraq would have increased by 12% from FY2014 levels, to $1.2 billion. The FY2015 funding request was nearly twice the FY2013 actual level and more than double the FY2013 enduring funding. Officials explained that more appropriated funds were being requested because less carryover funding was available in FY2015 than in previous years. The request included $250 million in OCO funding for a new permanent consulate in Basrah, Iraq, a key oil industry hub. The extent of the U.S. military presence in Afghanistan remained undetermined at the time the Department of State prepared its budget request. The request assumed a continued civilian presence in various parts of the country, including the Embassy in Kabul, consulates in Herat and Mazar-e-Sharif, and some presence in Jalalabad and Kandahar. The overall FY2015 request for State Operations in the country was for $961 million, a 15% increase over FY2014 estimated levels but a 40% drop from FY2013 actual funding. The requested funding would have allowed additional security measures to be put in place should all U.S. military forces have pulled out by the end of 2014, according to State officials. Pakistan, the third frontline state, would have seen its funding levels for State Operations decrease by 5% under the FY2015 proposal, from an estimated $140.4 million in FY2014 to $120 million. While requested enduring funds would grow by 56% as State shifts to a long-term diplomatic platform, OCO funding would be reduced by 44%. Operational funding totals for Pakistan are declining because prior year efforts to put into place permanent facilities and security to support the U.S. diplomatic presence are now completed, according to State officials. The likelihood of rapid change in staffing and programmatic requirements in the frontline states led House appropriators to avoid designating specific funding recommendations by country for the frontline states in H.R. 5013 . The House committee report directed the Administration "to refine its plans for programs, facilities, and staff in consultation with the Committees on Appropriations." Regarding Afghanistan, Section 7044 of the bill prohibited the use of funding for positions not notified to the committees or for additional contractors, unless "necessary to protect such facilities or the security, health, and welfare of United States personnel." It also required a report detailing Department of State/USAID transition and security plans. Among the Senate's provisions regarding the frontline states, S. 2499 specified that any funds spent on property for new diplomatic facilities in the frontline states are subject to prior consultation and regular notification of the Committees on Appropriations. The bill did not provide funds for a New Consulate Compound (NCC) in Basrah, Iraq, as requested by the Administration. Senate appropriators noted that "no agreement has been reached on an appropriate site," and specified that the funding requested for Basrah—$250 million—could instead be used for general security purposes or operations in Iraq. Several provisions in the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ), indicated continued congressional interest in the frontline states in several provisions, even if the act did not prescribe specific funding levels. The act directed the Secretary of State and USAID Administrator to "consult with the Committees on Appropriations on a regular and ongoing basis on operations and assistance for Afghanistan, Pakistan, and Iraq." The explanatory statement to the act indicates that the funding directives in the House and Senate reports for Afghanistan, Pakistan, and Iraq should be replaced by consultation with the Committees on Appropriations, and reporting on proposed funding levels for these countries. Other more specific measures include a ban on funding for the construction of a permanent U.S. consulate in Iraq on property for which no land-use agreement has been entered into (Section 7041), and a funding limitation regarding any additional federal personnel, contractors, or aviation facilities or assets in Afghanistan (Section 7044). The International Organizations accounts, including Contributions to International Organizations (CIO), Contributions for International Peacekeeping Activities (CIPA), and a new Peacekeeping Response Mechanism (PKRM) proposed by the Administration, would have seen a 54% jump in funding under the FY2015 request, to $4.50 billion. This includes $35 million requested on November 5 to support the U.N. Mission for Emergency Ebola Response (UNMEER). The U.S. share of assessed contributions to the U.N. regular budget is 22%; other U.N. members are to contribute the remaining 78% of the mission's costs, estimated at about $160 million through the end of 2015. The increase of $1.39 billion for the accounts over FY2014 estimated levels was largely intended for peacekeeping purposes, including operations in Mali, Darfur, Somalia, and Central African Republic, according to the Administration. The CIO account funds the U.S. share of the assessed budgets of 45 international intergovernmental organizations, including the United Nations. The FY2015 request sought $1.5 billion under this category, a 13.2% increase from FY2014 estimated levels that would have boosted funding to the World Health Organization, the Food and Agriculture Organization, NATO, and the International Labor Organization. The CIO request did not include funds for the United Nations Educational, Scientific and Cultural Organization (UNESCO) due to UNESCO member states' decision to admit "Palestine" as a member. Administration officials suggested they would continue to seek a waiver from Congress to fund the organization. The House measure would have provided 11.7% less than originally requested for Contributions to International Organizations, or $1.34 billion, while the Senate measure recommended all but roughly $2.45 million of the original request—it would have reduced funding for the U.S. contribution to the Organization of American States because of concern about what it deemed the OAS's opaque personnel practices and insufficient cost-cutting. The Administration's CIPA request of $2.52 billion would have increased that account by 43% from FY2014 estimated levels; the request would have funded U.S. assessed contributions to the special accounts for 11 U.N. peacekeeping operations and three international war crimes tribunals. In addition, the Administration's FY2015 request, as amended, included a $428 million Peacekeeping Response Mechanism (PKRM), a new proposal intended to support urgent peacekeeping needs, including $278 million for a recently authorized U.N. peacekeeping mission in the Central African Republic. The OCO funds requested for the PKRM would have allowed State to support contingency operations without taking funds from other peacekeeping efforts in progress or returning to Congress for off-cycle budgetary requests, officials suggested. Together, these peacekeeping requests represented a nearly 77% increase over FY2014 estimated funding. House appropriators recommended funding the CIPA account at the FY2014 estimated level of $1.77 billion. The Senate measure, on the other hand, would have fully funded the Administration's request for $2.52 billion for assessed contributions to peacekeeping operations, although it recommended moving funding previously found under the State Operations CIPA account to a Foreign Operations account under the International Security Assistance title (title IV) and Overseas Contingency Operations (title VIII). The Senate committee report explains the move by stating "U.N. peacekeeping missions are a critical component of furthering U.S. security interests globally." Neither H.R. 5013 nor S. 2499 would have funded the PKRM requested by the Administration. Instead, the Senate committee measure recommended additional funding for the Complex Crisis Fund (CCF) as well as transfer authority to meet unanticipated peacekeeping requirements. The 2015 Consolidated and Further Continuing Appropriations Act, 2015, provided $1.47 billion for Contributions to International Organizations, of which $74 million was designated OCO funding; the appropriation explicitly does not include UNESCO funding. While the total represents a 10% increase from FY2014 levels, it falls $79 million short of the Administration's request. The CIPA account, while falling short of the Administration's request by about $400 million, also jumps in the FY2015 appropriations, by 20% over FY2014 levels. In the wake of the September 11, 2012, attack on U.S. personnel in Benghazi, Libya, congressional and executive branch efforts to better prepare U.S. diplomats and facilities abroad for security threats continue. In its FY2015 budget request, the Administration sought funding to continue to implement the initiatives launched under the Increased Security Proposal and meet the post-Benghazi Accountability Review Board's (ARB's) recommendations. The request included approximately $3.1 billion in Worldwide Security Protection (WSP) funds, to provide security personnel with technical tools and training; and approximately $1.5 billion in Worldwide Security Upgrades (WSU) funds to upgrade and maintain safe, secure diplomatic facilities. Within the Embassy Security, Construction, and Maintenance (ESCM) request was $986.5 million to provide for the Department of State's share of the Capital Security Cost Sharing (CSCS) program, an interagency shared funding mechanism designed to ensure each U.S. government agency represented abroad is paying its fair share of construction costs for new and more secure facilities. The amount requested was down from the $1.4 billion appropriated for this purpose for FY2014, a result of higher assessed contributions from other agencies into the common account. Department officials underlined that the CSCS request met the full $2.2 billion level called for by the post-Benghazi Accountability Review Board. The requested CSCS program funding would support the development of new diplomatic facilities in Sri Lanka, Paraguay, Saudi Arabia, Mexico, and Papua New Guinea, according to the Administration. The request also featured $44 million to fund recurring costs for the 151 additional Diplomatic Security (DS) personnel the Department of State has sought to hire after the Benghazi attacks. According to the department, it hired 113 employees under this category in FY2013, including 75 new DS agents; the 38 remaining employees were to be hired in FY2014. Table 4 summarizes recent funding for the three accounts containing the bulk of funding for diplomatic security measures: Worldwide Security Protection funding (for security programs including a worldwide guard force), Worldwide Security Upgrades funding (for bricks and mortar security needs, including construction of secure new embassy compounds), and Diplomatic Security Bureau D&CP funding. The FY2015 request transfers a significant portion of what had been DS Bureau D&CP funding in previous years to the WSP account, which offers greater flexibility. Figure 4 illustrates that under the FY2015 request, approximately 42% of the Department of State's operational funding would have gone to security-related accounts, a percentage that has seen significant growth in recent years (from roughly 22% as recently as FY2008). The House appropriators' measure would have fully provided for the Administration's WSP request and exceeded its request for WSU by nearly $50 million. The Senate Appropriations Committee, for its part, would also have fully funded the WSP request. However, S. 2499 would not have designated $250 million of WSU OCO funds for a New Consulate Compound (NCC) in Basrah, Iraq, as requested by the Administration, because "no agreement has been reached on an appropriate site." Instead, Senate appropriators would have included that amount as undesignated Embassy Security, Construction, and Maintenance funding, and specify that the resources requested for Basrah could instead be used for general security purposes or operations in Iraq. Neither bill specified an amount for the Bureau of Diplomatic Security within the Diplomatic & Consular Programs account. H.R. 83 / P.L. 113-235 , the Consolidated and Further Continuing Appropriations Act, 2015, met the Administration's $3.1 billion request for Worldwide Security Protection funds—growing the account by 12.7% over FY2014-enacted levels. While the act exceeds the $1.47 billion request for Worldwide Security Upgrades by $23 million, this represents a reduction of 7.7% from FY2014 levels. Many observers suggest that the Department of State has historically faced chronic personnel shortfalls, a situation worsened in recent years by a growing number of overseas positions to fill, especially in the frontline states. The ranks of mid-level Foreign Service officers are particularly thin, forcing junior personnel to serve in assignments meant for personnel of higher rank. In the past few years, to address these gaps as well as the need to better train its employees, the State Department, with the support of Congress, increased hiring, growing the Foreign Service by almost 20% since the end of FY2008 and the Civil Service by 7%; however, hiring slowed significantly since FY2011-FY2012 due to budget constraints. The Administration's FY2015 request for human resources initiatives (under Diplomatic & Consular Programs) was the same as it requested in FY2014, a total of $2.60 billion—a reduction of 5% from FY2014 estimated funding levels. While the Administration's FY2015 request indicates that it planned 206 new positions at the Department of State altogether, 153 of these would have been funded by consular fees and devoted to work such as meeting increasing visa demand. The request for the remaining 53 new positions for which State sought appropriated funding was described by department officials as a much more modest personnel request than in recent years. As a point of comparison, the State Department requested appropriated funding for 35 new positions in its FY2014 request, for 121 new positions in its FY2013 request, and for 133 in its FY2012 request. The new positions requested were to be focused on the following priorities, as indicated in Figure 5 : 23 positions for Economic Statecraft activities (including increased staffing in the Secretary's Chief Economist Office) at a cost of $9.1 million; 11 positions for the Bureau of Energy Resources; 4 positions for the Intelligence and Research Bureau; and 3 positions for the Secretary's Coordinator for Cyber Issues office. In support of the Administration's policy of rebalancing to the Asia-Pacific region, the Human Resources request also included three Public Diplomacy positions in the Foreign Service in China, Indonesia, and Mongolia at a cost of $1.3 million. By comparison, the department requested 29 new positions focused on the Asia-Pacific in its FY2014 budget proposal. Among other personnel-related issues, the department's request notably did not include additional funding for Overseas Comparability Pay (OCP), as it has in previous years. OCP adjustment is intended to bring the base pay of Foreign Service personnel posted overseas to levels comparable to their Foreign Service colleagues serving in Washington, DC, who receive locality pay. OCP has long been a priority of the Foreign Service rank-and-file, who argue that the discrepancy affects morale, retention of FSOs, and acts as a financial disincentive to serve overseas, including by its cumulative impact on retirement pay. The department sought $81.4 million in FY2014 funding to provide the third portion of a three-phase adjustment, the first two tranches of which were supported by Congress in previous years. The third OCP phase was not supported by Congress in FY2013 or FY2014 appropriations. Neither the House nor the Senate committee measures would have fully met the Administration's request for Human Resources funding. H.R. 5013 would have provided nearly $3 million less than requested, while S. 2499 came in at $64 million below the request. Senate appropriators also explicitly ruled out funding for the new positions requested by the Administration, and instead indicated that they would consider reprogramming proposals, looking particularly favorably on funding mechanisms based on savings or reduced redundancy and inefficiency. The 2015 Consolidated Appropriations Act allocated a total of $2.27 billion for Human Resources activities, and did not specifically designate funds for the new non-security positions requested. Appropriators instead directed the Secretary to assign lower-priority positions to higher priority staffing requirements, while signaling their continued willingness to consider requests to fund new positions on a case-by-case basis. Section 7034(l) continues the authority provided to the Department to provide foreign service OCP, but prohibits implementation of the third phase of the authority. With the exception of food aid, the Foreign Operations budget funds most traditional foreign aid programs, including bilateral economic aid, multilateral aid, security assistance, and export promotion programs. Funding for U.S. Agency for International Development (USAID) administration is also part of the foreign operations budget. The FY2015-enacted appropriation for Foreign Operations accounts was $36.10 billion, or 0.6% less than the amended request of $36.32 billion and a 7.1% increase from the FY2014 estimated appropriation. Table 5 shows foreign operations and total foreign aid funding by type for FY2013, FY2014, and the FY2015 amended request and pending House and Senate bills: Aid by Type. Although the request appeared to include a significant boost over current year funding for USAID Operating Expenses, the Administration explained that the increase was intended to offset anticipated decreases in other funding sources, including recoveries, reimbursement, and trust funds, and would have allowed for continued operations at the current level rather than growth. While the Administration originally proposed reductions in bilateral economic aid, largely driven by a 27.8% cut in International Disaster Assistance (IDA) and a 33.1% cut in Migration and Refugee Assistance (for which the Administration explained that actual available resources would not be reduced because of anticipated carry-over funding from previous years), supplemental requests have since brought the FY2015 bilateral economic aid request to 7% above FY2014. Much of the increase was in the IDA and USAID Global Health accounts for funds to address the Ebola crisis. Security Assistance also would have been reduced under the original request, but would have increased 8% with the additional FMF and Counterterrorism Partnership Fund spending proposed in the July 2014 amended OCO request and the November 2014 OCO amendment requesting additional FMF to counter IS. Multilateral aid would have increased as a result of an International Monetary Fund quota increase (+$315 million), partly offset by a proposed cut to the International Development Association (-4.8%) and no request for the Global Agriculture and Food Security Program ($133 million in FY2014). House appropriators stayed close to current year spending levels for most types of aid, with the exception of multilateral assistance, which they would have cut significantly (-17.6%). Senate appropriators would have increased USAID administrative funding (+16.8%), similar to the Administration's proposal, provided slightly less than current year funding for bilateral economic aid (-2.8%), and more than the current funding levels for multilateral aid (+8.1%). The Senate committee-approved bill also included significantly more security assistance (+17.0%) under Foreign Operations than the current budget, but this in large part reflected the bill's shift of assessed contributions to peacekeeping activities from the State Operations to Foreign Operations section of the bill. Peacekeeping funds (including both assessed and voluntary contributions) recommended by Senate appropriators totaled $2.86 billion, compared to $2.25 billion proposed by House appropriators, the Administration's amended request of $3.35 billion, and FY2014 funding of $2.20 billion. Both the House and Senate legislation were approved by committee before the Administration made multiple amendments to its request in response to world events, so comparisons between the congressional proposals and the Administration's request are of questionable value. The enacted appropriation, P.L. 113-235 , included an 8.6% increase from FY2014 levels for Administration of Foreign Assistance, but 10.5% less than requested. Bilateral economic programs increased 12.2% from FY2014, driven largely by emergency funding to address the Ebola crisis. Security assistance declined by 0.7%, and multilateral assistance declined by 7.3% from FY2014 funding. Aid by Country and Region. Under the original FY2015 request, bilateral aid allocated by region (excluding humanitarian aid and the Millennium Challenge Corporation) would have varied in some instances from current year funding. Aid to South and Central Asia would have increased by 13.2% compared to FY2014, while East Asia Pacific and the Near East would have seen modest increases of about 1.9% and 1.6%, respectively. Funding for Africa would have been reduced by about 1.6%. Europe and Eurasia would have seen a decrease of 6.3% under the original request, but the amended request for European security assistance would have provided an increase of 7.6%. Only the Western Hemisphere would have seen significant reductions (-10.1%) from current year regional spending under the request. The proportional allocation of aid among regions would not have changed significantly ( Figure 6 ). Nevertheless, these portions would change with the inclusion in the amended request of a $1 billion Counterterrorism Partnership Fund, nearly $3 billion to fight the Ebola virus, and additional funds to fight IS. Regional and country allocations for these proposed funds have not been specified. The House and Senate appropriators did not provide comprehensive information on country and regional allocation in their pending bills. However, the House committee report notably rejected the Administration's proposed cuts to Western Hemisphere countries and increased aid to the region by no less than $120 million above the Administration request to address needs related to the surge of undocumented migrants at the U.S.-Mexico border. House appropriators also included funding above the original request to support democracy in the Ukraine and former countries of the Soviet Union. Senate appropriators included an additional $100 million to address the migrant surge. P.L. 113-235 and the accompanying report did not provide comprehensive data on regional or country allocations, but did provide some details. Notably, Israel was allocated $3.1 billion in Foreign Military Financing (FMF); Egypt was allocated $1.3 million from FMF; the report noted that $120 million above the request was provided to implement a migration prevention and response strategy for Central America; and $139.28 million was provided for bilateral assistance to Ukraine. The top aid recipient countries under the original FY2015 request ( Table 6 ) were fairly consistent with FY2014 allocation estimates. As in FY2014 and recent years, the top recipient list for FY2015 includes long-standing strategic partners such as Israel, Egypt, and Jordan; frontline states in the war against terrorism, such as Pakistan; and global health focus countries. One notable change under the original request was the ranking of Iraq, which had been a top recipient since the 2003 U.S. invasion, but fell just under the top 15 in FY2015 with the requested allocation of $309 million. However, the request was made before the security situation in Iraq deteriorated in the midst of an IS insurgency, and a large portion of the additional funds requested and enacted for activities to fight IS would likely support activities in Iraq. Similarly, the increased funds requested and (at a lower level) enacted to fight Ebola may move some of the countries hardest hit by the virus to the top recipients list. Ongoing political unrest in the Middle East and North Africa has significant implications for U.S. national security goals, challenging the Administration and lawmakers to respond in a manner that best promotes U.S. strategic interests and democratic values. For the last two budget cycles, the Administration had requested funding ($770 million for FY2013 and $580 million for FY2014) and authorities to create a Middle East North Africa Incentive Fund (MENA-IF) that would provide flexible resources to meet diverse and rapidly evolving needs. Congress neither authorized nor appropriated funds for a MENA-IF account in FY2013, and needs in the region have been addressed through existing accounts. The FY2014 appropriations bill also did not include funding for a MENA-IF account, but the explanatory statement accompanying the bill noted that OCO funds may be used for stabilization and response efforts in the Middle East and North Africa. In the absence of a designated account, the Administration estimated that it had spent $3.62 billion on MENA response between January 2011 and February 2014 using funds in existing accounts. For FY2015, the Administration did not request a separate MENA IF account, but instead requested funds for MENA response through a variety of established accounts. The request included a total of $1.53 billion for MENA through the Migration and Refugee Assistance (MRA), International Disaster Assistance (IDA), Economic Support Fund (ESF), International Narcotics Control and Law Enforcement (INCLE), Nonproliferation, Antiterrorism, Demining and Related Programs (NADR), Transition Initiatives (TI), and Complex Crises Fund (CCF) accounts. Of this amount, $1.255 billion (almost all designated as OCO) was expected to be used for Syria regional response, $225 million for reform activities, and $50 million for contingencies. The Administration's June 2014 amendment to the OCO request included the addition of $1 billion in foreign operations funds for a Counterterrorism Partnership Fund, which was largely intended to address instability in the MENA region related to the crisis in Syria, but may be used to support counterterrorism capacity building in other regions. The November 2014 request for an additional $520 million to counter IS focused on the MENA region as well. While not recommending a total funding level for the region, the FY2015 House and Senate committee reports noted that their funding recommendations for several Foreign Operations accounts reflected evolving needs in the Middle East and North Africa, including the crisis in Syria, refugee assistance to Jordan and other neighboring countries, and the deteriorating security situations in Iraq and Libya. Senate appropriators also recommended $5 million for a multi-donor MENA Transition Fund. The explanatory report accompanying P.L. 113-235 noted that the legislation did not create a new account for Middle East activities, but that funding for "Middle East Response" was provided through several existing accounts, including $400 million in ESF, $15 million under NADR, $5 million under INCLE, and $110 million under FMF. In addition, the report noted that the legislation provided significantly more funding than requested for IDA and MRA, and that a significant portion of these funds (both base and OCO) are to be used to address humanitarian needs in the Middle East. The report also noted that the act provided flexibility within OCO accounts to transfer funds between accounts if necessary to address unanticipated contingencies. As discussed earlier in this report, the Administration appears to have embraced the congressional approach to OCO in the FY2015 request, asking for the OCO designation for funding beyond the frontline states of Iraq, Afghanistan, and Pakistan. The foreign operations OCO funding request for FY2015, as amended, totaled $5.47 billion and included funds for Syria/MENA response, peacekeeping in Somalia and Central African Republic, and security assistance to bolster European self-defense capabilities, among other things. This would have been a 6.6% increase from FY2014 Foreign Operations OCO funding estimates, with the increase largely attributed to ramped-up activities to counter IS in Iraq and Syria. In their pending FY2015 proposals, House and Senate appropriators took notably different approaches to OCO designation, with the House committee coming in only slightly above the Administration's original request of $3.89 billion and the Senate committee designating a much larger portion of foreign operations funds, $6.87 billion, as OCO. (Both bills were reported before the Administration revised its Foreign Operations OCO request upward to $5.47 billion). Much of the discrepancy reflected the Senate committee's application of the OCO designation to a much larger portion of humanitarian assistance (IDA and MRA) than the House committee, as well as the Senate committee moving assessed contribution to peacekeeping operations from the State Operations to the Foreign Operations titles of the bill. A significant portion of the Administration's OCO request was made by amendment after committee approval of the House and Senate legislation, making it difficult to accurately compare the Administration's request to congressional action. The enacted FY2015 appropriation, P.L. 113-235 , included $7.49 billion in foreign operations funds designated as OCO, a 46% increase over FY2014 and higher than the Administration's request and both the House and Senate bills. The legislation took a broad approach to the OCO designation, described as "the extraordinary costs of contingency operations in Afghanistan, Pakistan and Iraq; stabilization, security and response efforts, including in the Middle East and North Africa; and other programs that address counterterrorism, counterinsurgency, and humanitarian crisis." OCO funding for the MRA account increased 66% from FY2014, to address humanitarian needs in Africa, the Near East, and South Asia. Significant increases, for unspecified purposes, were provided in the ESF and IDA OCO accounts as well. The legislation also provided authority for funds within other OCO accounts to be transferred to the MRA and IDA OCO accounts. Humanitarian assistance has increased as a portion of the foreign operations budget since FY2013, driven largely by the crisis in Syria, which has resulted in an estimated 2.4 million refugees and 9.3 million internally displaced persons. As of March 2014, the United States had provided over $1.70 billion in Syria-related humanitarian assistance, including aid to neighboring countries that have taken in refugees, and the need is not expected to diminish in the near future. In addition to Syria, the Administration anticipated at the time of the request an ongoing need for humanitarian assistance in South Sudan, the Central African Republic, and for unforeseen conflicts and emergencies. For FY2015, the Administration originally requested humanitarian assistance totaling $4.80 billion, including $2.05 billion for Migration and Refugee Assistance (MRA), $50 million for Emergency Refugee and Migration Assistance (ERMA), $1.30 billion for International Disaster & Famine Assistance (IDA) and $1.40 billion for Food for Peace (food aid funded through the Agriculture appropriation). The original requested amount would have been a 24.8% decrease from the total FY2014 estimated appropriation for these accounts, but the Administration asserted that anticipated carryover funds from FY2014, the result of large MRA and IDA increases in FY2013 and FY2014, would enable the United States to meet anticipated humanitarian needs. However, with the growing humanitarian needs created by the Ebola epidemic in Africa and the deteriorating environment in Iraq and Syria, the Administration requested an additional $1.49 billion in IDA funds in November 2014. The amended humanitarian assistance request totaled $6.29 billion, or 23% more than the FY2014 funding estimate. Both the House and Senate committees recommended significantly more than the Administration's original request for humanitarian accounts in their FY2015 proposals, and slightly more than the amended request. The House recommendation totaled $6.376 billion and the Senate $6.362 billion, both consistent with FY2014 funding. P.L. 113-235 provided $7.91 billion for humanitarian accounts, or about 24% above the enacted FY2014 level and the House and Senate committee-approved legislation. MRA, ERMA, and Food for Peace were funded at approximately the FY2014 level, while total IDA funding was increased by nearly 85% to $3.33 billion, bolstered by more than $1.44 billion in new emergency funding to address the Ebola crisis and $1.34 billion designated as OCO (up from $924 million in FY2014). The International Affairs budget has supported international food assistance for decades, primarily through the Food for Peace (P.L. 480, Title II) program utilizing donated U.S. agricultural commodities. Unlike most foreign assistance, this program is authorized in farm bills and funded through the Agriculture appropriations bill. In the FY2014 budget proposal, the Administration proposed several food aid reforms, including a requirement that only 55% of aid be used to procure and ship U.S. produced commodities, allowing more aid to be procured regionally or provided as cash. The Administration also proposed that Food for Peace be funded through Foreign Operations appropriations. The FY2014 appropriation did not adopt these reforms, but new authorizing legislation in the 2014 Farm Bill (Agricultural Act of 2014, P.L. 113-79 ) did create more flexibility in the Food for Peace program and create a new local and regional purchase program authorized at $80 million annually for FY2014 through FY2018. For FY2015, the Administration requested $1.4 billion for Food for Peace, within the Agriculture appropriation, of which $1.1 billion would be for emergency food needs and $270 million for development programs. In total, this would have been a 4% reduction from the FY2014 food aid estimate, but the Administration noted that it requested an additional $80 million in the Development Assistance account for development food aid. In addition, the Administration requested new authority to use up to 25% of the Food for Peace request ($350 million) for cash-based food assistance to address emergencies, asserting that this authority would allow food aid to reach 2 million more beneficiaries without increasing funding. The FY2015 House and Senate Agriculture appropriations bills, as reported by committee, both included $1.466 billion for Food for Peace, matching the FY2014 enacted funding. P.L. 113-235 , the enacted appropriation, matched that funding level. For more information on food aid, see CRS Report R41072, International Food Aid Programs: Background and Issues , by [author name scrubbed]. The Obama Administration introduced three new Africa initiatives in 2013, joining the three major ongoing foreign assistance initiatives introduced by the Administration in 2009 and 2010—the Global Health Initiative, the Food Security Initiative (Feed the Future), and the Global Climate Change Initiative. The initiatives were priorities in the FY2015 budget request. Africa Initiatives. The request included $114.3 million for Africa initiatives, including $77 million for Power Africa, $27.3 million for Trade Africa, and $10 million for the Young African Leaders Initiative (YALI). Power Africa, led by USAID, aims to increase access to reliable, affordable, and sustainable power. It is designed to leverage the resources of 12 U.S. trade and development agencies to facilitate project transactions and private sector investment in the power sector. Total U.S. government resources for Power Africa are expected to total up to $7.8 billion over five years. Trade Africa focuses on improving trade and investment activities in East Africa, while YALI seeks to develop the professional and leadership skills of emergent young African leaders. The House committee report did not mention any of these initiatives, while the Senate committee report recommended $15 million for YALI and included language supporting Power Africa and requiring the Administration to report to Congress on the initiative's objectives and the metrics used to measure progress. P.L. 113-235 mentioned none of the initiatives, although the explanatory statement indicated $15 million was allocated for YALI. Global Health Initiative . The original request included $8.05 billion for global health programs, a 4.6% decrease from the estimated FY2014 funding and level with FY2013 funding. Of this, $1.35 billion was for the Global Fund, an 18.2% reduction from FY2014 funding. The Administration asserted that the requested funds were focused on creating an AIDS-free generation, ending preventable maternal and child death, and preventing the spread of infectious diseases. Compared to FY2014 allocations, Family Planning (+2.7%) and Malaria (+1.4%) programs would have seen modest increases, while HIV/AIDS (-5.0%), Nutrition (-12.2%), and Neglected Tropical Diseases (-13.5%) activities would have been reduced. Maternal and Child Health (-0.1%) funding would have remained almost level, though a larger proportion would have gone toward a proposed 14.3% increase for the Global Alliance for Vaccines and Immunizations (GAVI). The proposal included significant reductions for Vulnerable Children (-34.1%), Tuberculosis (-19.1%), and Pandemic Influenza (-31.0%) activities. In November 2014, the Administration amended its Global Health Programs request to add $340 million for Ebola response, bringing the total GHP request to $8.39 billion. It is not clear how the additional funding would have been allocated by sector. Both House and Senate appropriators included more funding than was requested for global health in FY2015, recommending $8.31 billion and $8.14 billion, respectively, but still less than FY2014 funding. As in past years, the most notable divergence in sub-allocations between the proposals was for reproductive health and family planning funding, for which the Senate committee recommended $539 million, consistent with the Administration's request, while the House committee recommended $461 million, or 14% less. In contrast, the House committee report recommended $300 million (5%) more than the Senate report for global HIV/AIDS programs. P.L. 112-235 provided $8.77 billion for the global health programs account, including $312 million for emergency Ebola response. This was a 3.9% increase from the FY2014 estimate and 4.5% more than the amended request, though base funding of $845 billion (excluding emergency funds) was about level with the FY2014 estimate. Subsector allocations of non-emergency funds, as detailed in the explanatory statement, were very similar to the FY2014 estimates, with the exception of an 18% decrease in the contribution to the Global Fund, as requested. Food Security Initiative . Feed the Future (FtF) is the Administration's food security initiative, designed to support long-term country-led agricultural growth and nutrition plans. For FY2015, the Administration requested $1.00 billion for Feed the Future, a 4.5% increase over the FY2013 funding (FY2014 data are not yet available). The Administration's request was consistent with U.S. commitments made at G-8 summits in 2012 and 2013. For FY2015, requested funding would be used for programs in 19 focus countries and 9 aligned countries to reduce poverty and malnutrition. The FY2015 House committee report did not specify a funding level for Feed the Future programs or for food security and agricultural development generally. The Senate committee report recommended $1 billion for this purpose. P.L. 113-235 adopted the Senate provision, calling for no less than $1.006 billion for food security and agricultural development programs. Global Climate Change Initiative (GCCI) . The GCCI is designed to promote environmentally sustainable, climate resilient development. The initiative would have received nearly level funding in FY2015 under the Administration proposal, with a requested $839 million, but the program allocations would have differed considerably from FY2013 (the most recent data available). Bilateral clean energy funding would have increased by 34.7% and adaptation programs by 3.8%, while sustainable landscapes funding would have been reduced by 7.5%. Total U.S. contributions to World Bank climate accounts would have decreased by 12.5%, counting $84 million in bilateral aid transferred for this purpose in FY2013. According to the Administration, GCCI funding in FY2015 would be essential for implementing the President's Climate Action Plan and increasing U.S. leverage in negotiating an international climate agreement in 2015. The House committee report identified no specific allocations for bilateral climate change activities for FY2015, and included no funding for multilateral climate change programs. The Senate committee report recommended $193.3 million for adaptation and mitigation, $123.5 million for sustainable landscapes, and $189.45 million for clean energy, in addition to funding multilateral climate change programs. P.L. 113-235 did not specify a funding level for bilateral climate change activities, so the allocations in the Senate report presumably apply. The legislation included $184.6 million for the International Clean Technology Fund and $49.9 million for the Strategic Climate Fund—both less than the Senate bill but more than the House bill, which provided no funding for either account. Appendix A. State-Foreign Operations Appropriations, by Account Appendix B. International Affairs (150) Function Account, FY2014 Estimate, FY2015 Enacted, House and Senate Recommendations
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On December 16, 2014, Congress presented the Consolidated and Further Continuing Appropriations Act, 2015 (H.R. 83), to the President, who signed it into law (P.L. 113-235) that same day. In Division J of that act, Congress appropriated $51.98 billion for the Department of State and Foreign Operations, including $9.26 billion for Overseas Contingency Operations (OCO) and $2.53 billion to address the Ebola crisis. The annual State, Foreign Operations, and Related Programs appropriations bill (also referred to here as "foreign affairs appropriations" or "foreign affairs funding") is the primary legislative vehicle through which Congress reviews the U.S. international affairs budget and influences executive branch foreign policymaking. (Foreign relations authorization and foreign assistance authorization legislation, required by law prior to State Department and foreign aid expenditures, are also available to Congress to influence foreign policy, but Congress has not passed either since FY2003 and FY1985, respectively. Instead, Congress has waived the requirement within the appropriations laws.) On March 4, 2014, the Obama Administration submitted to Congress its budget request for FY2015. The original request for State, Foreign Operations, and Related Programs totaled $48.62 billion, including $5.91 billion for OCO funding. The Administration amended this request on June 27, 2014 by increasing OCO funds and updating export assistance estimates, thus raising the overall total to $50.08 billion. The Administration further amended the request in November 2014 for emergency funding to address the Ebola crisis in Africa and for civilian activities to counter the threat posed by the Islamic State (IS). The amended FY2015 request totaled $53.50 billion, 8.8% more than the FY2014-enacted level. Of the total FY2015 request, as amended, 14.6% was designated as OCO (compared to 13.3% in FY2014) and 5.4% was designated as emergency funding (compared to no emergency funding in FY2014). $17.18 billion was for State Department Operations and related agencies, an 8.3% increase from the FY2014 funding estimate of $15.86 billion. For Foreign Operations, the Administration requested $36.32 billion, a 7.7% increase from the FY2014 estimate of $33.72 billion. Key aspects of the Administration request that interested some Members of the 113th Congress included $4.59 billion requested for enduring diplomatic security funding to continue implementing post-Benghazi Accountability Review Board recommendations in FY2015, 4.7% more than estimated for these same accounts in FY2014; a twice-amended OCO request for funding to the frontline states of Iraq, Afghanistan, and Pakistan; including an additional $278 million for estimated costs of a U.N. peacekeeping mission in the Central African Republic within the new Peacekeeping Response Mechanism (PKRM); an additional $75 million within Foreign Military Financing (FMF) for security reform in Europe; $1 billion to enhance counterterrorism and crisis response activities within a Counterterrorism Partnership Fund; and $520 million to assist Syrian opposition groups and address humanitarian needs related to IS attacks in Iraq and Syria. $2.896 billion for humanitarian and health care activities related to the Ebola virus outbreak, including a $792 million contingency fund to increase flexibility in addressing future Ebola-related needs. support for the Administration's ongoing development initiatives: Global Health, Global Climate Change, and Feed the Future, as well as $114.3 million for new Africa initiatives; and an additional request for a new government-wide Opportunity, Growth, and Security Initiative that would provide more than $760 million to foreign affairs programs, beyond the regular budget request. The House and Senate Appropriations Committees reported FY2015 SFOPs bills out of committee on June 27 and June 9, respectively. The House committee bill (H.R. 5013) recommended $48.45 billion in total, including $5.19 billion designated as OCO. The Senate committee bill (S. 2499) recommended a funding total of $47.18 billion, with $8.63 billion designated as OCO. Both bills were reported before the Administration amended the OCO request, twice, and requested emergency funds to address the Ebola outbreak. Final funding levels are compared to FY2014 funding estimates and the FY2015 request (as amended, when noted) throughout this report and in Appendix A and Appendix B. Since the House and Senate were unable to pass regular appropriations bills before the end of the fiscal year, they passed H.J.Res. 124, Continuing Appropriations Resolution, 2015 (CR), on September 17 and 18, 2014, respectively. The President signed the CR into law (P.L. 113-164) on September 19, 2014. The CR funded government agencies and programs at an across-the-board reduction of .0554% below the Consolidated Appropriations Act, 2014 (P.L. 113-76), funding rate through December 11, 2014. OCO funds were not subject to the reduction. The CR included some anomalies, including one for foreign affairs that provided the Department of State with the ability to exceed the rate for operations applied to funds in a number of accounts in order to sustain assistance for Ukraine and other independent states in that region for programs, such as international broadcasting, economic, and security assistance. Two additional CRs—P.L. 113-202 and H.J.Res. 131—were passed to keep the government funded until passage of the full-year appropriations bill could occur. Total funding for the State Department, Foreign Operations, and Related Programs over the past 10 years has ranged from a low of $35.85 billion (including supplemental appropriations) in FY2006 to a high of $53.00 billion in FY2012 (including war-related Overseas Contingency Operations, OCO, appropriations). With the exception of FY2015, it has declined each year since FY2012, attributable, perhaps, to passage of the Budget Control Act of 2011 (BCA, P.L. 112-25). Appendix A (State Department, Foreign Operations, and Related Programs) and Appendix B (function 150) tables provide side-by-side account-level funding data for FY2014 estimated funding, the amended FY2015 request, and FY2015-enacted levels.
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The issue of whether or not to allow video cameras into the courtroom has been discussed and debated by Members of Congress, the legal community, journalists, and the public since the introduction of newsreel films in the early 20 th century. Technological advances have shifted some of the considerat ions in this ongoing dialogue, as newsreel cameras gave way to television cameras and Internet video. Increasingly, new technology makes video recording less disruptive, accessible to more people, and able to be distributed quickly, if not instantaneously. Most state courts, and several international supreme courts, allow video cameras to record and televise, or otherwise broadcast, their proceedings under certain circumstances. Although the U.S. Supreme Court does not allow cameras of any sort in its chamber, a few federal circuit and district courts do allow video recording of their proceedings, and the Judicial Conference of the United States continues to consider expanding the use of cameras in the lower federal courts. Some judges who have experience with video cameras in their chambers support the use of video recording or broadcasting in the courts; other judges have reservations, typically related to the effects cameras might have on the proceedings. The public generally tends to support televising U.S. Supreme Court proceedings. In this context, Members of Congress have introduced measures to enable, or expand, the use of video cameras in the federal courts. Typically, since the mid-1990s, a handful of bills have been introduced each session. Several bills reflecting four distinct proposals have been introduced in the 114 th Congress addressing cameras in the federal courts. Due to the assortment of considerations in this policy debate, the provisions of these cameras in the courtroom bills vary on several dimensions, balancing concerns about preserving judicial integrity and due process with other goals, like improved public education, media access, or government transparency. This report is not intended to provide a legal analysis of court cases relevant to the use of video cameras in federal courtrooms. The following sections of this report provide information about the current judicial policies and attitudes related to video camera use in the U.S. Supreme Court, federal circuit courts, and federal district courts; summaries of the major debates and considerations for policymakers on the subject of courtroom cameras, including the appropriateness of congressional action, standards for public and media access to the courts, and potential effects on courtroom proceedings; descriptions of the four legislative proposals currently before the 114 th Congress, including the Cameras in the Courtroom Act ( H.R. 94 and S. 780 ), the Sunshine in the Courtroom Act ( H.R. 917 and S. 783 ), the Transparency in Government Act ( H.R. 1381 ), and the Eyes on the Courts Act ( H.R. 3723 ); and complementary policy measures that might accomplish similar objectives. This section describes the current policies that the U.S. Supreme Court and the federal circuit and district courts have adopted regarding video cameras in their courtrooms, along with the attitudes Supreme Court Justices and other federal judges have expressed toward expanding video use. Video broadcasting can be treated as one of several means by which the courts provide information about their proceedings to the public and the press. As such, the other policies the federal courts have in place related to public and media access are also briefly discussed where relevant. The U.S. Supreme Court does not allow the use of any type of camera within its courtroom. For cases involving criminal matters, the Supreme Court abides by the Federal Rules of Criminal Procedure, which are submitted to Congress by the Supreme Court after consultation with the Judicial Conference of the United States. In 1946, Rule 53 was added to the Federal Rules of Criminal Procedure, which states the following: Except as otherwise provided by a statute or these rules, the court must not permit the taking of photographs in the courtroom during judicial proceedings or the broadcasting of judicial proceedings from the courtroom. The Judicial Conference added further prohibitions on cameras and broadcasting from federal courtrooms in 1973 through its Code of Conduct for United States Judges. Although Supreme Court Justices are not required to abide by the Code of Conduct, they do follow its guidance on many matters and seemingly have adopted its position on the issue of cameras in the courtroom. Even though cameras and recording devices are prohibited in the Supreme Court chambers, there is no statute that designates possession or use of them in the courtroom a criminal act. An individual's use of such equipment, however, may constitute a disruption to the Supreme Court, which is a violation of federal law. As Rule 53 indicates, the prohibition on cameras could be lifted if the Supreme Court and Judicial Conference amend the Federal Rules of Criminal Procedure, or if Congress passes a statute that allows or requires cameras in the courtroom. Supreme Court oral arguments and opinion announcements are open to the public on a first-come, first-served basis. There are about 400 seats in the courtroom, but the number of seats available to the public varies, based on the number of guests of the Justices, journalists, and members of the Supreme Court bar who are also in attendance. During oral arguments, some public seats are reserved for those who wish to stay for the full day's session, and other public seats are available for short-term (3-5 minute) viewing. The Supreme Court posts transcripts of its opinions, as well as transcripts and audio recordings of oral arguments, to its official website. Opinion transcripts are posted "within minutes" of their release, and argument transcripts are also posted on the same day of their release. Typically, the Supreme Court posts the audio recordings of oral arguments on Fridays, meaning that most oral arguments are not posted on the same day they were made. For some high-profile cases, the Supreme Court has released same-day audio recordings. At the Supreme Court level, none of the present Justices have consistently advocated for cameras in their courtroom, but several have expressed a willingness to consider the idea. Although the current Justices may seem reluctant, some observers note that their ambivalence actually reflects greater receptivity toward bringing cameras into the Supreme Court, given that some of their predecessors strongly opposed cameras in the courtroom. While most of the current Justices have remarked that they would consider permitting cameras in the Supreme Court if their colleagues agreed, many of the Justices have also revealed personal apprehension toward video broadcasting of Supreme Court proceedings. For the lower federal courts, and, in particular, the appellate circuit courts, the current Supreme Court Justices are somewhat more supportive of allowing cameras. Each Justice has made public statements recognizing potential benefits of televising judicial proceedings, but each has also made public statements that acknowledge the potential risks. Some of the Justices had experience with cameras in the courtroom while they were serving on these lower courts and have commented on their positive experiences. As a circuit court judge, for example, Justice Stephen Breyer voted in favor of the Judicial Conference's first pilot program and volunteered his court for the program, though it was not chosen. The concerns the Justices have raised about cameras in the courtroom are often related to the effect the videos might have on the judicial process. Justice Clarence Thomas, for example, has expressed support for cameras in the courtroom as long as the proceedings are not affected. Some are concerned that cameras may cause the Justices or others in court to behave differently, or that a change may alter how arguments are made. Other Justices, however, note that oral arguments are only a small part of the overall decision-making process: as long as their deliberations still occur in private, the decision-making process will remain largely unchanged. Some Justices also express the view that judges would lose their relative anonymity, which could bring greater political pressure or security threats and affect judges' ability to be neutral arbiters of the law. The Supreme Court is, by nature, an institution that is slow to change, according to its own members. It is often cautious in its jurisprudence related to new technology, and is similarly cautious about introducing new technology into judicial procedures. To some observers, video recording may seem like a tried and true technology, but to the Supreme Court and others, the need to maintain the integrity of the courtroom and its proceedings may outweigh the potential benefits of video cameras. In recent years, observers note that the Supreme Court has become more accessible through its own initiatives. New policies, like posting oral argument audio recordings online, help those interested in court proceedings receive information quickly and fully. Observers also note that the Justices also seem increasingly willing to speak at public engagements or on television interviews where they are often given the opportunity to better explain their judicial philosophy and reasoning behind decisions. Currently, two federal circuit courts and 14 federal district courts allow video recordings of their proceedings under certain, limited circumstances. Historically, federal statutes and professional guidelines have generally prohibited or discouraged use of cameras in federal circuit and district courts. Rule 53 of the Federal Rules of Criminal Procedure prohibits photography in and radio broadcasting from lower federal courtrooms during criminal cases, and, in 1948, Congress passed legislation that applied its provisions to the federal courts. This prohibition applies both during the initial criminal trials and during any subsequent appeals. The Judicial Conference continues to support Rule 53, given the heightened concerns about maintaining the right to a fair trial in criminal proceedings. Although these policies prohibit the recording or broadcasting of criminal proceedings, cameras may be allowed for civil cases. The use of video cameras in civil proceedings has increased since the 1990s, but most of the lower federal courts still do not allow cameras to record or broadcast from the courtroom, nor have they expanded camera coverage of criminal proceedings. For most of the 20 th century, the American Bar Association (ABA) advised judges against permitting cameras in courtrooms. Although the ABA Canons of Judicial Ethics were not initially binding, many federal judges voluntarily followed them once they were adopted in 1924. In 1937, the ABA added Canon 35, which discouraged judges from allowing cameras in the courtroom, and which was amended in 1952 to include televised proceedings. In April 1973, the Judicial Conference formally adopted its own Code of Judicial Conduct for federal judges, based upon the standards created by the ABA the preceding year. A general ban of cameras in the courtroom, similar to Canon 35, was found in Canon 3A(7), which stated, "A judge should prohibit broadcasting, televising, recording or taking photographs in the courtroom and areas immediately adjacent thereto during sessions of court, or recesses between sessions," but also noted a few exceptions of acceptable use. Since the late 1980s, the Judicial Conference has shown more openness toward allowing cameras in the courtroom for civil proceedings, particularly at the appellate level. In 1989, the Conference's Ad Hoc Committee on Cameras in the Courtroom reported that it viewed Canon 3A(7) as "unduly restrictive," and in 1990, after consultation with federal judges, state judges, and media representatives, the Judicial Conference eliminated Canon 3A(7) from the Code of Conduct, expanded permissible camera uses in its Guide to Judicial Policies and Procedures , and authorized a three-year pilot program experiment permitting photographs, recordings, and broadcasts in up to two circuit courts and up to six district courts. The initial Judicial Conference pilot program ran from July 1, 1991, to December 30, 1994, covered two federal circuit courts and six federal district courts, and was administered by the Federal Judicial Center (FJC). The most common type of media request in the program was for television cameras to report from the courtroom, and, generally, judges were supportive of this type of electronic media coverage for civil proceedings. In a follow-up survey, many of the participating judges indicated that they were initially neutral toward cameras at the beginning of the program and grew more supportive of cameras in the courtroom by the end of the program. Many of the federal judges affirmed that cameras were not disruptive and did not change their behavior. Responses from judges concerning the pilot program reflected less of a consensus about whether or not the cameras affected the behavior of attorneys, violated privacy of the witnesses, or educated the public, and these concerns prevented the Judicial Conference from recommending an expanded use of courtroom cameras at that time. In September 1994, the Judicial Conference voted against a recommendation to expand camera coverage in district courts, citing that the "intimidating effect of cameras on some witnesses and jurors was cause for concern." Yet, in March 1996, the Judicial Conference did "authorize each court of appeals to decide for itself whether to permit the taking of photographs and radio and television coverage of appellate arguments." The two circuit courts that participated in the initial pilot program continued to allow cameras, and are currently the only two federal appellate courts to do so. In 2013, one of these, the Ninth Circuit Court, began to live-stream oral argument videos on its website. In September 2010, the Judicial Conference authorized a second pilot program to study cameras in the courtroom. This pilot program began in July 2011 and concluded in July 2015, with fourteen federal district courts participating. One notable change to the second study was that video footage of district court proceedings was posted online at USCourts.gov. Even though the pilot program has concluded, the participating district courts can continue to allow cameras in their courtrooms until otherwise instructed to stop by the Judicial Conference. Results from the second pilot program are scheduled to be released in 2016, and will be included in an update to this report when they are available. Recent statements on behalf of the Judicial Conference may indicate that its overall assessment of expanding cameras in the courts could remain similar. At a House hearing in 2014, for example, one federal judge reiterated many of the findings from the 1994 survey as reasons why the Judicial Conference opposed legislation introducing cameras in the courtroom. Although several lower federal courts do permit video cameras, other records of their proceedings are somewhat more difficult to obtain than those of the U.S. Supreme Court. Most of the federal circuit courts post audio recordings of oral arguments on their websites, but the availability varies from court to court. Typically, transcripts of oral arguments are not posted by the circuit courts, nor are transcripts or audio recordings of oral arguments at the district court level, though policies among the district courts can vary as well. Generally, copies of district court transcripts or audio may be purchased from the court or online via the federal judiciary's PACER system. Copies of current federal circuit and district court decisions are available for free from GPO's United States Courts Opinions collection and on most of the courts' websites. Past years are also available, though coverage varies depending on the court. There has not been a comprehensive survey of federal circuit and district court judges about their opinions toward cameras in the courtroom. As the use of cameras has expanded in local, state, and a few federal courts, some federal judges have had past or present experience with cameras in their courtrooms and others have no personal experience with cameras in their courtrooms. Although some federal judges have made public statements supporting cameras and others have made statements against cameras, many have not expressed any opinion on the subject, and thus, it is difficult to draw any representative conclusions about the overall attitudes of federal judges. There are many factors involved in the cameras in the courtroom debate that might be relevant to policymakers considering related legislation. In addition to the more particular arguments related to cameras in the courtroom, Members of Congress may first want to evaluate the implications of congressional action in this area, given its potential effects on interbranch relations with the judiciary. Members may also wish to consider more practical considerations relating to how these policies might be introduced and implemented. Examples from past, current, and proposed cameras-in-the-courtroom programs may help illustrate potential benefits and drawbacks of these initiatives, and they may also illustrate how different values or concerns may be balanced. Under the U.S. Constitution, Congress has significant legislative powers over the operation of the federal judiciary. The expectation of judicial independence, however, has typically led to a congressional tradition of deference to the courts, allowing the federal judiciary to determine its own procedures for its daily operations. During the 20 th century, Congress somewhat formalized this practice of deference through the creation, in 1922, of the Judicial Conference as the policymaking body for the federal courts, and through the passage of the Rules Enabling Act in 1934. For a more thorough discussion on Congress's relationship with the judiciary, see CRS Report RL32926, Congressional Authority Over the Federal Courts , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. Proponents of cameras-in-the-courtroom legislation argue that Congress has the constitutional power to legislate judicial administrative matters and that authorizing cameras in federal courtrooms falls under this jurisdiction. Because there are concerns that cameras may substantively affect judicial proceedings, others argue that this decision is more than a simple administrative matter. Some may view this as an imprudent exercise of congressional authority, especially given Congress's past tendency to let the judiciary determine many of its own procedures. Some may even argue that such legislation raises constitutional concerns. These questions regarding appropriate institutional authority also raise concerns for some that congressional action permitting cameras in federal courts could lead to greater interbranch tensions. Given the concerns related to Congress's authority in this arena, many on both sides of the issue propose that the decision to allow or prohibit cameras should be left to the federal judiciary to decide for itself. As Senator Mike Lee noted in a 2011 Senate hearing on cameras in the court, "regardless of what we can do as a matter of raw political power, there is a question of what we should do." At a House hearing in 2006, Justice Clarence Thomas warned that there may be "some conflict between the branches" if Congress mandated televising of judicial proceedings, but noted that "[t]he bills that allow for members of the court to make that determination, of course, don't have that problem. I guess if there's going to have to be a bill, the better method is probably to allow the members of the court to decide which cases." Some of the questions surrounding Congress's authority to implement such legislation may be less consequential if congressional legislation introducing cameras to the courtroom includes particular measures to prioritize judicial autonomy or discretion. Policies that authorize, or allow, judges to introduce cameras at their discretion, rather than requiring cameras in the courtroom, may potentially avoid some of these concerns. This approach also mirrors the process for the Judicial Conference's pilot programs, wherein the chosen courts were selected from a group that volunteered to participate and allow cameras. Even among the legislative proposals that require cameras in the courtroom, most include an opt-out measure, allowing the presiding judge or others in the judiciary to prohibit cameras if they might interfere with due process and/or safety of the participants in the case. If legislation contains an opt-out provision, policymakers may want to consider the circumstances under which participants may opt out of recordings (e.g., to ensure safety or due process), the scope of these exemptions (e.g., no filming of the proceedings at all or no filming of particular individuals/parts of the proceedings), and who can make these determinations (e.g., the presiding judge, a panel of judges, or any participant in the case). One of the policy issues that Congress has discussed related to cameras in the courts is the extent to which the public and the media are entitled to have access to courtrooms and their proceedings. Proponents argue that these are constitutionally-protected rights, yet others contend that there are limits to these rights. Some suggest that public and media access to the courts, for example, may need to be limited in the interest of preserving procedural fairness, which they believe reflects another constitutionally-protected right. The Sixth Amendment of the U.S. Constitution, for example, includes the "right to a speedy and public trial," which some have argued implies that members of the general public have an inherent right to observe criminal trials. Others, however, argue that this provision is a protection for the accused and not a right of the public, reflecting the Framers' attempt to prevent secretive trials involving only a judge and defendant. Some also argue that the public and media have rights to access the courts under the First Amendment, and that cameras in the courtroom are a natural extension of these rights. Proponents believe that it is important to have a more expansive view of public access to the courts, particularly for the Supreme Court and its proceedings, given that Supreme Court decisions often affect a broad segment of American society but has limited seats for the public and is geographically remote for most people. In addition to the expectation of a general media right to access the courts, many argue that journalists should be able to cover the courts using video because it is the medium through which many Americans receive their news. Television remains a major source of political information for Americans, and although younger Americans may be looking more to the Internet for news, videos are often distributed online as well. Thus, proponents argue that video, more than other media formats, would be instrumental in informing the public about the courts and their decisions. Media outlets and journalism advocacy groups often also support greater access for cameras in the courtroom. The provision of public knowledge about the courts through television news, however, is contingent on news outlets broadcasting sufficient information to educate the public, and the public's willingness to watch it. When given a choice, many Americans typically do not choose to watch news or public affairs programming. As private companies, news outlets must compete with one another for viewers and advertisers, and news networks might not have the incentive to cover most court proceedings. Although the public has shown great interest in watching certain trials on television, these cases may not be representative of the judicial system as a whole. Proceedings that do not involve celebrities and/or shocking crimes may not be televised at all. This raises concerns about the educational potential of cameras in the courtroom, especially if television stations may show video clips out of context or employ other editing techniques in an effort to make the courtroom proceedings appear more dramatic or controversial. The 24-hour news cycle pushes stations to try to be the first with any scoop, and this emphasis on fast turnaround can also cause serious errors in judicial reporting. From the 1950s to the early 2000s, before high-speed Internet, the cameras-in-the-courtroom debate was largely framed as whether or not journalists should be able to film court proceedings for television broadcasts, making the arguments in the preceding section more consequential. Today, cameras-in-the-courtroom advocates often envision that cameras will be operated by the court and that the main broadcast forum will be the court's own website. This is how the Federal Judicial Center (FJC) pilot program, many state courts, and several international supreme courts utilize courtroom cameras. While the Internet and its potential for self-published media alleviate many concerns about biased or limited courtroom video coverage from selective television coverage, some of these issues still persist. Existing programs permitting cameras in the courtroom often contain restrictions on what can be covered and how, reflecting a balance between access to the courts and procedural fairness for participants in the case. If the courts themselves control the recording and/or broadcasting of their proceedings, then many potential problems related to inappropriate or prejudicial media coverage can be potentially mitigated. Proceedings covered in their entirety may better show both sides fairly, and prevent accusations of bias for or against one party, though this approach may be more intrusive to the courtroom and require greater resources. The decision to broadcast live or to record proceedings for later release is also consequential—in trial courts especially, simultaneous broadcasts sometimes raise concerns about their effects on ongoing proceedings. Institutionally, the judicial branch was designed to be relatively insulated from public and political pressure to ensure that the courts functioned as neutral arbiters of the law. As an unelected branch of government, whose members receive lifetime appointments, some intrinsic concerns about the accountability of the federal judiciary always have existed. Although many still recognize the value of the courts' role and support the institutional features that attempt to maintain its neutrality, there has been an overall tendency toward greater transparency and openness in American government over the last half century, and a perception among some that the federal courts lag behind the other branches in this respect. Thus, some view cameras in the courtroom as a way to better ensure transparency and openness in judicial proceedings. If cameras in the courtroom provide greater judicial transparency, there are a number of parties who might benefit from this improved openness. Some proponents believe that Members of Congress will be better informed about the courts' proceedings via complete video broadcasts, enabling Congress to perform better oversight of the judiciary. Others argue that having a more complete view of court proceedings could help other courts fully understand rulings and the logic behind them. In turn, all courts may become more consistent in their interpretations of past case precedents and become more uniform in how subsequent decisions are made. Finally, it is often argued that the public would benefit from the improved openness and transparency that videos of the court would bring. By seeing inside the courtroom, observing full arguments, and seeing the norms court participants follow, the public may better understand the judicial process. The public might also learn more details of and implications from important cases heard before the courts. Few argue against the overall value of ensuring government openness and transparency in the American political system. Many opponents of cameras-in-the-courtroom legislation, however, believe that the federal courts and their proceedings are already sufficiently open and transparent. This view stems from the constitutional right to a public trial discussed in the preceding section, and the resulting measures that are already in place to provide public and media access to the courts and their records. Some note that videos in the courtroom would duplicate the existing materials available on audio or on paper, citing that the real decision-making process would still occur behind closed doors, where judges privately deliberate. Instead of video broadcasting, some suggest that greater judicial transparency may be achieved through alternative, or supplementary, policy measures, like live-streaming audio of the court's proceedings on the Internet, releasing same-day audio recordings for all cases, or allowing journalists to bring tablets or laptops into the courtroom to file reports in real time. Others contend that video, as a medium, is able to distribute information in a way that other formats cannot and that there is a substantial, unique benefit from seeing and hearing the proceedings via video footage. Video, for example, shows body language and visual cues that other formats cannot. Since observers can see the speakers in video, it may be easier for them to identify whether it is the judge, the attorney, the defendant, or another person in the courtroom who is speaking. Video can visually inform the audience about what is occurring during breaks or pauses in the proceedings, which could help educate the public about the judicial process. On the other hand, some argue that even the best courtroom coverage would still be an incomplete picture of the judicial process, as it would not capture the reading, deliberation, and conference meetings that may influence judges' decision-making. Discussions before Congress have also raised the argument that increasing public or media access through video broadcasting might hurt the ability of the accused to receive a fair trial. Typically, these concerns fall into three categories. First, there are concerns that cameras and/or other reporting equipment may be disruptive to the courtroom. Second, there is an expectation of privacy for various participants and processes in a courtroom that cameras may breach. Finally, there are concerns that, for better or worse, cameras may affect how cases are argued and/or decided. Video broadcasting legislation, in this view, may be problematic if the legislation does not provide sufficient procedural protections for courtroom participants and proceedings. Historically, video and photographic cameras were bulky, sometimes noisy, and could create an interruption and distraction in the courtroom. Technological advancements, however, have made cameras increasingly discreet. By the early 1980s, video cameras were unobtrusive enough that they were successfully used by some state courts. Now, even handheld smartphones can record and transmit high-definition videos and these types of devices have become so unobtrusive that, on a few recent occasions, they have secretly been brought into and used in the Supreme Court. Although clunky cameras may no longer be physically disruptive to the courtroom, there are other ways video cameras may interfere with court proceedings. Today, for example, the number of people with cameras could be a problem and distraction if anyone, and not just credentialed members of the press, is allowed to film proceedings. Administering cameras in the courtrooms may create additional work for judges or court staff that detracts from their other responsibilities. Review of applications from news outlets, if cameras are only authorized on a case-by-case basis, could be time-consuming. Video policies that enable participants to object to coverage, which is a common mechanism used to help ensure procedural fairness, creates extra paperwork and meetings for the presiding judge or panel charged with adjudicating these appeals. Even if cameras are stationary in the courtroom and activate on a motion or voice sensor, someone (usually a presiding judge) must constantly monitor what is captured by the camera and prevent bench conversations, juries, or protected witnesses from being filmed. A second category of concerns regarding the administration of trials involves ensuring proper privacy protections for courtroom participants and particular elements of the proceedings. Many of the privacy concerns are more applicable to the trial court level and especially for criminal cases. Existing policies adopted by the Judicial Conference and several states reflect these considerations by having expanded use of cameras in appellate proceedings and restricted use of cameras, or a prohibition on them altogether, in initial civil or criminal proceedings. Although privacy concerns may simply reflect personal preferences of courtroom participants to retain their anonymity, others argue there are reasons why increased public exposure of these individuals could impede procedural fairness. Maintaining privacy protections for jurors if cameras are introduced to the courtroom is an important and long-standing consideration. Since 1956, "recording, listening to, or observing proceedings of grand or petit juries while deliberating or voting" has been prohibited by law in federal courts. In recent years, courts at all levels and state legislatures have increasingly enacted measures to keep the identities of jurors and their trial-related activities private. If jurors' identities are known in high-stakes cases, there are fears that outside pressure—financial bribes or violent threats—may prevent them from considering case facts fairly and objectively. Even less direct coercion, in the form of peer pressure or the added stress of interacting with reporters, may adversely affect jurors' impartiality. Courtrooms often use measures like gag orders or sealed records about the jurors to insulate them from outside pressure while a case is pending, and many courtrooms with video cameras prohibit any filming of jurors as an additional protection. Similarly, there are concerns that witnesses may feel intimidated, directly or indirectly, if their testimony is broadcast outside the courtroom. Witnesses may be called upon to divulge sensitive personal information, and although their testimony is generally part of the public record, witnesses can maintain better anonymity when proceedings are not televised. The media spotlight and potential for public criticism may make witnesses reluctant to testify, or cause witnesses to focus on preserving their public image rather than focusing solely on their testimony. There are also concerns that judges and lawyers could lose their relative anonymity. Although they are public figures, many federal judges and even Supreme Court Justices are not widely recognized. Because judges and lawyers often make controversial decisions, or are considered responsible for unpopular verdicts, there are genuine concerns for the safety of these legal professionals. This may also lead to greater expenses for courtroom security and protection from the U.S. Marshals Service. Although these threats of violence exist regardless of whether proceedings are televised, limiting the amount of public exposure these individuals receive may help protect them. A related concern is that the broadcast of an initial trial may turn the defendant into a well-known public figure. Having been "tried in the court of public opinion," this publicity could affect the ability of the defendant to receive a fair re-trial, appeal trial, or subsequent trials for other charges. Media exposure from the first trial could lead to prejudice for or against the defendant among prospective jurors or others involved with later proceedings. In addition to affecting the privacy and anonymity of individuals associated with the case, there are ways in which video cameras might violate elements of confidentiality typically associated with judicial proceedings. For example, attorneys will often speak with their clients, or attorneys will approach the bench to converse privately with the judge. Although it may be possible for others to surmise the content of these discussions, they are not treated as part of the formal court record. It is a common concern that cameras in the courtroom may inadvertently pick up these traditionally private conversations and share them with unintended audiences. There may be concerns that a due process violation could occur if sharing these conversations affects the outcome of a trial and/or the relationship between the accused and the defense counsel. Generally, courts that allow cameras are mindful of these privacy concerns and have implemented measures to prevent many issues from becoming problematic. Some state courts prohibit any coverage of criminal or initial trials. Other policies require obscuring witnesses' identities, or notifying witnesses that they have the right to obscure their identities or opt out of video recording. Categorical exemptions sometimes prohibit filming of particular types of participants or cases. Others authorize the presiding judge to block filming on a case-by-case basis when privacy concerns are presented. Some courts require consent from all participants before filming of proceedings is authorized. Providing a defendant a fair trial requires adherence to objective legal and procedural standards, with the assumption that keeping this protocol will result in a fair verdict, grounded in factual evidence, and in keeping with the law. As a result of the concerns addressed above, some believe that adding cameras to the courtroom might change the way in which cases are argued and decided. Some of these changes may not seem to impact proceedings or outcomes, but any deviation from these standard judicial norms might lead to charges of procedural unfairness. The concern that video recording may alter participants' behavior has existed since the earliest days of newsreel cameras in the courtroom. Some maintain that, even if cameras are inconspicuous and people are increasingly accustomed to being recorded, the simple knowledge of being watched or filmed may lead to behavior changes that can be difficult to pinpoint. Cameras may, for example, cause witnesses to act nervous, and judges or juries may misinterpret their behavior as a signal that they are not being truthful. At a 2014 hearing, Representative John Conyers noted that "experience teaches that there are numerous situations in which [cameras in the courtroom] might cause actual unfairness, some so subtle as to defy detection by the accused or controlled by the judge." Policies requiring notification of or consent from all parties being filmed may also lead to an observer effect, by increasing awareness of the otherwise discreet video cameras. The traditional conceptualization of judicial decision-making assumes that individual case facts, the letter of the law, and past case precedents should be the guiding factors in a judicial decision. Scholars today typically acknowledge that a variety of other factors may influence judicial decision-making. Public opinion has always been among these other influences, yet televised judicial proceedings leads to concerns that too much weight will be placed on public opinion and the courts will lose their ability to be neutral arbiters of the law. If the audience outside the courtroom becomes more consequential, lawyers, judges, and other courtroom actors might change how they act in court. Similar concerns were raised when television cameras were introduced in Congress, alleging that congressional behavior would be affected in a number of ways, including increased grandstanding and a tendency of Members to talk more directly to the public, rather than to their colleagues. Yet since members of the federal judiciary are not elected officials, and therefore understand their relationship to the public differently than Members of Congress, it may be less likely that marked behavior changes would occur among judges in front of the camera. Others suggest that cameras may change behavior in court for the better, as the public exposure they bring might improve judicial accountability. If lawyers know they are being watched by a broader audience, they may come to court better prepared for their arguments. All actors may act with greater courtesy and professionalism to each other, out of the interest of maintaining judicial legitimacy and authority. In the modern history of Congress, there have been a number of legislative attempts to allow or require video cameras in federal courtrooms. This section provides an overview of the current bills before the 114 th Congress related to video cameras in the federal courts. Table 1 provides a side-by-side comparison of these bills, their current legislative status, and key components. Many of these current legislative initiatives are identical or substantively similar to past bills—when applicable, comparisons will be made between the current and previous versions of bills (introduced in the 110 th -113 th Congresses). This section will be updated as necessary to reflect current legislative developments. The Cameras in the Courtroom Act was introduced in the House ( H.R. 94 ) on January 1, 2015, and in the Senate ( S. 780 ) on March 18, 2015. This bill would amend 28 U.S.C. 24, adding Section 678 titled "Televising Supreme Court Proceedings." Under the bill's provisions, the Supreme Court "shall permit television coverage of all open sessions of the Court." The Cameras in the Courtroom Act does not address cameras in the federal circuit or district courts. Television coverage could be blocked if a majority vote of the Supreme Court Justices decided that "such coverage in a particular case would constitute a violation of the due process rights of one or more of the parties before the Court." The Cameras in the Courtroom Act has been introduced in previous sessions of Congress. Substantively identical versions of the bill have been introduced in both chambers since the 110 th Congress. During the 112 th Congress, the Senate Judiciary Committee also held a hearing related to the bill titled, "Access to the Court: Televising the Supreme Court." The Sunshine in the Courtroom Act was introduced in the House ( H.R. 917 ) on February 12, 2015, and in the Senate ( S. 783 ) on March 18, 2015. This bill only addresses the federal circuit and district courts, and not the Supreme Court. Under its requirements, "the presiding judge ... may, at the discretion of that judge, permit the photographing, electronic recording, broadcasting, or televising to the public of any court proceeding over which that judge presides." The Judicial Conference may issue guidelines to assist with the management and administration of these provisions, and the presiding judge may further issue rules and disciplinary actions related to media use in his or her courtroom. Under the Sunshine in the Courtroom Act, jurors may not be subjected to media coverage during jury selection or during the trial itself. Furthermore, the judge "shall not" permit any of the designated filming or broadcasting activities if the judge (or a majority vote of the participating judges on a panel) "determines the action would constitute a violation of the due process rights of any party." District courts must disguise the face and identity of any witness, if requested by the witness, and inform all witnesses of their right to do this. The Sunshine in the Courtroom Act has been introduced in previous sessions of Congress, though earlier versions noted that it would only be in effect for three years after its enactment, and the current version does not include this timeframe provision. The Transparency in Government Act ( H.R. 1381 ) was introduced in the House on March 16, 2015. This bill addresses televising Supreme Court proceedings and providing expanded access to its audio recordings, among other provisions related to open government. It is a broader bill in scope than the others addressing cameras in the courts in the 114 th Congress and contains additional changes for the federal judiciary as well as ethics and transparency initiatives for other parts of the federal government. Regarding televising of the Supreme Court, Section 801 of the Transparency in Government Act includes provisions that are identical to the Cameras in the Courtroom Act, stating that the Court "shall permit television coverage of all open sessions" unless a majority vote decides against it to ensure due process for the parties before the Court. It does not mention broadcasting video on the Internet, but in Section 802, the Transparency in Government Act also requires that the Chief Justice "shall ensure that the audio of an oral argument before the Supreme Court of the United States is recorded and is made publicly available on the Internet website of the Supreme Court at the same time that it is recorded." A similar version of the Transparency in Government Act was introduced in the 113 th Congress ( H.R. 4245 ). This previous version contained the Section 802 requirement of posting same-day oral argument audio recordings to the Court's website, but had a different provision regarding televised proceedings. Instead of introducing television directly, Section 801 in the earlier Transparency in Government Act would have directed the Government Accountability Office (GAO) conduct a study to assess the effects that cameras during oral arguments would have "on costs, and on the atmosphere of such arguments." The Eyes on the Courts Act ( H.R. 3723 ) was introduced in the House on October 8, 2015. Unlike previous bills, which either address the Supreme Court or the federal circuit and district courts together, the Eyes on the Courts Act addresses all federal appellate courts, meaning the Supreme Court and the circuit courts. The bill's provisions note that the Judiciary Conference would provide implementation guidelines, supplemented by rules or disciplinary actions set forth by the presiding judge. Under the Eyes on the Courts Act, the presiding judge "shall permit the photographing, electronic recording, broadcasting, televising, or streaming in real time or near-real time on the Internet of that proceeding to or for the public." Like other bills, it allows the presiding judge to make an exception for a participant if it is believed that these activities would violate his or her due process rights. This bill also would also allow the presiding judge to opt out if these activities are "otherwise not in the interests of justice." A judge must issue any exemption in writing at least 72 hours before the start of the proceedings. Legislation intended to expand video broadcasting in the federal courts can reflect a number of legislative goals, including greater judicial transparency, public education about the courts, improved public access to proceedings, or expanded media access to the courts. As the debate surrounding cameras in the courtroom continues almost 100 years after it began, it is important to consider what underlying goals these policy measures are intended to achieve. Policymakers may want to consider whether there are complementary measures that could achieve similar goals through other means. Historically, the issue of cameras in the courtroom has been framed as a matter of expanding media access to the courts. In the era before electronic broadcasting, the press served as an indispensable intermediary between the public and the courts. Unless citizens could personally witness trial proceedings, they had to rely upon the reports and accounts that were created by the media. If journalists are still viewed as critical intermediaries, and one of the goals of adding cameras to the courtroom is to improve journalists' ability to cover its proceedings, there may be other policy measures that might help fulfill this objective. At the Supreme Court level, for example, other measures could improve the Court's communications with journalists. The Court could revise its press credentialing requirements to include more Internet-based news outlets, use email or social media to announce decisions, distribute email copies of opinions to members of the press corps, allow reporters to use tablets or smartphones for note-taking, or provide wireless Internet in the courthouse (if not the courtroom). These initiatives may help fulfill the goal of improved media access to the Supreme Court and other federal courts, without the possible downsides associated with introducing cameras to the chambers. The public still learns about major events from the media, but the Internet has fostered a growing expectation that more complete information about a story or an event will be readily available online. Primary source documents and raw video footage of political proceedings or newsworthy events are commonly available on the Internet, contributing to the sense that information about today's current events does not have to be mediated by the press. Thus, the contemporary cameras-in-the-courtroom debate today may be framed in part as a means to improve direct public access to information about court proceedings. This objective could be fulfilled by improvements to existing forms of public information, like introducing same-day audio recording releases or live-streamed audio from the Supreme Court. Other suggested measures, like providing closed-circuit cameras to broadcast exclusively to a larger venue outside the courtroom, could still face some of the potential challenges that policies to televise or broadcast proceedings more broadly face. Because records of proceedings are available and the courtrooms are not closed to the public or the press, it can be argued that the courts may already meet a sufficient standard of transparency and access, and legislative action may not be necessary. Lack of congressional action would not preclude the federal judiciary from setting its own policies that could expand the use of cameras in the courtroom. Recent actions taken by the courts, such as the Supreme Court's measures to improve the timely release of audio recordings and the Judicial Conference's 2011-2015 pilot program on cameras in the courtroom, may suggest that the courts themselves may be inclined to take measures to improve access to their proceedings. International, state, and local courts have expanded the use of video cameras to record and/or broadcast their proceedings over the last 20 years, and the federal judiciary has experimented with video cameras in the federal circuit and district courts as well. Where cameras are permitted in courtrooms, many safeguards have been implemented to try to maintain judicial integrity and the rights of courtroom participants. In many courtrooms where cameras operate today, they typically do so without notable opposition or legal challenge. Proponents argue that these measures help improve transparency and accountability in the courts, better meet the needs of modern journalists, and improve public access to information about the courts. During the same time period, legislative attempts to expand the use of video cameras in the federal courts have frequently been introduced but have not been enacted. Even as video technology has changed and become more commonplace, fundamental concerns persist about potentially negative effects of video cameras in the courtroom. Although many bills include provisions to help alleviate these concerns, the important role that the judiciary plays in American society leads some to approach any changes in this area with caution. Since many of the debates on cameras in the courtroom center around differing constitutional interpretations, some maintain that Congress should defer to the judiciary's position on these questions. The results of the Judicial Conference's 2011-2015 pilot program may be released at one of its 2016 meetings. Once they are released, the Judicial Conference could decide to change its position or policies regarding cameras in the courtroom. These findings may also provide Congress with more information about the potential benefits and drawbacks of video broadcasting from the federal courts. This report will be updated as needed to reflect any subsequent developments.
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Members of Congress, along with the legal community, journalists, and the public, have long considered the potential merits and drawbacks of using video cameras to record and/or broadcast courtroom proceedings. The first bill to propose video camera use in the federal courts was introduced in the House of Representatives in 1937, and since the mid-1990s, Members of Congress in both chambers have regularly introduced bills to expand the use of cameras in the federal courts and have sometimes held hearings on the subject. Video cameras are commonly used in state and local courtrooms throughout the United States to record and broadcast proceedings. All 50 state supreme courts in the United States allow video cameras under certain conditions, and cameras are allowed in many states for trial and appellate proceedings. Yet video cameras are not widely used in federal circuit and district courts, and they are not used at all in the Supreme Court. While Rule 53 of the Federal Rules of Criminal Procedure has banned photography and broadcasting of any federal criminal proceedings since 1946, the Judicial Conference of the United States conducted pilot programs from 1991 to 1994 and from 2011 to 2015 to study the use of video cameras in federal courtrooms in civil proceedings. As a result of their participation in these pilot programs, two federal circuit courts and 14 federal district courts presently allow video cameras in their courtrooms under certain circumstances. Yet even as the use of cameras in courts has become more widespread during the past few decades, many of the fundamental questions about the use of video cameras in the courts remain relatively unchanged. The debate regarding video cameras in federal courtrooms revolves around these and other issues: the appropriate degree of congressional involvement in matters related to the operation of the federal judiciary; the degree of access the public and media should have to the federal courts; the advantages and disadvantages of additional judicial transparency; the potential effects of cameras in the courtroom on ensuring a fair trial and protecting participants' privacy; and the possible ways in which cameras may alter the way courts conduct business and affect judicial integrity. Addressing these issues often involves balancing one consideration against another. For example, protections to make sure the accused receives a fair trial might lead to more restricted public or media access to the courts. Generally, while Congress may legislate in this area, to date, considerable deference has been given to the Supreme Court Justices and other officials within the federal judiciary in determining if and how video recording and broadcasting should be implemented in the federal courts. A study based on the Judicial Conference's 2011-2015 pilot program is expected later this year and may alter considerations in this policy debate.
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As congressional policymakers continue to debate telecommunications reform, a major point of contention is the question of whether action is needed to ensure unfettered access to the Internet. The move to place restrictions on the owners of the networks that compose and provide access to the Internet, to ensure equal access and non-discriminatory treatment, is referred to as "net neutrality." There is no single accepted definition of "net neutrality." However, most agree that any such definition should include the general principles that owners of the networks that compose and provide access to the Internet should not control how consumers lawfully use that network; and should not be able to discriminate against content provider access to that network. What, if any, action should be taken to ensure "net neutrality" has become a major focal point in the debate over broadband, or high-speed Internet access, regulation. As the marketplace for broadband continues to evolve, some contend that no new regulations are needed, and if enacted will slow deployment of and access to the Internet, as well as limit innovation. Others, however, contend that the consolidation and diversification of broadband providers into content providers has the potential to lead to discriminatory behaviors which conflict with net neutrality principles. The two potential behaviors most often cited are the network providers' ability to control access to and the pricing of broadband facilities, and the incentive to favor network-owned content, thereby placing unaffiliated content providers at a competitive disadvantage. In 2005 two major actions dramatically changed the regulatory landscape as it applied to broadband services, further fueling the net neutrality debate. In both cases these actions led to the classification of broadband Internet access services as Title I information services, thereby subjecting them to a less rigorous regulatory framework than those services classified as telecommunications services. In the first action, the U.S. Supreme Court, in a June 2005 decision ( National Cable & Telecommunications Association v. Brand X Internet Services ), upheld the Federal Communications Commission's (FCC) 2002 ruling that the provision of cable modem service (i.e., cable television broadband Internet) is an interstate information service and is therefore subject to the less stringent regulatory regime under Title I of the Communications Act of 1934. In a second action, the FCC in an August 5, 2005 decision, extended the same regulatory relief to telephone company Internet access services (i.e., wireline broadband Internet access, or DSL), thereby also defining such services as information services subject to Title I regulation. As a result neither telephone companies nor cable companies, when providing broadband services, are required to adhere to the more stringent regulatory regime for telecommunications services found under Title II (common carrier) of the 1934 Act. However, classification as an information service does not free the service from regulation. The FCC continues to have regulatory authority over information services under its Title I, ancillary jurisdiction. Simultaneous to the issuing of its August 2005 information services classification order, the FCC also adopted a policy statement outlining the following four principles to "encourage broadband deployment and preserve and promote the open and interconnected nature of [the] public Internet:" (1) consumers are entitled to access the lawful Internet content of their choice; (2) consumers are entitled to run applications and services of their choice (subject to the needs of law enforcement); (3) consumers are entitled to connect their choice of legal devices that do not harm the network; and (4) consumers are entitled to competition among network providers, application and service providers, and content providers. Then FCC Chairman Martin did not call for their codification. However, he stated that they will be incorporated into the policymaking activities of the Commission. For example, one of the agreed upon conditions for the October 2005 approval of both the Verizon/MCI and the SBC/AT&T mergers was an agreement made by the involved parties to commit, for two years, "... to conduct business in a way that comports with the Commission's (September 2005) Internet policy statement.... " In a further action AT&T included in its concessions to gain FCC approval of its merger to BellSouth to adhering, for two years, to significant net neutrality requirements. Under terms of the merger agreement, which was approved on December 29, 2006, AT&T agreed to not only uphold, for 30 months, the FCC's Internet policy statement principles, but also committed, for two years (expired December 2008), to stringent requirements to "... maintain a neutral network and neutral routing in its wireline broadband Internet access service." In perhaps one of its most significant actions relating to its Internet policy statement to date, the FCC, on August 1, 2008, ruled that Comcast Corp., a provider of Internet access over cable lines, violated the FCC's policy statement, when it selectively blocked peer-to-peer connections in an attempt to manage its traffic. This practice, the FCC concluded, "... unduly interfered with Internet users' rights to access the lawful Internet content and to use the applications of their choice." While no monetary penalties were imposed, Comcast is required to stop these practices by the end of 2008. Comcast stated that it will comply with the order, but it has filed an appeal in the U.S. DC Court of Appeals. Separately, in an April 2007 action, the FCC released a notice of inquiry (WC Docket No. 07-52), which is still pending, on broadband industry practices seeking comment on a wide range of issues including whether the August 2005 Internet policy statement should be amended to incorporate a new principle of nondiscrimination and if so, what form it should take. On January 14, 2008 the FCC issued three public notices seeking comment on issues related to network management (including the now-completed Comcast ruling) and held two (February 25 and April 17, 2008) public hearings specific to broadband network management practices. As consumers expand their use of the Internet and new multimedia and voice services become more commonplace, control over network quality also becomes an issue. In the past, Internet traffic has been delivered on a "best efforts" basis. The quality of service needed for the delivery of the most popular uses, such as email or surfing the Web, is not as dependent on guaranteed quality. However, as Internet use expands to include video, online gaming, and voice service, the need for uninterrupted streams of data becomes important. As the demand for such services continues to expand, network broadband operators are moving to prioritize network traffic to ensure the quality of these services. Prioritization may benefit consumers by ensuring faster delivery and quality of service and may be necessary to ensure the proper functioning of expanded service options. However, the move on the part of network operators to establish prioritized networks, while embraced by some, has led to a number of policy concerns. There is concern that the ability of network providers to prioritize traffic may give them too much power over the operation of and access to the Internet. If a multi-tiered Internet develops where content providers pay for different service levels, the potential to limit competition exists, if smaller, less financially secure content providers are unable to afford to pay for a higher level of access. Also, if network providers have control over who is given priority access, the ability to discriminate among who gets such access is also present. If such a scenario were to develop, the potential benefits to consumers of a prioritized network would be lessened by a decrease in consumer choice and/or increased costs, if the fees charged for premium access are passed on to the consumer. The potential for these abuses, however, is significantly decreased in a marketplace where multiple, competing broadband providers exist. If a network broadband provider blocks access to content or charges unreasonable fees, in a competitive market, content providers and consumers could obtain their access from other network providers. As consumers and content providers migrate to competitors, market share and profits of the offending network provider will decrease leading to corrective action or failure. However, this scenario assumes that every market will have a number of equally competitive broadband options from which to choose, and all competitors will have equal access to, if not identical, at least comparable content. Despite the FCC's ability to regulate broadband services under its Title I ancillary authority and the issuing of its broadband principles, some policymakers feel that more specific regulatory guidelines may be necessary to protect the marketplace from potential abuses; a consensus on what these should specifically entail, however, has yet to form. Others feel that existing laws and FCC policies regarding competitive behavior are sufficient to deal with potential anti-competitive behavior and that no action is needed and if enacted at this time, could result in harm. The issue of net neutrality, and whether legislation is needed to ensure access to broadband networks and services, has become a major focal point in the debate over telecommunications reform. Those opposed to the enactment of legislation to impose specific Internet network access or "net neutrality" mandates claim that such action goes against the long standing policy to keep the Internet as free as possible from regulation. The imposition of such requirements, they state, is not only unnecessary, but would have negative consequences for the deployment and advancement of broadband facilities. For example, further expansion of networks by existing providers and the entrance of new network providers, would be discouraged, they claim, as investors would be less willing to finance networks that may be operating under mandatory build-out and/or access requirements. Application innovation could also be discouraged, they contend, if, for example, network providers are restricted in the way they manage their networks or are limited in their ability to offer new service packages or formats. Such legislation is not needed, they claim, as major Internet access providers have stated publicly that they are committed to upholding the FCC's four policy principles. Opponents also state that advocates of regulation cannot point to any widespread behavior that justifies the need to establish such regulations and note that competition between telephone and cable system providers, as well as the growing presence of new technologies (e.g., satellite, wireless, and power lines) will serve to counteract any potential anti-discriminatory behavior. Furthermore, opponents claim, even if such a violation should occur, the FCC already has the needed authority to pursue violators. They note that the FCC has not requested further authority and has successfully used its existing authority, in the August 1, 2008, Comcast decision (see above) as well as in a March 3, 2005, action against Madison River Communications. In the latter case, the FCC intervened and resolved, through a consent decree, an alleged case of port blocking by Madison River Communications, a local exchange (telephone) company. The full force of antitrust law is also available, they claim, in cases of discriminatory behavior. Proponents of net neutrality legislation, however, feel that absent some regulation, Internet access providers will become gatekeepers and use their market power to the disadvantage of Internet users and competing content and application providers. They cite concerns that the Internet could develop into a two-tiered system favoring large, established businesses or those with ties to broadband network providers. While market forces should be a deterrent to such anti-competitive behavior, they point out that today's market for residential broadband delivery is largely dominated by only two providers, the telephone and cable television companies, and that, at a minimum, a strong third player is needed to ensure that the benefits of competition will prevail. The need to formulate a national policy to clarify expectations and ensure the "openness" of the Internet is important to protect the benefits and promote the further expansion of broadband, they claim. The adoption of a single, coherent, regulatory framework to prevent discrimination, supporters claim, would be a positive step for further development of the Internet, by providing the marketplace stability needed to encourage investment and foster the growth of new services and applications. Furthermore, relying on current laws and case-by-case anti-trust-like enforcement, they claim, is too cumbersome, slow, and expensive, particularly for small start-up enterprises. The 110 th Congress addressed the debate over net neutrality largely within the broader issue of telecommunications reform. Then House Telecommunications and the Internet Subcommittee Chairman Markey, a strong advocate of net neutrality legislation, introduced legislation ( H.R. 5353 ) to address this issue and held a May 6, 2008 hearing on the measure. House Judiciary Chairman Conyers introduced H.R. 5994 , a bill which establishes an antitrust approach to address anticompetitive and discriminatory practices by broadband providers as a follow-up to a March 11, 2008 hearing on net neutrality held by the House Judiciary Antitrust Task Force. A stand-alone net neutrality measure ( S. 215 ) was introduced and referred to the Senate Commerce, Science, and Transportation Committee where an April 22, 2008 hearing on the "Future of the Internet" was held. No further activity was undertaken in the 110 th Congress. A consensus on this issue has not yet formed, and no stand-alone measures addressing net neutrality have been introduced in the 111 th Congress, to date. House Communications, Technology, and the Internet Subcommittee Chairman Boucher has stated that he continues to work with broadband providers and content providers to seek common ground on network management practices, and at this time, is pursuing this approach. However, the net neutrality issue has been narrowly addressed within the context of the economic stimulus package. H.R. 1 ( P.L. 111-5 ) contains provisions that require the National Telecommunications and Information Administration (NTIA), in consultation with the FCC, to establish "... nondiscrimination and network interconnection obligations" as a requirement for grant participants in the Broadband Technology Opportunities Program (BTOP). The law further directs that the FCC's four broadband policy principles, issued in August 2005, are the minimum obligations to be imposed. The NTIA has not, as of yet, issued these requirements.
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As congressional policymakers continue to debate telecommunications reform, a major point of contention is the question of whether action is needed to ensure unfettered access to the Internet. The move to place restrictions on the owners of the networks that compose and provide access to the Internet, to ensure equal access and non-discriminatory treatment, is referred to as "net neutrality." There is no single accepted definition of "net neutrality." However, most agree that any such definition should include the general principles that owners of the networks that compose and provide access to the Internet should not control how consumers lawfully use that network; and should not be able to discriminate against content provider access to that network. Concern over whether it is necessary to take steps to ensure access to the Internet for content, services, and applications providers, as well as consumers, and if so, what these should be, is a major focus in the debate over telecommunications reform. Some policymakers contend that more specific regulatory guidelines may be necessary to protect the marketplace from potential abuses which could threaten the net neutrality concept. Others contend that existing laws and Federal Communications Commission (FCC) policies are sufficient to deal with potential anti-competitive behavior and that such regulations would have negative effects on the expansion and future development of the Internet. A consensus on this issue has not yet formed, and the 111th Congress, to date, has not introduced stand-alone legislation to address this issue. However, the net neutrality issue has been narrowly addressed within the context of the economic stimulus package (P.L. 111-5). Provisions in that law require the National Telecommunications and Information Administration (NTIA), in consultation with the FCC, to establish " ... nondiscrimination and network interconnection obligations" as a requirement for grant participants in the Broadband Technology Opportunities Program (BTOP). This report will be updated as events warrant.
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Social Security benefits received before a person attains full retirement age (FRA) are subject to an actuarial reduction for early retirement and also may be reduced by the Social Security Retirement Earnings Test (RET) if the beneficiary has earnings that exceed an annual threshold. Under the RET, a beneficiary who is below FRA and will not attain FRA during the calendar year is subject to a $1 reduction in benefits for each $2 of earnings above an annual exempt amount, which is $14,640 in 2012. During the calendar year in which a beneficiary attains FRA, he or she is subject to a $1 reduction in benefits for each $3 of earnings above a higher annual exempt amount, which is $38,880 in 2012. This report explains how the RET is applied under current law and provides detailed benefit examples to show how the RET affects both the worker beneficiary and any family members (auxiliary beneficiaries) who receive benefits based on the worker beneficiary's record. The report points out features of the RET that are not widely known or understood, such as the recomputation of benefits when a beneficiary attains FRA to adjust (increase) benefits to take into account months for which no benefit or a partial benefit was paid as a result of the RET. Finally, the report discusses policy issues related to the RET, including recent research on the effect of the RET on work effort and the decision to claim Social Security benefits. Key points discussed in the report include the following: Benefits may be reduced in part or in full for one or more months as a result of the RET. Benefit reductions under the RET apply both to the worker beneficiary and to any family members (auxiliary beneficiaries) who receive benefits based on the worker beneficiary's record. This would include, for example, a dependent child and a spouse who may have already attained FRA. When a worker beneficiary and family members are subject to a benefit reduction under the RET, the reduction is pro-rated and applied to each person's benefit in proportion to each person's original entitlement amount. (The total amount of the reduction remains the same, but the reduction is pro-rated across more people.) An auxiliary beneficiary may be subject to a reduction in benefits under the RET both on the basis of the worker beneficiary's earnings above the exempt amount and on the basis of his or her own earnings above the exempt amount. Benefits "lost" as a result of the RET may be recouped by the beneficiary. When a beneficiary attains FRA and is no longer subject to the RET, his or her benefits are adjusted upward to take into account months for which no benefit or a partial benefit was paid as a result of the RET. The Social Security Administration (SSA) estimates that elimination of the RET for individuals aged 62 or older would have no major effect on Social Security's projected long-range financial outlook. In the short run, however, SSA estimates that eliminating the RET would have a negative effect on the Social Security trust fund in the amount of $81 billion from 2012 to 2018. The RET raises several policy issues, including the effect of the RET on labor supply (how many hours to work and when to retire) and its effect on when workers claim Social Security benefits. In general, Social Security benefits are meant to replace, in part, earnings lost to an individual or family because of retirement, disability, or death. The rationale for the RET was outlined in the 1935 report of the Committee on Economic Security, which recommended that no benefits be paid before a person had "retired from gainful employment." The original Social Security Act barred payment of benefits for any month in which a beneficiary received wages from "regular employment." This provision never went into effect, however, because the Social Security Board and many other analysts thought it would be nearly impossible to determine what was "regular" employment in different industries and occupations. Instead, the board recommended a specific monetary amount to simplify administration. In 1939, Congress incorporated these recommendations in amendments to the Social Security Act. Starting with the first benefits paid in 1940, benefits were withheld for months in which covered earnings were $15 or more. The RET has evolved from a monthly test to an annual one (with the exception of the "grace year" as discussed below) and from a provision that initially affected all worker beneficiaries to one that affects beneficiaries who are below the FRA. The most recent legislative change to the RET was in 2000 when Congress eliminated the RET for beneficiaries beginning with the month they attain FRA. This change was made under the Senior Citizens Freedom to Work Act ( P.L. 106-182 ). Before the change in 2000, the RET applied to beneficiaries until they attained the age of 70. Social Security benefits are based on the average of a worker's highest 35 years of earnings. A worker's primary insurance amount (PIA) is computed by applying the Social Security benefit formula to the worker's career-average, wage-indexed earnings. The benefit formula replaces a higher percentage of the pre-retirement earnings of workers with low career-average earnings than for workers with high career-average earnings. A worker's initial monthly benefit is equal to the worker's PIA if he or she begins receiving benefits at FRA. A worker's initial monthly benefit will be less than his or her PIA if the worker begins receiving benefits before FRA, and it will be greater than his or her PIA if the worker begins receiving benefits after FRA. For a more detailed explanation of the Social Security benefit computation and the actuarial adjustment to benefits claimed before or after FRA, see Appendix A . Social Security also provides auxiliary benefits to eligible family members of a retired, disabled or deceased worker. Benefits payable to family members are equal to a specified percentage of the worker's PIA. For example, a spouse's benefit is equal to 50% of the worker's PIA, and a widow(er)'s benefit is equal to 100% of the deceased worker's PIA. The total amount of benefits payable to a family based on a retired or deceased worker's record is capped by the maximum family benefit amount, which varies from 150% to 188% of the retired or deceased worker's PIA. For more information on auxiliary benefits and the maximum family benefit amount, see Appendix B . The RET applies to beneficiaries who are below the Social Security FRA and have earnings that exceed a specified dollar amount (an annual exempt amount). The RET does not apply to worker beneficiaries who are at or above FRA (the RET no longer applies beginning with the month the beneficiary attains FRA) or to those who are disabled. In addition, the RET does not apply to beneficiaries living outside the United States whose work is not covered by the U.S Social Security system; in this case, the "foreign work test" is applied. Self-employed persons are subject to the RET if they have performed "substantial services," which are determined by the nature of the service performed rather than by profit or loss. For beneficiaries who are below FRA and will not attain FRA during the calendar year, Social Security benefits are reduced by $1 for each $2 earned above the exempt amount. For beneficiaries who will attain FRA during the calendar year, Social Security benefits are reduced by $1 for each $3 earned above the exempt amount. Earnings above the exempt amount are charged against monthly benefits beginning with the first chargeable month of the year, at the applicable rate of $1 for each $2 or $3 of earnings above the exempt amount, and continue to be charged each month until all earnings above the exempt amount have been charged against the worker's benefits and any benefits payable to family members on his or her work record. A partial benefit is paid when the charge to a given month is less than the monthly benefit. The RET applies only to wage and salary income (i.e., earnings from work). It does not apply to income from pensions, rents, dividends, interest, and other types of "unearned" income. The RET annual exempt amounts in 2012 are $14,640 for beneficiaries who are below FRA and will not attain FRA in 2012, and $38,880 for beneficiaries who will attain FRA in 2012. The RET exempt amounts generally increase each year at the same rate as average wages in the economy. Appendix C shows the annual exempt amounts under the RET from calendar years 2000 to 2012. A "grace year" applies during the first year of benefit entitlement (or, for dependent beneficiaries, in the last year of benefit entitlement). During the grace year, the RET is applied effectively on a monthly basis. A beneficiary may receive full benefits for any month during which his or her earnings do not exceed one-twelfth of the annual exempt amount, regardless of the total amount of earnings for the year. As an example, consider a worker aged 62 who (1) has $60,000 in earnings from January through June 2012, (2) claims Social Security retirement benefits on July 1, 2012, and (3) has no additional earnings for the remainder of the year (July through December 2012). Because this person does not have earnings above the 2012 monthly exempt amount of $1,220 in any month from July through December 2012, full benefits are paid for each month of the second half of the year. This is the case even though this person's total earnings for 2012 are $60,000, an amount higher than the 2012 annual exempt amount of $14,640. There are two ways in which a person who receives Social Security auxiliary benefits (benefits paid to spouses, survivors, and other dependents) could be affected by the RET. First, benefits paid to spouses and dependents are affected by the RET when the benefits are based on the record of a worker beneficiary who is subject to the RET (i.e., the worker beneficiary is below FRA and has earnings above the exempt amount). This includes benefits paid to spouses who are below FRA as well as to those who are above FRA. An exception is made for auxiliary benefits paid to divorced spouses. If a divorced spouse has been divorced from the worker beneficiary for at least two years, the auxiliary benefit is not affected by the worker beneficiary's earnings. Second, benefits paid to spouses (including divorced spouses) and dependents are affected by the RET when the auxiliary beneficiary is below FRA and has his or her own earnings above the exempt amount. Auxiliary beneficiaries are subject to the same annual exempt amounts and benefit reduction rates that apply to worker beneficiaries. A person receiving spousal benefits who is affected by the RET based on his or her own earnings above the exempt amount may be simultaneously (dually) entitled to a retired-worker benefit based on his or her own work record. A dually entitled beneficiary receives his or her own retired-worker benefit first, plus any spousal benefit remaining after the spousal benefit is reduced based on the retired-worker benefit. In effect, the total benefit payable to a dually entitled beneficiary is capped at the higher of the retired-worker benefit and the spousal benefit. In the case of a dually entitled beneficiary, his or her own earnings above the exempt amount affect both his or her own retired-worker benefit and the spousal benefit. In addition, if the worker beneficiary on whose record the spousal benefit is based has earnings above the exempt amount, the spousal benefit is affected by those earnings as well. When a dually entitled beneficiary attains FRA, each benefit that was affected by the RET (the retired-worker benefit or the spousal benefit) is adjusted upward to take into account months for which no benefit or a partial benefit was paid as a result of the RET. An example is provided later in the report to show how benefits paid to a non-working spouse are affected when the worker beneficiary has earnings above the exempt amount. In addition, an example is provided to show how spousal benefits are affected when both the worker beneficiary and the spouse have earnings above the exempt amount. When a beneficiary has had benefits fully or partially withheld under the RET, benefits "lost" as a result of the RET are restored starting at FRA. Specifically, the worker's benefits are recomputed—and increased—when he or she attains FRA. In the benefit recomputation at FRA, the actuarial reduction for benefit entitlement before FRA that was applied in the initial benefit computation is adjusted (the actuarial reduction for early retirement is lessened) to reflect the number of months the worker received no benefit or a partial benefit as a result of the RET. In the initial benefit computation, retirement benefits are reduced for early retirement by a fraction of the worker's PIA for each month of entitlement before FRA. Retirement benefits are reduced by five-ninths of 1% (or 0.0056) of the worker's PIA for each of the first 36 months of entitlement before FRA. Stated another way, the actuarial reduction for early retirement is about 6.7% per year for the first three years of entitlement before FRA (i.e., from the age of 62 to 65). For each additional month of entitlement before FRA (up to 24 months), retirement benefits are reduced by five-twelfths of 1% (or 0.0042) of the worker's PIA, for an actuarial reduction of 5% per year (i.e., from the age of 65 to 67). Stated generally, if a worker's benefits are reduced in the initial benefit computation to reflect x months of early retirement, and the worker subsequently has benefits withheld under the RET for y months , the benefit recomputation at FRA will reflect an actuarial reduction for x minus y months of early retirement, resulting in a higher monthly benefit amount starting at FRA. As an example, consider a worker who starts receiving Social Security retirement benefits at the age of 62, although his or her FRA is 66, and he or she has earnings above the RET exempt amount. Because the person claims retirement benefits four years before attaining FRA and has earnings above the RET threshold, he or she will be subject to both the actuarial reduction for benefit entitlement before FRA and benefit withholding under the RET. The actuarial reduction is equal to about 6.7% per year for the first three years of benefit entitlement before FRA and 5% per year thereafter. In this example, the total actuarial reduction in the person's initial monthly benefit is 25% ((6.7% * 3 years) + (5% * 1 year)). In addition, the person continues to work throughout the four-year period from the age of 62 to 66 and has earnings high enough to cause a reduction in his or her monthly benefit under the RET. If the RET results in a 50% reduction in Social Security benefits in each of the four years from the age of 62 to 66, the person would have benefits withheld for six months each year, for a total of 24 months. The benefit recomputation when the person attains FRA will take into account that the person received no benefits for 24 months as a result of the RET. Specifically, the reduction factor for benefit entitlement before FRA will be adjusted from 48 months to 24 months. Starting at FRA, the person's monthly benefit will be increased to reflect an actuarial reduction for benefit entitlement before FRA of about 13.4% (6.7% * 2 years), instead of 25%. The person receives a higher monthly benefit because benefits withheld under the RET are restored starting at FRA. If spousal benefits are withheld under the RET (as discussed in section " The RET May Affect Social Security Benefits Received by Spouses, Survivors and Other Dependents "), they will be adjusted upward when the spouse attains FRA (not when the worker beneficiary attains FRA). For a spouse who has already attained FRA, there is no subsequent adjustment to benefits to take into account months for which no benefit or a partial benefit was paid as a result of the RET. Table 1 shows the number of worker beneficiaries who had earnings in 2006, the most recent year for which data are available. About 1.3 million worker beneficiaries who were below FRA during all or part of 2006 had earnings. With respect to the data shown in Table 1 , it is important to note that not all worker beneficiaries with earnings are affected by the RET. For example, those who have earnings below the exempt amount are not affected by the RET. In addition, those who are in the first year of entitlement may benefit from the "grace year" provision and are not subject to the RET during any months in which they have earnings that are lower than the monthly RET exempt amount (i.e., the annual RET exempt amount divided by 12). Table 2 illustrates the application of the RET to a single person who receives benefits based on his or her own work record. The table illustrates the effect of the RET on single worker beneficiaries in two different age groups, reflecting the application of different annual exempt amounts and benefit reduction rates under the RET for beneficiaries who will remain below FRA throughout the calendar year and beneficiaries who will attain FRA during the calendar year. The two single worker beneficiaries in the examples have the following characteristics: Single Worker Beneficiary Who is Below FRA Throughout the Calendar Year . This example shows a worker beneficiary with a monthly benefit amount of $2,000 (this amount has already been adjusted for retirement before FRA) and $40,000 of earnings in 2012. Because this worker beneficiary is below FRA throughout the calendar year, he or she is subject to a $1 reduction in benefits for each $2 of earnings above the annual exempt amount of $14,640 in 2012. Single Worker Beneficiary Who Will Attain FRA During the Calendar Year . This example shows a worker beneficiary with a monthly benefit amount of $2,000 (this amount has already been adjusted for retirement before FRA) and $40,000 of earnings in 2012. Because this worker beneficiary will attain FRA during the calendar year, he or she is subject to a $1 reduction in benefits for each $3 of earnings above the annual exempt amount of $38,880 in 2012. As discussed above, certain auxiliary benefits (benefits paid to the worker's family members such as a spouse or children) are subject to withholding under the RET if either the worker beneficiary or the auxiliary beneficiary has earnings above the exempt amount. When the worker beneficiary has earnings above the exempt amount, these earnings are charged against the total family benefit, that is, the total of benefits paid to the worker beneficiary and auxiliary beneficiaries who receive benefits based on the worker beneficiary's record. (When the auxiliary beneficiary has earnings above the exempt amount, these earnings are charged only against the auxiliary beneficiary's benefit, as discussed below.) Table 3 provides an example of a worker beneficiary who is entitled to a monthly retirement benefit of $2,000 (this amount has already been adjusted for retirement before FRA). In addition, the worker beneficiary's spouse and child are each entitled to a monthly auxiliary benefit of $1,000 based on the worker beneficiary's record. Therefore, the total monthly family benefit is $4,000. If the worker beneficiary is below FRA and has earnings above the exempt amount, reductions under the RET are pro-rated among family members in proportion to each family member's original entitlement amount, before any adjustment for the family maximum or for retirement before FRA. The total amount of the reduction remains the same, but the reduction is pro-rated across two or more people. If reductions under the RET are large enough to exceed the total family benefit for one or more months, no benefits are payable to the family for those months. If a partial benefit is payable for a given month, reflecting a reduction under the RET for that month that is less than the total family benefit, the partial benefit is pro-rated among family members. In Table 3 , benefits for the illustrative family are shown under two cases of the RET. The first case shows a family headed by a worker beneficiary who is below FRA throughout the calendar year and is subject to a benefit reduction under the RET equal to one-half of earnings above the lower exempt amount of $14,640 in 2012. The second case shows a family headed by a worker beneficiary who will attain FRA during the calendar year and is subject to a benefit reduction under the RET equal to one-third of earnings above the higher exempt amount of $38,880 in 2012. The preceding examples illustrate cases in which the worker beneficiary has earnings above the exempt amount. In some cases, both the worker beneficiary and an auxiliary beneficiary (such as a spouse) may have earnings above the exempt amount. Table 4 shows an example of a couple in which (1) one member, the worker beneficiary, receives a retired-worker benefit based on his or her own work record, and (2) one member, the auxiliary beneficiary, receives a spousal benefit only. Both beneficiaries are assumed to be below FRA throughout the calendar year and to have earnings above the RET exempt amount. Because neither beneficiary will attain FRA during the calendar year, both are subject to the same RET exempt amount and benefit reduction rate. Benefit reductions under the RET are applied to the couple in the following order: First, the worker beneficiary's RET charge is pro-rated and applied to both the worker beneficiary's retired-worker benefit and the auxiliary beneficiary's spousal benefit. Second, if there is a balance remaining on the spousal benefit (if the spousal benefit has not been reduced to zero), the auxiliary beneficiary's RET charge is applied to (and further reduces) his or her spousal benefit only (the auxiliary beneficiary's earnings above the RET exempt amount do not affect the worker beneficiary's retired-worker benefit). More complex situations may exist in which, for example, a person is dually entitled to a retired-worker benefit (based on his or her own work record) and a spousal benefit (based on a different work record) and the person has earnings above the exempt amount. In the case of a dually-entitled beneficiary, his or her earnings above the exempt amount affect both his or her own retired-worker benefit and the spousal benefit that he or she receives. The dually entitled beneficiary's earnings above the exempt amount do not affect the retired-worker benefit received by his or her spouse because that benefit is based on the spouse's work record. Table 5 summarizes the applicability of the RET to worker beneficiaries and auxiliary beneficiaries when either type of beneficiary has earnings above the exempt amount. Policymakers have asked questions about the RET's impact on labor supply and on the timing of Social Security benefit claims. Some argue that the RET is perceived as a "tax" on work effort, and that it induces workers to work fewer hours, or even to retire completely from the workforce. Another line of enquiry is whether the RET causes workers to delay claiming Social Security benefits. Both of these effects could have important implications for the retirement security of workers, their spouses and their survivors. Quantitative studies have found mixed evidence concerning the RET's impact on work hours, retirement and the timing of Social Security benefit claims. Although the RET has been found to have a substantial effect on the labor supply of workers at or just above the annual RET threshold, the impact on workers with higher wages and salaries is more ambiguous. There is somewhat stronger evidence that the RET causes workers to delay claiming Social Security benefits. The impact of the RET on work hours varies by income level. At wages and salaries that are at or just above the annual RET threshold, the RET may encourage workers to work fewer hours, to keep wages or salaries just under the RET threshold. This effect is known as "bunching" or "clustering" under the RET threshold. A 1999 study found that a subset of workers do cluster at earnings levels just below the RET threshold. At higher earnings levels, the RET's impact on work hours is more ambiguous. Some workers perceive the RET as a tax on work effort (despite the recomputation of benefits at FRA). Moreover, other workers who are aware of the recomputation may place a relatively low value on future income. To the extent that the RET is perceived as a tax on earnings, it may induce some workers to reduce their work hours or even to retire completely from the workforce. Other workers, however, may respond to the RET reduction to Social Security benefits by working more, not fewer, hours to reach their income goals or requirements. For these workers, eliminating the RET would increase total income (income from labor plus income from Social Security). This has led some to argue that eliminating the RET would benefit some higher earners because the additional Social Security benefits that would become available would permit higher earners, if they wished, to reduce their work hours. One study of the period from 1973 to 1998 found that the RET had little or no effect on the aggregate work hours and earnings of men aged 62 and older, although there is somewhat stronger evidence that the RET had an impact on women's earnings (no evidence was found for an impact on women's work hours). However, a study of Social Security beneficiaries' response to the 2000 removal of the RET for beneficiaries at or above FRA found that, when workers are segmented by earnings level, fairly large effects on earnings are found, with the effects on earnings concentrated just below and above the RET threshold. (The study did not examine how work hours were affected by the 2000 change in the RET.) Research has not found the RET to have a large effect on labor force participation, that is, a worker's decision to retire or remain in the workforce. This is perhaps in part because the RET is a relatively small part of the larger retirement decision that includes other factors such as pension rules and the worker's health, and also because it is difficult to separate the RET's impact from the trend toward later retirement that is already under way. Because the RET applies to persons who are younger than FRA, it may discourage persons below the FRA from claiming benefits. As noted earlier, some workers perceive the RET as a "tax" on benefits received before FRA, even though the recomputation of benefits at FRA (which results in a higher monthly benefit starting at FRA) allows the worker to recoup benefits withheld under the RET. The quantitative evidence that the RET has an impact on the decision concerning when to claim Social Security benefits is somewhat stronger than the quantitative evidence for the RET's impact on work and earnings. For example, the Gruber and Orszag study that examined persons aged 62 and older during the period from 1973 to 1998 estimated that a $1,000 increase in the RET threshold could increase the share of men aged 62 and older who receive Social Security benefits by 0.7% to 1.6%, while eliminating the RET could increase that share by 5.2% to 13.5%. A more recent study that examined the 2000 elimination of the RET for men and women at or above FRA found a 2 to 5 percentage point increase in benefit claims among men and women aged 65 to 69, and a 3 to 5 percentage point increase among men and women who reach the age of 65. Some argue that, to the extent the RET causes some workers to delay claiming Social Security benefits, this can be beneficial for the worker as well as for his or her spouse or survivor. Claiming Social Security benefits before the FRA can reduce a worker's Social Security benefit amount in two ways, as noted earlier: (1) through the RET, although when the worker attains FRA his or her benefits are recomputed and a higher monthly benefit amount is payable starting at FRA; and (2) through the actuarial reduction for early retirement which, although it is intended to be actuarially fair to the individual over his or her expected lifetime, causes a permanent reduction to the worker's monthly Social Security benefit amount. As discussed, the RET applies to spousal benefits. (See section " The RET May Affect Social Security Benefits Received by Spouses, Survivors and Other Dependents .") Spousal benefits that have been reduced by the RET are restored starting when the spouse attains FRA. Spousal benefits are not restored, however, when the RET is applied to the benefits of a spouse who is already at or above FRA. (See " Benefits Withheld Under the RET are Restored Starting at FRA .") Survivors' benefits may be permanently affected by the worker beneficiary's decision to claim benefits before FRA. Under a provision in the Social Security Act called the widow(er)'s limit provision , the widow(er)'s benefit may be reduced if the widow(er)'s benefit payable on the worker's record exceeds the benefit the worker was receiving (including any actuarial reduction for early retirement that may have reduced the worker's benefit) before his or her death. If a worker has benefits withheld under the RET and he or she dies before attaining FRA (when the worker's benefit would have been recomputed), for purposes of determining the limit on the widow(er)'s benefit, the worker's benefit is recomputed at the time of the worker's death to take into account months for which no benefit or a partial benefit was paid as a result of the RET. Elderly widows, in particular, may face reduced living standards if their spouses claim benefits before FRA, because of the actuarial reduction to benefits described above. Women tend to outlive their husbands and are therefore more likely than men to receive Social Security survivors' benefits. In addition, individuals and couples are more likely to deplete other assets later in retirement, leaving the couple or surviving spouse more reliant on Social Security. Some argue that eliminating the RET would have positive budget and economic effects because people would work more and pay more Social Security payroll and other taxes. The effect of the RET on labor supply is probably modest, however, as discussed above. A common complaint among beneficiaries affected by the RET is that they are being denied a benefit they have "bought and paid for." A related argument is that the RET resembles a form of needs testing, making benefit receipt contingent on demonstrating "need" for this earned benefit. Supporters of the RET counter that Social Security is intended as a form of insurance against the risks of retirement and disability; just as the program does not pay disability benefits to those who are not disabled, it should not pay retirement benefits to those who are not retired. The recomputation of benefits at FRA to restore benefits withheld under the RET is not widely known or understood. As noted previously, if a beneficiary has benefits withheld under the RET, his or her benefit is recomputed when he or she attains FRA to take into account months for which no benefit or a partial benefit was paid due to the RET. The recomputation results in a higher monthly benefit amount starting at FRA and allows the worker to recoup the value of any benefits "lost" under the RET, assuming he or she lives to average life expectancy. As a result, some observers argue that the RET should not be perceived as a "tax." However, for some workers with shorter lifespans, the recovery of benefits may be incomplete. Conversely, for those who live longer than average, the recomputation may result in higher lifetime benefits that more than make up for the initial benefit reductions under the RET. Because life expectancy is linked to income, some argue that the RET may be regressive on a lifetime basis. Critics of the RET argue that it discriminates against claimants who must continue working to supplement their benefits. In contrast, claimants with no earnings who have other forms of income, such as private pensions or investment income, can receive full Social Security benefits. Supporters of the RET counter that eliminating the RET would provide a bonus to people who are fortunate enough to be able to continue working after becoming entitled to retirement benefits, and the additional Social Security benefits may allow or encourage some individuals to reduce their work hours. Under current law, the RET has no major effect on Social Security financing over the long run because, on average , the RET has "no significant effect" on lifetime benefits. Therefore, the Social Security Administration's Office of the Chief Actuary (OCACT) estimates that elimination of the RET for individuals aged 62 or older would have no major effect on Social Security's projected long-range financial outlook. In the short run, however, OCACT estimates that elimination of the RET would have a negative effect on the Social Security trust fund in the amount of $81 billion from 2012 to 2018. The trust fund would experience a projected cash-flow deficit of $12.1 billion in 2012, and a projected cash-flow deficit of $10.4 billion in 2018. OCACT notes: "In the first several years after elimination of the retirement earnings test, benefit payments are projected to increase substantially, because benefits are paid under the proposal where such payments would be withheld, or the individual would have not applied for benefits yet, under current law." In summary, OCACT notes that the projected financial effects for the Social Security program of eliminating the RET are due to "(1) some individuals no longer having their benefits withheld, (2) some individuals who would apply for Social Security benefits earlier because of the earnings test elimination, and (3) a small net increase in earnings for individuals currently subject to the earnings test." Appendix A. Computation of the Social Security Retired-Worker Benefit To be eligible for a Social Security retired-worker benefit, a person generally needs 40 earnings credits, or 10 years of Social Security-covered employment (among other requirements). A worker's initial monthly benefit is based on his or her 35 highest years of earnings which are indexed to historical wage growth (earnings through the age of 60 are indexed; earnings thereafter are counted at nominal value). The 35 highest years of indexed earnings are divided by 35 to determine the worker's career-average annual earnings. The resulting amount is divided by 12 to determine the worker's average indexed monthly earnings (AIME). If a worker has fewer than 35 years of earnings in covered employment, years of no earnings are entered as zeros. The worker's basic benefit amount (i.e., before any adjustments for early or delayed retirement) is the primary insurance amount (PIA). The PIA is determined by applying a formula to the AIME as shown in Table A -1 . First, the AIME is sectioned into three brackets, or levels, of earnings. Three progressive factors—90%, 32%, and 15%—are applied to the three different brackets of AIME. The three products derived from multiplying each factor and bracket of AIME are added together. For workers who become eligible for retirement benefits (i.e., those who attain age 62), become disabled, or die in 2012, the PIA is determined as shown in the example in Table A -1 . Adjustment to Benefits Claimed Before or After FRA A worker's initial monthly benefit is equal to his or her PIA if he or she begins receiving benefits at FRA (i.e., FRA is the earliest age at which full (unreduced) retirement benefits are payable). A worker's initial monthly benefit will be less than his or her PIA if he or she begins receiving benefits before FRA, and it will be greater than his or her PIA if he or she begins receiving benefits after FRA. As noted previously, FRA ranges from the age of 65 to 67 depending on the person's year of birth. Retirement benefits are reduced by five-ninths of 1% (or 0.0056) of the worker's PIA for each month of entitlement before FRA up to 36 months, for a reduction of about 6.7% a year. For each month of benefit entitlement before FRA in excess of 36 months, retirement benefits are reduced by five-twelfths of 1% (or 0.0042), for a reduction of 5% a year. Workers who delay filing for benefits until after FRA receive a delayed retirement credit (DRC). The DRC applies beginning with the month the worker attains FRA and ending with the month before he or she attains the age of 70. Starting in 1990, the DRC increased until it reached 8% per year for workers born in 1943 or later (i.e., starting with those who attained age 62 in 2005 or age 66 in 2009). Appendix B. Social Security Auxiliary Benefits (Benefits for the Worker's Family Members) Social Security provides benefits to eligible family members of a retired, disabled or deceased worker. Benefits payable to family members are equal to a specified percentage of the worker's PIA, subject to a maximum family benefit amount. Social Security provides a monthly benefit to the spouse or divorced spouse (if the marriage lasted 10 or more years) of an entitled retired or disabled worker equal to 50% of the worker's PIA. A monthly survivor benefit equal to 100% of the deceased worker's PIA is payable to the surviving spouse or surviving divorced spouse of a worker who was fully insured at the time of death. Benefits for spouses, divorced spouses and surviving spouses are reduced if claimed before FRA. In addition, these benefits are reduced or fully offset if the beneficiary receives his or her own Social Security retired-worker benefit or a pension from a job that was not covered by Social Security (such as certain federal, state or local government jobs). The child of a disabled or retired worker is eligible for 50% of the worker's PIA. The child of a deceased worker is eligible for 75% of the worker's PIA. Social Security also provides a monthly mother's or father's benefit, equal to 75% of the worker's PIA, to a surviving parent of any age who cares for the deceased worker's child, when that child is under the age of 16 or disabled. Table B -1 provides a summary of Social Security auxiliary benefits for the family of a retired, disabled or deceased worker, including eligibility requirements related to age and other factors. Maximum Family Benefit Amount The total amount of benefits payable to a family based on a retired or deceased worker's record is capped by the maximum family benefit amount. The maximum family benefit varies from 150% to 188% of the retired or deceased worker's PIA, and the maximum family benefit cannot be exceeded regardless of the number of beneficiaries entitled to benefits on the worker's record. If the sum of all benefits based on the worker's record exceeds the maximum family benefit amount, each dependent's or survivor's benefit is reduced in equal proportion to bring the total amount of benefits within the family maximum. For the family of a worker who attains age 62 in 2012, or dies in 2012 before attaining age 62, the total amount of benefits payable is limited to 150% of the first $980 of PIA, plus 272% of PIA over $980 and through $1,415, plus 134% of PIA over $1,415 and through $1,845, plus 175% of PIA over $1,845. The dollar amounts in the maximum family benefit formula are indexed to average wage growth, as in the primary benefit formula. A separate maximum family benefit formula applies to the family of a worker who is entitled to disability benefits. Appendix C. Annual Exempt Amounts Under the Social Security Retirement Earnings Test, Calendar Years 2000-2012 The RET annual exempt amount is indexed to average wage growth in the economy. An exception, however, is that the annual exempt amount is not increased in a year during which no Social Security cost-of-living adjustment (COLA) is payable. In 2010 and 2011 there was no Social Security COLA, therefore the RET exempt amount did not increase in these years. The RET applies only to wage and salary income (i.e., earnings from work). It does not apply to "unearned" income, such as income from pensions, rents, dividends, or interest.
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Under the Social Security Retirement Earnings Test (RET), the monthly benefit of a Social Security beneficiary who is below full retirement age (FRA) is reduced if he or she has earnings that exceed an annual threshold. In 2012, a beneficiary who is below FRA and will not attain FRA during the year is subject to a $1 reduction in benefits for each $2 of earnings above $14,640. A beneficiary who will attain FRA in 2012 is subject to a $1 reduction in benefits for each $3 of earnings above $38,880. The annual exempt amounts ($14,640 and $38,880 in 2012) generally are adjusted each year according to average wage growth. If a beneficiary is affected by the RET, his or her monthly benefit may be reduced in part or in full, depending on the total applicable reduction. For example, if the total applicable reduction is greater than the beneficiary's monthly benefit amount, no monthly benefit is payable for one or more months. If family members also receive auxiliary benefits based on the beneficiary's work record, the reduction is pro-rated and applied to all benefits payable on that work record (including benefits paid to spouses who are above FRA). For example, in the case of a family consisting of a worker beneficiary who has earnings above the annual exempt amount and a spouse and child who receive benefits based on his or her work record, the benefit reduction that applies under the RET is charged against the total family benefit. The RET has been part of the Social Security program in some form throughout the program's history. The original rationale for the RET was that, as a social insurance system, Social Security protects workers from certain risks, including the loss of earnings due to retirement. Therefore, benefits should be withheld from workers who show by their earnings that they have not "retired." The RET does not apply to Social Security disability beneficiaries who are subject to separate limitations on earnings. If a beneficiary is affected by the RET, his or her monthly benefit is recomputed, and the dollar amount of the monthly benefit is increased, when he or she attains FRA. This feature of the RET, which allows beneficiaries to recoup benefits "lost" as a result of the RET, is not widely known or understood. The benefit recomputation at FRA is done by adjusting (lessening) the actuarial reduction for retirement before FRA that was applied in the initial benefit computation to take into account months for which benefits were reduced in part or in full under the RET. Any spousal benefits that were reduced because of the RET are recomputed when the spouse attains FRA. For a spouse who has already attained FRA, however, there is no subsequent adjustment to benefits to take into account months for which no benefit or a partial benefit was paid as a result of the RET. The Social Security Administration estimates that elimination of the RET for individuals aged 62 or older would have a negative effect on the Social Security trust fund in the amount of $81 billion from 2012 to 2018, although it would have no major effect on Social Security's projected long-range financial outlook. This report explains how the RET works under current law. In addition, it provides benefit examples to illustrate the effect of the RET on Social Security beneficiaries who are below FRA and family members who receive benefits based on their work records. It also briefly discusses policy issues, including recent research on the effect of the RET on work effort and the decision to claim Social Security benefits. This report will be updated periodically.
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Section 106(3) of the Copyright Act grants a copyright holder the exclusive right to distribute copies of a copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending. In addition to the general distribution right, Section 602(a) of the Copyright Act provides a copyright holder with the right to prohibit the importation into the United States of copies of a work that have been acquired outside the United States; such importation, if done without the authority of the copyright holder, is considered an infringement of the exclusive right to distribute copies of the work under § 106. However, the Copyright Act's "first-sale" doctrine, codified at § 109(a), provides a limitation to the copyright holder's distribution right: "Notwithstanding the provisions of section 106(3), the owner of a particular copy … lawfully made under this title … is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy." For example, someone who purchases a new book in a bookstore (thus constituting the "first sale" of that particular copy) becomes the owner of that physical item. He or she may thereafter distribute the book (for example, give it away to a friend or sell it to a used book store) without obtaining prior consent of the book's copyright owner. Owners of copies of a copyrighted work that have been "lawfully made under" title 17 of the U.S. Code (where the Copyright Act is codified) are thus immunized from copyright infringement liability when they transfer ownership of those copies to other individuals. As the U.S. Supreme Court has previously explained, "The whole point of the first sale doctrine is that once the copyright owner places a copyrighted item in the stream of commerce by selling it, he has exhausted his exclusive statutory right to control its distribution." Compelling public policy reasons support the Copyright Act's first sale doctrine. As the U.S. Supreme Court has noted, "The primary objective of copyright is not to reward the labor of authors, but 'to promote the Progress of Science and useful Arts.'" In accordance with this constitutional mandate, the Copyright Act balances the rights of copyright holders in their intellectual property with the public's interest in having robust ownership rights in the tangible material in which copyrighted works are fixed. By terminating the distribution right of copyright holders after the initial sale of a particular copy, owners of those copies benefit from having unrestrained alienability of personal property. So-called "gray-market" goods are products that have been manufactured and purchased abroad and thereafter imported into the United States (without the authorization of the intellectual property holder) for resale to U.S. customers (usually at discounted prices) . Also known as "parallel imports," gray-market goods are legitimate, genuine products possessing a brand name protected by a trademark and/or containing designs or other subject matter protected by copyright. These goods are usually manufactured abroad and then purchased and imported into the United States by third parties, "thereby bypassing the authorized U.S. distribution channels." U.S. retailers can sell gray-market products at cheaper prices compared to the higher domestic prices established by the manufacturer. The legal question that faced the U.S. Supreme Court in Costco Wholesale Corp. v. Omega S.A. was whether a manufacturer's right to prohibit unauthorized importation of copyrighted works is exhausted by the initial foreign sale of copies of copyrighted works that were made outside the United States. In 1998, the U.S. Supreme Court was confronted with a question reminiscent of that posed in Costco , although there is a factual difference between the cases. In Quality King Distributors, Inc. v. L' a nza Research International, Inc., a California company (L'anza) manufactured and sold shampoo and other hair care products; the products were manufactured in the United States, but were sold by L'anza both domestically and internationally. L'anza had copyrighted the labels that it affixed to its products. The prices that L'anza charged its domestic distributors were significantly higher than the prices charged to foreign distributors. L'anza's United Kingdom distributor had sold several tons of L'anza's products (affixed with the copyrighted labels) to a distributor in Malta; Quality King Distributors bought the products from the Malta distributor and imported the products for resale in the United States through retailers who were not within L'anza's authorized chain of distribution. L'anza sued Quality King for infringement of its distribution and importation rights under the Copyright Act. The district court rejected Quality King's defense based on the first sale doctrine; the Ninth Circuit Court of Appeals affirmed that judgment, noting that § 602's ban on importation would be "meaningless" if § 109 "were found to supersede the prohibition on importation in this case." The Supreme Court in Quality King reversed the Ninth Circuit and held that the first sale doctrine endorsed in § 109 applies to copies of copyrighted works that are imported into the United States. In reaching this conclusion, the Court first observed that the copyright holder's distribution right granted by § 106(3) is expressly limited by other provisions of the Copyright Act, including the first sale doctrine codified at § 109(a). Section 602(a) provides that unauthorized importation is an infringement of the copyright holder's exclusive right to distribution under § 106. Therefore, the Court reasoned that the rights granted by § 602 must also be limited by the first sale doctrine. According to the Court, because § 106(3) "does not encompass resales by lawful owners, the literal text of § 602(a) is simply inapplicable to both domestic and foreign owners of L'anza's products who decide to import them and resell them in the United States." The Court held that the owner of goods lawfully made under the Copyright Act "is entitled to the protection of the first sale doctrine in an action in a United States court even if the first sale occurred abroad." In a concurring opinion, Justice Ginsburg identified the issue left unresolved by the Quality King opinion: This case involves a "round trip" journey, travel of the copies in question from the United States to places abroad, then back again. I join the Court's opinion recognizing that we do not today resolve cases in which the allegedly infringing imports were manufactured abroad. In making this clarification, Justice Ginsburg cited without comment two treatises on copyright law: See W. Patry, Copyright Law and Practice 166-170 (1997 Supp.) (commenting that provisions of Title 17 do not apply extraterritorially unless expressly so stated, hence the words "lawfully made under this title" in the "first sale" provision, 17 U.S.C. § 109(a), must mean "lawfully made in the United States"); see generally P. Goldstein, Copyright § 16.0, pp. 16:1-16:2 (2d ed. 1998) ("Copyright protection is territorial. The rights granted by the United States Copyright Act extend no farther than the nation's borders."). The facts of Costco v. Omega are relatively straightforward. The Swiss corporation Omega manufactures wrist watches in Switzerland and sells them through authorized distributors and retailers around the world. Omega engraves on the underside of its watches a small logo—an original artwork that it refers to as the "Omega Globe Design," that Omega had registered as a copyrighted work with the U.S. Copyright Office. Costco obtained authentic Omega watches from the "gray market"—from third parties that had purchased the watches from authorized Omega distributors overseas. Costco then sold the watches to U.S. customers within its California warehouse stores. While Omega had authorized the initial foreign sale of its watches, it did not authorize their importation into the United States or Costco's domestic sale of the watches. Omega sued Costco for infringing its distribution and importation rights under §§ 106(3) and 602(a) of the Copyright Act; Costco defended itself by arguing that the first sale doctrine, § 109(a), precludes Omega's infringement claims. Without explanation, the U.S. District Court for the Central District of California granted summary judgment to Costco on the basis of the first sale doctrine. In September 2008, the U.S. Court of Appeals for the Ninth Circuit reversed the district court, holding that the first sale doctrine does not apply to imported goods that were manufactured and first sold abroad. The appellate court reached this determination by asserting that copies of copyrighted works made and first sold outside the United States are not considered "lawfully made" within the meaning of § 109(a); thus, these copies are not subject to the first sale doctrine, and Costco is precluded from raising such defense to Omega's infringement claims. In support of its position, Costco had argued that the Supreme Court's Quality King decision had "effectively overruled" three Ninth Circuit opinions in the 1990s that were issued before Quality King. Those earlier appellate court opinions had developed a "general rule that § 109(a) can provide a defense against §§ 106(3) and 602(a) claims only insofar as the claims involve domestically made copies of U.S.-copyrighted works." The Ninth Circuit in Costco determined, however, that Quality King did not directly overrule or otherwise invalidate this general rule that § 109(a) is limited to copies legally made in the United States. Instead, the Ninth Circuit distinguished Quality King by limiting that decision to its specific facts—that of a good made in the United States that had been sold abroad and then re-imported without the consent of the copyright holder. The appellate court explained that the basis for its "general rule" was its concern that applying § 109(a) to copies made abroad "would violate the presumption against the extraterritorial application of U.S. law." The court further opined that "[t]o characterize the making of copies overseas as 'lawful[ ] … under [Title 17]' would be to ascribe legality under the Copyright Act to conduct that occurs entirely outside the United States, notwithstanding the absence of a clear expression of congressional intent in favor of extraterritoriality." Finally, the court stated, In short, copies covered by the phrase "lawfully made under [Title 17]" in § 109(a) are not simply those which are lawfully made by the owner of a U.S. copyright. Something more is required. To us, that "something" is the making of the copies within the United States , where the Copyright Act applies. The Ninth Circuit also cited Justice Ginsburg's concurrence in Quality King that appeared to approve its interpretation of § 109(a), and noted that the Quality King "majority opinion did not dispute this interpretation." The appellate court acknowledged that if its interpretation of § 109(a) were taken to its logical extreme, a copyright holder "could seemingly exercise distribution rights after even the tenth sale in the United States of a watch lawfully made in Switzerland." However, the court explained that its earlier precedents would address this situation—those opinions had held that parties can raise the first sale defense in cases involving foreign-made copies if the copyright holder had authorized a lawful domestic sale. Because Omega had not authorized any of the domestic sales in this case, the appellate court found it unnecessary to decide whether this exception to its "general rule" had survived Quality King . On April 19, 2010, the Supreme Court granted certiorari in Costc o to consider the following issue: Under the Copyright Act's first-sale doctrine, 17 U.S.C. § l09(a), the owner of any particular copy "lawfully made under this title" may resell that good without the authority of the copyright holder. In Quality King Distribs., Inc. v. L'Anza Research Int'l, Inc., 523 U.S. 135, 138 (1998), this Court posed the question presented as "whether the 'first sale' doctrine endorsed in § 109(a) is applicable to imported copies." In the decision below, the Ninth Circuit held that Quality King (which answered that question affirmatively) is limited to its facts, which involved goods manufactured in the United States, sold abroad, and then re-imported. The question presented here is: Whether the Ninth Circuit correctly held that the first-sale doctrine does not apply to imported goods manufactured abroad. In its brief submitted to the Court, the petitioner Costco argued that the Ninth Circuit's distinction between goods made in the United States and those made abroad "has no basis in the Copyright Act's first sale-doctrine"; furthermore, Costco warned that the Ninth Circuit's ruling, if upheld by the Court "would have severe consequences, which Congress could not have intended, for the U.S. economy." Costco elaborated its concerns about the implications of the Ninth Circuit's interpretation of § 109(a) that makes the first sale doctrine categorically inapplicable to goods manufactured abroad: Manufacturers that sell globally will prefer to manufacture their goods abroad because of the increased control they will gain over subsequent sales and use of their products. Conversely, retailers and consumers will be hesitant to buy or sell such products for fear of unintended liability for infringement. Moreover, by exempting goods manufactured abroad from the first-sale doctrine, the Ninth Circuit's decision gives rise to a number of other absurd outcomes unintended by Congress, including copyright infringement liability for libraries that lend foreign books or movies. The respondent Omega urged the Court to uphold the Ninth Circuit opinion and find that "a third party infringes a copyright owner's exclusive rights by importing or distributing in the United States a copy that the copyright owner made and sold overseas exclusively for distribution outside the United States." Omega argued that the act of making copies of a copyrighted work abroad, for foreign sale and distribution, is not governed by the Copyright Act—thus, such actions do not implicate any exclusive rights granted under § 106, and these copies cannot be lawfully or unlawfully made "under this title." Omega noted that because § 602(a)(1) applies to genuine copies of copyrighted works made abroad, Congress deliberately allowed for the segmentation of domestic and foreign markets—that is, "Congress intended to provide U.S. copyright owners the right separately to authorize foreign and domestic distribution of legitimate copies." In then-Solicitor General Elena Kagan's brief for the United States as amicus curiae that was filed regarding the petition for a writ of certiorari in Costco , the United States government argued that the Ninth Circuit's decision is consistent with Quality King and the "consensus view of the leading commentators on copyright law." While acknowledging Costco's "legitimate concerns" about the Ninth Circuit's "reasoning [that] could result in adverse policy consequences, particularly if carried to its logical extreme," the United States stated that it was unaware of any evidence that the most serious potential consequences have actually materialized. These "potential adverse policy effects that [Costco] identifies are a direct and inherent consequence of Congress's decision in 1976 to expand Section 602's ban on unauthorized importation beyond piratical copies," the government observed. This policy choice of Congress allows the differential treatment of goods made domestically and abroad. However, the government suggested that "Congress of course remains free to amend the Copyright Act in order to adjust the balance between protection of copyright holders' prerogatives and advancement of other policy objectives." The Supreme Court heard oral arguments in Costco v. Omega on November 8, 2010. Because Elena Kagan in her previous role as Solicitor General had written a brief recommending that the Court not grant the petition for writ of certiorari in the case, the new Justice Kagan recused herself in Costco . The recusal directly impacted the Court's ability to resolve the legal question posed by the case because of a 4-4 split among the participating members of the Court. On December 13, 2010, the Court issued a per curiam opinion that simply stated: "The judgment is affirmed by an equally divided Court." The Court's action in Costco upholds the Ninth Circuit's ruling but does not establish controlling precedent for other federal circuits on the question of whether the copyright law's first sale doctrine applies to goods manufactured abroad and then imported into the United States. Thus, this remains an open question outside of the Ninth Circuit. Because of the equal division of the Supreme Court in Costco , the Ninth Circuit's decision remains the law in that circuit, while other federal circuits are free to issue opinions that agree or conflict with the Ninth Circuit. The Supreme Court could revisit the legal question in a future case involving importation of gray-market goods. Also, Congress could consider legislation to clarify the relationship between the Copyright Act's § 109(a) first sale provision and the § 602(a)(2) importation right. A definitive judicial or legislative resolution of this legal question may continue to be of great interest to parties that are affected by the secondary markets of copyrighted goods—intellectual property owners, manufacturers, consumers, resale stores such as Costco, and online marketplaces such as eBay, Amazon.com, and Craigslist.
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Section 106(3) of the Copyright Act grants a copyright holder the exclusive right to distribute copies of a copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending. In addition, § 602(a) of the Copyright Act generally prohibits the importation into the United States, without the authority of the copyright holder, of copies of a work that have been acquired outside the United States; such importation is considered an infringement of the exclusive right to distribute copies of the work under § 106. However, the Copyright Act's "first-sale" doctrine, codified at § 109(a), provides a limitation to the copyright holder's distribution rights—it entitles the owner of a particular copy of a copyrighted work that has been "lawfully made under" title 17 of the U.S. Code (where the Copyright Act is codified) to sell or otherwise dispose of the possession of that copy, without the prior permission of the copyright holder. In other words, once a copyright holder agrees to sell particular copies of his work to others (constituting the "first sale" of such copies), the copyright holder may not thereafter further control subsequent transfers of ownership of those copies. At issue in Costco Wholesale Corp. v. Omega S.A. was the scope of the first sale doctrine with respect to so-called "gray-market" goods—products that have been manufactured and purchased abroad and thereafter imported into the United States for resale at often discounted prices to U.S. customers. The case involved the sale by Costco of authentic Omega watches made in Switzerland. Costco had purchased these watches (which bear a copyrighted design on their underside) from third parties that had purchased the watches from authorized Omega distributors located abroad. While Omega had permitted the initial foreign sale of its watches, it had not authorized their importation into the United States or Costco's domestic sale of the watches. Omega sued Costco for infringing its distribution and importation rights under §§ 106(3) and 602(a) of the Copyright Act; Costco defended itself by arguing that the first sale doctrine, § 109(a), precluded Omega's infringement claims. In September 2008, the U.S. Court of Appeals for the Ninth Circuit reversed the district court's grant of summary judgment to Costco, holding that the first sale doctrine does not apply to imported goods that had been manufactured and first sold abroad. The appellate court reached this determination by asserting that copies of copyrighted works made and sold outside the United States are not considered "lawfully made" within the meaning of § 109(a); thus, these copies are not subject to the first sale doctrine, and Costco is precluded from raising such defense to Omega's infringement claims. In reaction to this decision, some observers expressed concern that the Ninth Circuit's interpretation of the first sale doctrine creates incentives for outsourcing, as manufacturers would desire to move production abroad of goods containing copyrighted aspects (thus avoiding the first sale doctrine's effect and providing the manufacturer with greater control over distribution of the goods). On December 13, 2010, in a one sentence per curiam decision, the U.S. Supreme Court affirmed the Ninth Circuit's judgment due to a 4-4 tie vote among the participating justices (Justice Elena Kagan had recused herself because of her involvement in the case as U.S. Solicitor General prior to becoming a member of the Court). The Court's action in Costco Wholesale Corp. upholds the Ninth Circuit's ruling but does not establish controlling precedent for other federal circuits on the question of whether the copyright law's first sale doctrine applies to goods manufactured abroad and then imported into the United States. Therefore, those federal circuits are free to issue opinions that agree or conflict with the Ninth Circuit's judgment on this matter, and the Supreme Court could revisit the legal question in a future case. Also, Congress could consider legislation to clarify the relationship between the Copyright Act's § 109(a) first sale provision and the § 602(a)(2) importation right.
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This report addresses Congress's oversight authority over individual federal judges or Supreme Court Justices. Congressional oversight authority, although broad, is limited to subjects related to the exercise of legitimate congressional power. While Congress has the power to regulate the structure, administration and jurisdiction of the courts, its power over the judicial acts of individual judges or Justices is more restricted. For instance, Congress has limited authority to remove or discipline a judge for decisions made on the bench. Article III, Section 1 of the Constitution provides that judges have "good behavior" tenure, which effectively has come to mean lifetime tenure for Article III judges subject to removal only through conviction on impeachment. However, impeachment of a judge or justice requires a finding that such judge or Justice has engaged in a "High Crime or Misdemeanor." Thus, an investigation into decisions or other acts by a particular judge pursuant to an impeachment would appear to require some connection between an alleged "High Crime or Misdemeanor" and a particular case or cases. Of course, review and consideration of particular court decisions or other judicial acts are well within the purview of Congress's legislative authority. For instance, Congress has the legislative authority to amend statutes that it believes were misinterpreted by court cases, or to propose amendments to the Constitution that it believes would rectify erroneous constitutional decisions. However, investigating the judge or Justices behind such decisions may require something more. This report reviews a number of circumstances in which Congress may be authorized to either pursue or otherwise influence an investigation of individual federal judges or Supreme Court Justices. The report first addresses the general powers and limitations on Congress's oversight authority. Second, the report examines the Senate approval process for the nominations of individual judges or Justices, and the Senate's ability to obtain information on judicial acts by individual judges or Justices during that process. The report also considers the limits of existing statutory authority for judicial discipline within the Judicial Branch, and how Congress has influenced such procedures. It discusses the issue of how far congressional investigatory powers can be exercised regarding possible judicial impeachments. Finally, it treats investigations regarding the individual actions of a judge outside of the above contexts, such as how a judge imposes sentences under the United States Sentencing Guidelines. Throughout its history, Congress has engaged in oversight—the review, monitoring and supervision of the implementation of public policy. These oversight powers are based on Congress's authority to engage in effective inquiries and investigations to assure itself and the public that the laws are being "faithfully executed." The first several Congresses inaugurated such important oversight techniques as special investigations, reporting requirements, resolutions of inquiry, and use of the appropriations process to review executive activity. Contemporary developments, moreover, have increased the legislature's capacity and capabilities to oversee and check the Judiciary and the Executive. For instance, public laws and congressional rules have measurably enhanced Congress's implied power under the Constitution to conduct oversight. Although oversight may occur regarding any matter within the legislative purview of the Congress, such oversight can become particularly complicated as regards the other branches of government. These congressional investigatory powers derive from Congress's various legislative authorities over those branches, whether it be the power of the purse, the power to organize the Executive and Judicial Branches, or the power to make all laws necessary for "carrying into Execution" Congress's own enumerated powers as well as those of the Executive. Such legislative and oversight powers can even extend to individual assessments of the performance of judges or Justices, such as might occur during a judicial nomination process or during an impeachment proceeding. For instance, as is discussed below, any number of oversight methods would be available to obtain information regarding a particular judge or Justice during a nomination process. These might include informal Member contacts with the judge or Justice; congressional staff studies; studies prepared by congressional support agencies or noncongressional entities; and formal committee hearings. To the extent that the cooperation of the Executive or Judicial Branches is required to facilitate these processes, these methods would generally be sufficient. Even if there were a dispute between the branches as to access to information, the threat of withholding consent to the nomination would be likely to lead to some accommodation of congressional requests. However, the question arises as to whether the Congress has the authority to compel the Judicial or Executive Branch to provide information on individual judges or their judicial acts. One possibility is for the Congress to establish statutory reporting requirements. As is discussed below, Congress has, by statute, provided that the Department of Justice must provide information to Congress on downward departures under the United States Sentencing Guidelines by individual federal judges. As is discussed below, Justice Rehnquist, however, has suggested that this provision, know as the Feeney Amendment, is a violation of separation of powers. Further, a district court considering this provision has struck it down. A more controversial option would be to attempt to compel judges and Justices to respond to congressional oversight through the subpoena and contempt process. For instance, committees have the authority to issue subpoenas for testimony or documents. Refusal to comply with such a subpoena is punishable as a contempt of Congress, which could result in imprisonment for up to one year and/or a fine of up to $100,000. Most often, however, the threat of contempt, or the actual vote of a committee or of the House itself, has resulted in compliance before the referral for prosecution. However, outside the impeachment context, the efficacy of such an oversight method with respect to federal judges or Justices seems unclear. A successful use of the criminal contempt mechanism by a committee needs to overcome two formidable legal and practical obstacles. First, although the Speaker (or in the case of the Senate, the President of the Senate) may certify a statement of facts of such contempt "to the appropriate United States attorney, whose duty it shall be to bring the matter before the grand jury for its action," the Department of Justice has taken the position that Congress cannot constitutionally direct that the Executive initiate a contempt prosecution. In the instance of a prosecution of a judge for failure to comply with a congressional subpoena, for instance, the Department of Justice may weigh pragmatic and legal factors, e.g., a likely unfriendly forum and the availability of the impeachment process, as reasons to decline to prosecute. A second option might be for the full Judiciary Committee to seek a House resolution authorizing it to bring a civil action to compel compliance with the subpoena. Such an action, if successful, serves to either force the witness to testify or produce the documents sought, or subjects the subpoenaed person to a contempt of court for failure to comply with court's order. The down side to this course, as with the first option, is that it takes place in a forum likely to be sympathetic to a claim of congressional intrusion on judicial independence. It does not appear that the House has ever enforced a subpoena against a sitting federal judge. A third option is utilization of the statutory judicial discipline process. Currently, federal judges are subject to internal discipline proceedings within the Judiciary. These judicial discipline procedures are available to anyone, including a Member of Congress, who deems it appropriate to file a complaint against a federal district court judge, judge of a U.S. circuit court of appeals, bankruptcy judge, or magistrate judge. While this oversight option is not directly controlled by Congress, information derived from this process may ultimately serve as the basis for impeachment proceedings. Finally, the Committee might seek a resolution of the House authorizing the Judiciary Committee to investigate the conduct of a judge to ascertain whether formal impeachment proceedings might be appropriate. Congress's oversight authority is based on obtaining information that will assist it in the legislative process with respect to matters within its constitutional purview. These powers are acknowledged to extend to the Judiciary and the operations of the courts, but only up to a point. Chief Justice Rehnquist, in the context of recent congressional actions with respect to downward departures in sentencing by federal judges, attempted to define that line of demarcation as follows: ... We can all recognize that Congress has a legitimate interest in obtaining information which will assist in the legislative process. But the efforts to obtain information may not threaten judicial independence or the established principle that a judge's judicial acts cannot serve as a basis for his removal from office. It is well settled that not only the definition of what acts shall be criminal, but the prescription of what sentence or range of sentences shall be imposed on those found guilty of such acts, is a legislative function—in the federal system, it is for Congress. Congress has recently indicated rather strongly, by the Feeney Amendment, that it believes there have been too many downward departures from the Sentencing Guidelines. It has taken steps to reduce that number. Such a decision is for Congress, just as the enactment of the Sentencing Guidelines nearly twenty years ago was. The new law also provides for the collection of information about sentencing practices employed by federal judges throughout the country. This, too, is a legitimate sphere of congressional inquiry, in aid of its legislative authority. But one portion of the law provides for the collection of such information on an individualized judge-by-judge basis. This, it seems to me, is more troubling. For side-by-side with the broad authority of Congress to legislate and gather information in this area is the principle that federal judges may not be removed from office for their judicial acts. The Chief Justice acknowledged that this principle is not set forth in the Constitution but was established in the impeachment trial of Judge Samuel Chase in 1805 when the Senate failed to convict Chase. The Chief Justice states that the acquittal "represented a judgment that impeachment should not be used to remove a judge for conduct in the exercise of his judicial duties." The Chief Justice reiterated his reliance on this principle in his most recent report to Congress on the state of the Judiciary. The Chief Justice does not define what he means by "conduct in the exercise of his judicial duties." For example, this reference may be intended to suggest that the appropriate means for challenging a judge's decision on a given case is not the impeachment process, but rather the appeals process, which affords the parties affected an opportunity for review of the judge's decision and correction of errors in that judgment. In addition, the reversal of a lower court decision does not generally mean that the judge below had engaged in conduct rising to the level of a "high crime or misdemeanor." On the other hand, the Chief Justice's statement are unlikely to be interpreted to mean that a judge should not be impeached for criminal acts from the bench, gross misconduct on the bench, or abuse of his or her judicial office, as a review of the past judicial impeachments would significantly undercut such a view. It should be noted, however, that outside of the impeachment context, the use of compulsory process against a sitting judge has been extremely rare. One such instance occurred in 1953 when a House Judiciary subcommittee subpoenaed federal district court Judge Louis E. Goodman to testify about allegations that judges and prosecutors had improperly interfered with a grand jury investigation of misconduct of officials of the (then) Internal Revenue Bureau. Judge Goodman appeared before the subcommittee and refused to testify about the grand jury matters in question, either in public or in executive session, citing both grand jury secrecy rules (which would allow such revelations only in judicial proceedings) and the independence of the Judiciary. After the judge read a pair of statements into the record, the subcommittee questioned the judge, but he continued to refuse to reveal matters pertinent to the grand jury proceedings. After the close of the hearing the judge's refusal to respond to the Subcommittee's inquiries was not further pursued. In sum, an evaluation of the limits on congressional investigatory oversight authority requires an examination of the contexts in which Congress does have authority over the federal court. There is little question that where Congress is investigating the federal courts generally, its investigatory authority is broad, as Congress has significant legislative authority over the structuring of the Judicial Branch. However, where Congress is investigating individual judges or Justices, then it would appear that Congress may need to articulate a legislative basis or some other constitutional authority for such investigation. Following is a discussion of some of these congressional authorities and precedents. Under the Appointments Clause of the Constitution, Art. II, Section 2, Clause 2, the President appoints federal Article III judges and Justices of the U.S. Supreme Court "by and with the Advice and Consent of the Senate." Some of the broadest authority of the Congress to investigate individual judges or Justices would appear to arise during the nominations process. Although the use of subpoenas is unusual in the nomination and confirmation process, other means of oversight can be utilized toward the end of informing Congress as to the qualifications of the nominee. These opportunities can arise in a number of different procedural contexts. The Constitution appears to separate the appointments process into three stages: nomination by the President alone; consent (or rejection) by the Senate; and final appointment and commissioning of the appointee by the President. As to the Senate's "advice" on the nomination, Presidents have varied as to the extent to which they have sought input from the Senate on nominations. Frequently, a President faced with the task of making a Supreme Court nomination will, as a matter of courtesy, consult with party leaders in the Senate, members of the Senate Judiciary Committee, and Senators from a potential nominee's home state, particularly Senators from the President's political party. Depending on the importance or contentiousness of a particular nomination, significant information may be gathered by both the Executive Branch and by outside groups on potential nominees. Access to such information by a Senator at this stage of the proceedings would be likely to be obtained informally. The benefit of such information would be primarily for Senators seeking to influence a President's decision as to a prospective Supreme Court nominee. Efforts by a Senator to influence such a decision may include both private consultation with the Executive Branch, or with the expression of views in a public forum, whether in committee, on the floor of the Senate or in statements to the media. The consent phase is generally more rigidly structured. In recent years, the role of the Senate Judiciary Committee has usually consisted of three stages: a pre-hearing investigative stage; public hearings; and a committee decision as to what recommendation to make to the full Senate on the nominee. Each of these stages would appear to represent an opportunity for Congress to exercise extensive oversight. Later proceedings seem to present less opportunity for investigations. Following committee consideration, a nomination reported out of Senate Judiciary Committee is placed on the Executive Calendar to be considered in executive session. In the absence of a vote to the contrary, such executive sessions is open to the public. Under current practice, floor debate on Supreme Court nominations are open to the public, the press, and, since 1986, to live television coverage. However, the increased contentiousness of the judicial confirmation process over the last three decades may be said to have fundamentally changed the nature of that process. The accumulated precedents over these years arguably indicates that the Senate, or a determined minority of that body, has some leverage to obtain access to information regarding judicial nominees that is not ordinarily available to a committee engaged in an investigatory oversight proceeding. For instance, when the President submits a nomination to the Senate, the dynamics of the inquiry process may be different from that of an oversight investigation. When faced with a congressional request for information that is deemed privileged, the President may have to weigh the price of sacrificing an executive privilege by providing the information sought against the risk that the nominee may not be confirmed. The failed nomination of Miguel Estrada to the D.C. Circuit Court of Appeals in 2002 is a case in point. Senate Democrats, asserting an inability to evaluate his fitness and qualification for the office because of the sparsity of his public writings, requested access to all his memoranda dealing with appeal, certiorari or amicus recommendations during the five years he was an attorney in the Solicitor Generals' Office. The Administration refused to comply. During the confirmation hearing, two Senators presented for the record evidence of seven instances in which prior Administrations had provided requested documents for nominees related to prior service in the Department of Justice (DOJ) which were claimed to be analogous to those being sought about Estrada. They involved the nominations Judge Frank Easterbook to the Seventh Circuit, Judge Robert Bork and Chief Justice William Rehnquist to the Supreme Court, Benjamin Civiletti to be Attorney General, William Bradford Reynolds to be Associate Attorney General, Judge Stephen Trott to the Ninth Circuit, and Jeffrey Holmes to be Assistant Administrator at the Environmental Protection Agency. In a response from the DOJ Office of Legislative Affairs (DOJ-OLA), dated October 8, 2002, it was contended that disclosure of the memoranda demanded, which were asserted to be confidential and privileged, would have the effect of "undermin[ing] the integrity of the decisionmaking process" of the Solicitor General's Office (SG). This claim was said to be supported by the statements of seven past Solicitors General; by the fact that none of the 67 court of appeals nominees since 1977 who had worked at the SG's office had ever been asked for similar memoranda; by the fact that none of the seven cited instances of disclosure involved appeal, certiorari on amicus recommendation documents or other internal SG deliberation memoranda; and because the deliberative nature of the documents sought had been recognized by the courts as authority for the Executive to protect the integrity of such materials which would reveal advisory opinions, recommendations, and deliberations comprising part of a process by which government policies are formulated. The memo asserted that "as a matter of law and tradition, these privileges can be overcome only when Congress establishes a 'demonstrably critical' need for the requested information," citing Senate Select Committee v. Nixon . The memo concluded with the further assertion that "the existence of a few isolated examples where the Executive Branch on occasion has accommodated a Committee's targeted requests for very specific information does not in any way alter the fundamental and long-standing principle that memoranda from the Office of the Solicitor General –and deliberative Department of Justice materials more broadly–must remain protected in the confirmation context so as to maintain the integrity of the Executive Branch's decisionmaking process." President Bush never claimed executive privilege with respect Estrada's SG memos, as did President Nixon with the Kleindienst nomination and President Reagan with the Rehnquist nomination, and in the end allowed Estrada to withdraw in the face of a threat of a filibuster. The Kleindienst, Rehnquist, Bork and Trott nominations, dismissed as irrelevant by the DOJ-OLA memo, are nevertheless instructive. Kleindienst's nomination to be Attorney General was on the brink of approval when a newspaper article accused him by lying about his connection with a corrupt deal to settle an antitrust case. A special hearing was conducted at which the Committee received conflicting accounts as to whether a White House aide had been involved in the settlement talks. The White House Counsel, John Dean, claimed executive privilege to prevent the aide's testimony. Senator Sam Ervin threatened to filibuster Kleindienst's nomination if the aide was not produced. The threat led to an agreement for the aide's testimony and Kleindienst was confirmed. A year later Kleindienst resigned during the Watergate affair and later pled guilty to a misdemeanor charge for lying at his confirmation hearing about President Nixon's intervention in the corrupt settlement of the antitrust case. During the confirmation proceeding for the elevation of Justice Rehnquist to be Chief Justice, the Judiciary Committee sought documents that he had authored on controversial subjects when he headed DOJ's Office of Legal Counsel. President Reagan asserted executive privilege, claiming the need to protect the candor and confidentiality of the legal advice submitted to Presidents and their assistants. But with opponents of Rehnquist gearing up to issue a subpoena, the nomination of not only Rehnquist but that of Antonin Scalia to be an Associate Justice, whose nominations were to be voted on in tandem, were in jeopardy. President Reagan agreed to allow the Committee access to a smaller number of documents, and Rehnquist and Scalia were ultimately confirmed. The DOJ-OLA memo correctly states that the documents sought during the Trott nomination had nothing to do with his work. Two Senators used his nomination as a vehicle to gain access to a report prepared by DOJ's Public Integrity Section regarding a recommendation to Attorney General Meese that he seek appointment of an independent counsel to investigate the activities of a former Ambassador. Meese did not seek the appointment and refused the Senators' requests for the report on the ground of DOJ's "longstanding policy" not to allow access to internal deliberative memoranda. It soon became clear that the Trott nomination would be held up indefinitely unless the Department yielded, which it did, and the Senators' hold was ended. The DOJ-OLA memorandum appears to understate the nature and scope of the documents disclosed in Judge Robert Bork's nomination hearing. [author name scrubbed] describes the Justice Department's understanding of the sensitive nature of documents turned over: The Justice Department gave Biden the documents. Some were forwarded, such as memos from the Solicitor General's office on the pocket veto issue. Others, under seal by order of a federal district court, had to be unsealed and supplied to the committee. A few were converted to redacted versions (deleting a few sentences of classified material) or in unclassified form. The Department explained that "the vast majority of the documents you have requested reflect or disclose purely internal deliberations within the Executive Branch, the work product of attorneys in connection with government litigation or confidential legal advice received from or provided to client agencies within the Executive Branch." Releasing such materials "seriously impairs the deliberative process within the Executive Branch, our ability to represent the government in litigation and our relationship with other entities." Yet the department waived those considerations "to cooperate to the fullest extent possible with the Committee and to expedite Judge Bork's confirmation process...." When the Senate Judiciary Committee issued its report on Judge Bork's nomination, it included a fifteen-page memo that he wrote as Solicitor General on the constitutionality and policy considerations of the President's pocket veto power. The patterns observed in the engagement and resolution of information access disputes between congressional investigative committees and DOJ are analogous, pertinent, and, in every respect but one, indistinguishable from access disputes occurring during the Senate confirmation process for judicial and DOJ nominations. Experience has shown that the investigative disputes are often resolved on the perceived legitimacy of each branch's claim based on past practice. Although the accommodation process between Congress and the Executive Branch is conducted in a highly political atmosphere, the arguments made by each side are usually grounded in legal doctrine and rely heavily on their interpretations and past experiences. At times, the Executive Branch is able to persuade Congress that a particular request is insufficiently weighty, sometimes based on the representations that the particular information being sought has never before been provided to Congress. The resolution in such cases is to allow executive briefing, limited access to redacted documents, or no access. But where the perceived need for the withheld documents or testimony is great (which often means politically important), Congress's reaction to withholding on such grounds is often to conclude that if the agency has produced such information (or its equivalent) before, it can produce it again, and that resistance must be based on a desire to cover up something that Congress would clearly want to see. In a series of investigations outside the nomination context (particularly during the investigations of the Clinton Administration), congressional committees built on succeeding acquiescences, together with threats of contempt of Congress votes, to force DOJ to disclose documents, at least in some form. The disclosure during the campaign finance investigations of the Freeh and La Bella memos to Senate and House committees after bitter and assertive Executive withholdings, is agreed to have been a significant event in the history of such confrontations that put the Executive in a difficult position for future attempts to withhold internal DOJ deliberative document in open cases. This shortly came to be realized in the confrontation over subpoenaed DOJ documents said to reflect ongoing corruption over a period of 30 years in the FBI's Boston regional office. That confrontation involved the agency's knowing acquiescence in the giving of perjured testimony by undercover informers which resulted in the conviction and imprisonment of four innocent persons for murder committed by the informants, as well as the further knowledgeable acquiescence in at least 21 further murders over the next 29 years by the informants. President Bush claimed executive privilege to prevent disclosure of the documents, asserting in his written claim the broadest immunity for internal DOJ deliberative documents. The President ordered the release of the documents after the pubic hearing when it became apparent that the Committee had a bipartisan majority to sustain a contempt vote in the Committee and on the House floor. The investigative experiences are compelling but distinguishable from the confirmation context. The distinguishing factor, however, appears to favor those seeking disclosure of a nominee's writings or communications. In the investigative context the ability of a committee to force compliance rests on its apparent ability to muster majorities at the full committee and House floor levels as well as some public support for such an executive rebuke. In the Senate confirmation process much less is currently needed. If 41 votes can be mustered and maintained to prevent a cut-off of debate on a nomination, the Executive will be put to the choice of abandoning the nominee or compromising in some way on the disclosure of the documents. As the Rehnquist and Kleindienst experiences demonstrate, even a presidential claim of privilege will not suffice if there is a determined majority (or minority) and the President decides he must have the nominee. Perhaps one other element is needed: the credibility of the claim of need for the documents and whether in the past analogous documents have been disclosed. This is not a question of legally binding precedent as in the adversarial litigation context. It is simply a credible past experience in a political context. The key distinguishing factor, then, is the confirmation context itself. The President does not have the leverage he has in the investigative context. There he can force majority votes in committees and on the floor, and even if a contempt citation is voted against an executive official, the likelihood of an indictment being sought by a U.S. Attorney is negligible. The only wild card is the degree, if any, of political damage the President perceives he could sustain by his withholding action. That appears to explain most of the disclosures in the investigative context. Currently, in a Senate confirmation proceeding, a minority may prevail if it can sustain 41 votes. Experience has shown that if the President cannot bring political or public pressure to bear, and wants the nomination, he will have to effect some disclosure compromise or abandon the nominee. It is not clear if Congress has authority to investigate and punish judges' behavior outside of the impeachment process. Beginning in 1930, it was urged in scholarly writings and in congressional debates that an alternative to removal by impeachment could be discerned in the impeachment section of Article II and in the judiciary article of Article III. Although proposed from time to time Congress never adopted such a proposition. However, Congress did address judicial discipline authority within the Judicial Branch. The first federal statutory judicial discipline procedures were enacted in the Judicial Councils Reform and Judicial Conduct and Disability Act of 1980. Congressional oversight over this process might provide a basis for investigation of a particular judge or Justice. For instance, if a complaint alleges conduct that may rise to the level of impeachable offenses, then the Judicial Conference can refer the matter to the House of Representatives for whatever action the House deems appropriate. An argument can be made that these judicial discipline proceedings can serve as the basis for judicial impeachment thus further providing a basis for Congress to oversee the process. Under the former 28 U.S.C. § 372(c) procedure, in 1986, 1988 and 1989, the Judicial Conference of the United States transmitted to the House of Representatives certifications of a judicial council and of the Judicial Conference to the effect that Judge Harry Claiborne, Judge Alcee Hastings and Judge Walter Nixon, Jr., respectively, may have engaged in conduct that might be considered grounds for impeachment. Judges Claiborne and Nixon had been previously convicted of felony charges, while Judge Hastings had been acquitted. The National Commission on Judicial Discipline and Removal observed that the certifications with respect to the two judges who had prior criminal convictions: were only a formality. Congress implicitly acknowledged as much in a 1990 amendment that permits the Judicial Conference to initiate and transmit such a determination on the basis of the criminal record. In the matter of Judge Hastings, however, the exhaustive investigation by a special committee and subsequent report and certification by the judicial council—coming as they did after the acquittal of Hastings on criminal charges—were undoubtedly critical to the House's willingness to proceed. In each instance, the House voted articles of impeachment, and the Senate convicted the judge after an impeachment trial and removed the judge from office. The current judicial discipline law was enacted as the Judicial Improvements Act of 2002. The new judicial discipline procedures are available to anyone, including a Member of Congress, who deems it appropriate to file a complaint against a federal district court, judge of a U.S. circuit court of appeals, bankruptcy judge, or magistrate judge. In 1999 a public interest group and a Member of Congress used the judicial discipline mechanism in the former 28 U.S.C. § 372(c) to investigate allegations of judicial misconduct. Complaints were filed against the chief judge of the United States District Court of the District of Columbia, Norma Holloway Johnson, alleging that she had engaged in "prejudicial" conduct in assigning "highly-charged criminal cases" concerning individuals with "close ties to the President, the White House and the Clinton Administration" to district court judges appointed by President Clinton, thereby bypassing the district court's random assignment rules. The initial complaint, filed by Judicial Watch, Inc., a public interest group, on August 30, 1999, charged that Judge Johnson had improperly bypassed the normal random case assignment system, established by Local Criminal Rule 57.10 (a), to send a tax evasion case against Webster L. Hubbell and a campaign financing case against Charlie Trie to recent judicial appointees of President Clinton. The Chief Judge used a provision of the rule which allowed her to deviate from the random assignment requirement and send a case to a particular judge if she determined that "at the time an indictment is returned that the case will be protracted and that the expeditious and efficient disposition of the court's business requires assignment of the case on a non-random basis." On November 17, 1999, Acting Chief Judge Stephen Williams dismissed the complaint as "frivolous." Judicial Watch petitioned for review of the dismissal on December 17, 1999. On January 10, 2000, Representative Howard Coble, Chairman of the House Judiciary Committee's Subcommittee on Courts and Intellectual Property, filed a letter in support of reconsideration detailing further instances of alleged improper assignments by the Chief Judge. On February 9, 2000, in response to Chairman Coble's letter, the Judicial Council ordered the reconsideration of that part of the Judicial Watch allegation dealing with case assignments and a determination whether a special committee should be appointed to investigate the matter. On February 16, 2000, Chairman Coble filed a formal complaint against Chief Judge Johnson with respect to assignments in several campaign finance cases. On March 14, 2000, Acting Chief Judge Williams authorized the Special Committee of the Judicial Council to investigate the complaints, and thereafter the Special Committee retained Joe D. Whitley as counsel to conduct the investigation. After an extensive review and investigation of nine questioned assignments—two from the office of Independent Counsel involving Webster Hubbell, and seven from the Justice Department's Campaign Financing Task Force, the Counsel reported that they had not found, with respect to any case, evidence that Chief Judge Johnson's purpose included a political intent to advance the interests of President Clinton, the Clinton Administration or the White House, a conclusion that was adopted after review by the Special Committee to the Judicial Counsel. The findings and conclusions of the Report of the Special Committee were affirmed in a memorandum opinion by the Judicial Council on February 26, 2001, which dismissed the complaints. While the proceeding did not result in any disciplinary action being taken against the Chief Judge, it had (1) the appearance of thoroughly and publically ventilating the serious charges brought against the judge and (2) supplied the impetus for the repeal of Local Criminal Rule 57.10 (c) which, since 1971, had authorized chief judges of the district court to deviate from the random assignment requirement. A chief judge no longer has authority to specially assign cases. It also demonstrated that a well founded official complaint by the House Judiciary Committee can trigger the statutory judicial discipline mechanism. Another circumstance under which Congress could exercise its oversight authority over individual judges or Justices would be in anticipation of or during impeachment proceedings. Federal judges are among those "civil Officers of the United States" who can be impeached for engaging in conduct amounting to treason, bribery, or other high crimes and misdemeanors. Impeachment, however, is a cumbersome process, which takes time and resources away from other legislative business. But, as has been indicated above, while use of compulsory process against a sitting judge outside the impeachment process is rare and legally problematic, the issuance of subpoenas during the impeachment process, including against judges, has become more common and acceptable. Indeed, the failure to comply with subpoenas during an impeachment inquiry could result in an independent article of impeachment. Moreover, Federal Rule of Criminal Procedure 6(e)(3)(c)(i) authorizes a court to make disclosures "preliminary to or in connection with a judicial proceeding." Consistently, and without an exception that we are aware of, the courts have held that a House investigation preliminary to impeachment is a judicial proceeding within the scope of the exception to the Rule. Indeed, courts have held that investigations conducted by committees of judicial councils pursuant to the Judicial Councils Reform and Judicial Conduct and Disability Act, as amended, are within the exception and have granted access to grand jury material. In addition, in at least four instances the House has directly requested and received grand jury materials in impeachment proceedings. The case law with respect to what a congressional committee may do with 6(e) material released by a court, while sparse, is unequivocal: a committee is free to do with it as it will, as long as it complies with the rules of the House with respect to dissemination. The courts have conceded that they are powerless to place restrictions on the use of the material once it is in hands of a committee. There have been a total of eleven judges who have been the focus of impeachment trials; of those eleven, seven were convicted on impeachment and removed from office. The judges impeached by the House and tried by the Senate in the first eight impeachment proceedings were: John Pickering, District Judge for the United States District Court for the District of New Hampshire (1803-04); Samuel Chase, Associate Justice of the United States Supreme Court (1804-05); James H. Peck, District Judge for the United States District Court for the District of Missouri (1826-31); West H. Humphreys, District Judge for the United States District Court for the District of Tennessee (1862); Charles Swayne, District Judge for the United States District Court for the Northern District of Florida (1903-05); Robert W. Archbald, Circuit Judge, United States Court of Appeals for the Third Circuit, serving as Associate Judge for the United States Commerce Court (1912-13); Harold Louderback, District Judge, United States District Court for the Northern District of California (1932-33); and Halsted Ritter, District Judge of the United States District Court for the Southern District of Florida (1936). In the three most recent judicial impeachments, investigations under the former 28 U.S.C. § 372(c) judicial discipline provisions resulted in referrals of the cases by the Judicial Conference of the United States to the House of Representatives for the House to determine whether or not impeachment might be appropriate. Judge Harry E. Claiborne, United States District Judge for the District of Nevada, was impeached, tried in the Senate, and convicted in 1986. In the case of Judge Hastings, the impeachment investigation and proceedings spanned parts of 1988 and 1989. The most recent judicial impeachment, that of Judge Walter L. Nixon, Jr., United States District Judge for the Southern District of Mississippi, took place in 1989. The power to determine whether impeachment is appropriate in a given instance rests solely with the House of Representatives. Thus, investigations preliminary and attendant to impeachments carry some of the broadest authorities to investigate the activities of individual judges or Justices. An impeachment process may be triggered in a number of ways, including charges made on the floor by a Member or Delegate; charges preferred by a memorial from the same, usually referred to a committee for examination; a resolution dropped in the hopper by a Member and referred to a committee; a message from the President; charges transmitted from the legislature of a state or territory or from a grand jury; facts explored and reported by a House investigating committee; or a suggestion from the Judicial Conference of the United States, that the House may wish to consider whether impeachment of a particular federal judge would be appropriate. The Senate also has a unique role to play in the impeachment process, as it has the authority and responsibility to try an impeachment brought by the House. In addition, should an individual be convicted on any of the articles, the Senate must determine the appropriate judgment: either removal from office alone, or, alternatively, removal and disqualification from holding further offices of "honor, Trust or Profit under the United States." For either body to base an investigation on the potential impeachment of a judge or Justice, it would appear that an impeachable offense would need to be at issue. However, what constitutes an impeachable offense has been the topic of considerable debate. Neither the Federalist Papers , nor the debates in the Constitutional Convention, nor the state ratifying conventions give us particular guidance on the standards to be applied to judicial impeachments beyond the constitutional language in Article II, Sec. 4 of the U.S. Constitution. Conviction through the impeachment process for "Treason, Bribery, or other high Crimes and Misdemeanors" is the constitutional standard for removal of a President, Vice President, or other civil officers of the United States. Treason is defined both in statute and in the Constitution. Bribery, while not defined in the Constitution, was an offense at common law, has been a statutory offense since the First Congress enacted the Act of April 30, 1790, and is now codified at 18 U.S.C. § 201. Thus, treason and bribery may be fairly clear as to their meanings, but the remainder of the language has been the subject of considerable debate. The phrase "high crimes and misdemeanors" is not defined in the Constitution or in statute. It was used in many of the English impeachments, which were proceedings in which criminal sanctions could be imposed upon conviction. No definitive list of types of conduct falling within the "high crimes and misdemeanors" language has been forthcoming as a result of this debate, but some measure of clarification has emerged. The debate on impeachable offenses during the Constitutional Convention in 1787 indicates that criminal conduct was at least part of what was included in the "treason, bribery, or other high crimes and misdemeanors" language. However, the precedents in this country reflect the fact that conduct which may not constitute a crime, but which may still be serious misbehavior bringing disrepute upon the public office involved, may provide a sufficient ground for impeachment. For example, Judge John Pickering was convicted on all four of the articles of impeachment brought against him, including charges that he mishandled a case before him in violation federal laws and procedures. The alleged misconduct included (1) delivering a ship which was the subject of a condemnation proceeding for violation of customs laws to the claimant without requiring bond to be posted after the ship had been attached by the marshal; (2) refusing to hear some of the testimony offered by the United States in that case; and (3) refusing to grant the United States an appeal despite the fact that the United States was entitled to an appeal as a matter of right under federal law. However, it should also be noted that the fourth article against him alleged that he appeared on the bench in an intemperate and intoxicated state. In another example, Judge Halsted Ritter was acquitted of six of the seven articles brought against him. He was, however, convicted on the seventh which summarized or listed the first six articles. The factual allegations upon which the seventh article was based included assertions that Ritter, while a federal judge, accepted large fees and gratuities and engaged in income tax evasion. However, the basis of the seventh article was that the "reasonable and probable consequences of the actions or conduct" involved therein were "to bring his court into scandal and disrepute, to the prejudice of said court and public confidence in the Federal judiciary, and to render him unfit to continue to serve as such judge." This article was challenged unsuccessfully on a point of order, arguing that article VII merely repeated and combined facts, circumstances and charges from the preceding six articles. The President Pro Tempore ruled that article VII involved a separate charge of "general misbehavior," which it would appear was a charge going beyond the criminality of the behaviour alleged in previous articles. The House Judiciary Committee, in recommending articles of impeachment against President Richard Nixon in 1974, appears to have premised those articles on the theory that President Nixon abused the powers of his office, causing "injury to the confidence of the nation and great prejudice to the cause of law and justice," and resulting in subversion of constitutional government; that he failed to carry out his constitutional obligation to faithfully execute the laws; and that he failed to comply with congressional subpoenas needed to provide relevant evidence for the impeachment investigation. The minority of the House Committee on the Judiciary in the report recommending that President Nixon be impeached took the view that errors in the administration of his office were not sufficient grounds for impeachment of the President or any other civil officer of the United States. The minority views seem to suggest that, under their interpretation of "high crimes and misdemeanors," crimes or actions with criminal intent must be the basis of an impeachment. Impeachment charges were brought against President Andrew Johnson involving allegations of actions in violation of the Tenure of Office Act, including removing Secretary of War Stanton and replacing him with Secretary of War Thomas and other related actions. Two of the articles brought against the President asserted that he sought to set aside the rightful authority of Congress and to bring it into reproach, disrepute and contempt by "harangues" criticizing the Congress and questioning its legislative authority. President Johnson was acquitted on those articles upon which votes were taken. Another Executive Branch officer to go to trial on articles of impeachment was Secretary of War Belknap. The articles alleged that he, in an exercise of his authority as Secretary of War, appointed John Evans to maintain a trading post at Fort Sill, and allowed Evans to continue in that position, as part of an arrangement which provided Belknap personal gain. The arrangement allegedly provided that Evans would pay $12,000 annually from the profits of the trading post to a third party who would, in turn, pay Belknap $6,000 annually. Belknap resigned before the Senate trial on his impeachment and was not convicted on any of these articles. It has been suggested that the impeachment provisions and the "good behaviour" language of the judicial tenure provision in Article III, Section 1, of the Constitution should be read in conjunction with one another. Whether this would serve to differentiate impeachable offenses for judicial officers from those which would apply to civil officers in the Executive Branch is not altogether clear. During the impeachment investigation of Justice Douglas in the 91 st Congress, Representative Paul McCloskey, Jr., reading the impeachment and good behavior provisions in tandem, contended that a federal judge could be impeached for either improper judicial conduct or non-judicial conduct amounting to a criminal offense. Then Minority Leader Gerald Ford inserted in the Congressional Record a memorandum taking the position that impeachable misbehavior by a judge involved proven conduct, "either in the administration of justice or in his personal behavior," which casts doubt on his personal integrity and thereby on the integrity of the entire judiciary. During the Douglas impeachment debate, Representative Frank Thompson, Jr., argued that historically federal judges had only been impeached for misconduct that was both criminal in nature and related to their judicial functions, and that such a construction of the constitutional authority was necessary to maintaining an independent Judiciary. In the Final Report by the Special Subcommittee on H.Res. 920 of the Committee on the Judiciary of the House of Representatives , 91 st Cong., 2d Sess. (Comm. Print, Sept. 17, 1970), as cited in 3 Deschler ' s ch. 14, § 3.13, the Subcommittee suggested two "concepts" related to this question for the Committee to consider. These concepts shared some common ground. As the Subcommittee observed: Both concepts would allow a judge to be impeached for acts which occur in the exercise of judicial office that (1) involved criminal conduct in violation of law, or (2) that involved serious dereliction from public duty, but not necessarily in violation of positive statutory law or forbidden by the common law. Sloth, drunkenness on the bench, or unwarranted and unreasonable impartiality [sic] manifest for a prolonged period are examples of misconduct, not necessarily criminal in nature, that would support impeachment. When such misbehavior occurs in connection with the federal office, actual criminal conduct should not be a requisite to impeachment of a judge or any other federal official. While such conduct need not be criminal, it nonetheless must be sufficiently serious to be offenses against good morals and injurious to the social body. Both concepts would allow a judge to be impeached for conduct not connected with the duties and responsibilities of the judicial office which involve [sic] criminal acts in violation of law. Thus it would appear that this common ground represented those general principles which the Subcommittee deemed fundamental to conduct upon which impeachment of a federal judge could be based. This review of some of the precedents on the question of what constitutes an impeachable offense suggests that the answer to this question is less than clear. Criminal conduct appears to be a sufficient ground, whether the person involved is a judge or a member of the Executive Branch. Where the person to be impeached is the President or an executive officer, conduct having criminal intent, serious abuses of the power of the office involved, failure to carry out the duties of that office, and, possibly, interference with the Congress in an impeachment investigation of the President or other executive official may be enough to support an article of impeachment. As to federal judges, the impeachment language might be read in light of the constitutional language providing that they serve during good behavior. With this in mind, a judge might be vulnerable to impeachment, not only for criminal conduct, but also for improper judicial conduct involving a serious dereliction of duty; placing the judge, the court, or the Judiciary in disrepute; or casting doubt upon his integrity and the integrity of the Judiciary. The question arises as to whether the Congress has authority to investigate individual judges or Justice without reference to either a judicial nomination, an impeachment, or judicial discipline. On January 12, 2004, in United States v. Mendoza , a federal district court in California considered a constitutional challenge to the Feeney Amendment to the "Prosecutorial Remedies and Other Tools to end the Exploitation of Children Today Act of 2003" (PROTECT) Act, which provides reporting requirements on the judicial decisions of individual federal district court judges. In Mendoza , the court found that the requirement that the United States Attorney General report a district court's grant of a downward departure under the United States Sentencing guidelines to the House Judiciary Committee and the Senate Judiciary Committee was an unconstitutional interference with judicial independence and a violation of separation of powers. The doctrine of separation of powers is not found in the text of the Constitution, but has been discerned by courts, scholars and others in the allocation of power in the first three Articles, i.e., the "legislative power" is vested in Congress, the "executive power" is vested in the President, and the "judicial power" is vested in the Supreme Court and the inferior federal courts. That interpretation is also consistent with the speeches and writings of the framers. But while the rhetoric of the Supreme Court points to a strict separation of the three powers, its actual holdings are far less decisive. Nevertheless, beginning with Buckley v. Valeo , the Supreme Court has reemphasized separation of powers as a vital element in American federal government. The federal courts have long held that the Congress may not act to denigrate the authority of the Judicial Branch. In the 1782 decision in Hayburn ' s Case , several Justices objected to a congressional enactment that authorized the federal courts to hear claims for disability pensions for veterans. The courts were to certify their decisions to the Secretary of War, who was authorized either to award each pension or to refuse it if he determined the award was an "imposition or mistaken." The Justices on circuit contended that the law was unconstitutional because the judicial power was committed to a separate department and because the subjecting of a court's opinion to revision or control by an officer of the Executive or the Legislative Branch was not authorized by the Constitution. Congress thereupon repealed the objectionable features of the statute. More recently, the doctrine of separation of powers has been applied to prevent Congress from vesting jurisdiction over common-law bankruptcy claims in non-Article III courts. The Mendoza decision did not deny the authority of the Congress to require the Judiciary to provide reports regarding the administration of the court's federal criminal law docket. Although criminal sentencing is traditionally left to the discretion of judges, the United States Sentencing Commission was established by Congress to limit this discretion by regularizing sentencing procedures. Thus, for the last 15 years, sentencing in federal courts has been governed by a regime promulgated by the Commission, the United States Sentencing Guidelines. During this time, Congress has passed numerous laws providing for review, promulgation, or amendment of federal sentencing guidelines applicable to particular offenses. In addition, the Supreme Court has recently held that, to the extent that the Guidelines increase the penalty for a crime based on factors not submitted to a jury, that the guidelines are only advisory, not mandatory. Thus, Congress would seem to have a significant basis for oversight over the operation of the guidelines. The Mendoza court also upheld other portions of the PROTECT Act. The PROTECT ACT was a response to concerns over the frequency and magnitude of downward departures, and dealt not just with the guidelines but with the structure of the Sentencing Commission. With respect to certain types of cases where the offenses involved child victims or sexual offenses, both the United States Code and the U.S. Sentencing Guideline were amended to restrict downward departures to only those instances where such departures are explicitly authorized. However, Title IV of the PROTECT Act also revised reporting requirements for the sentencing court and for the Attorney General to require the court to increase the specificity of the order regarding downward departures. The Act requires the sentencing court to provide a transcript of the court's statement of reasons, together with the order of judgment and commitment, to the Probation System and to the Sentencing Commission, and, if the sentence includes a term of imprisonment, to the Bureau of Prisons. However, as noted above, the Act also requires that in certain cases, the Attorney General must report a district court's grant of a downward departure to the House Judiciary Committee and the Senate Judiciary Committee. The report must specify the case; the facts involved; the identity of the district court judge; the district court's stated reasons, whether or not the court provided the United States with advance notice of its intention to depart; and the position of the parties with respect to the downward departure, whether or not the Government has filed, or intends to file a motion for reconsideration. It is these last provisions that were ultimately struck down by the Mendoza court. In doing so, the court stated that: This Court agrees with Defendant's analysis and concludes that [the reporting provision] chills and stifles judicial independence to the extent that it is constitutionally prohibited. The chilling effect resulting from such reporting requirements is sufficient to violate the separation of powers limitations of the United States Constitution. The Court also noted that What criteria is relevant for a separation of powers analysis is the "practical consequences" of the provision, or provisions, in question. Mistretta v. United States, 488 U.S. 361, 393, 102 L. Ed. 2d 714, 109 S. Ct. 647 (1989) (quoting Commodity Futures Trading Commission v. Schor, 478 U.S. 833, 857, 92 L. Ed. 2d 675, 106 S. Ct. 3245 (1986); Nixon v. Fitzgerald, 457 U.S. 731, 753, 73 L. Ed. 2d 349, 102 S. Ct. 2690 (1982)). The provision of the statute in question affects the relationship between the political branches to such an extent that it interferes with the Judiciary's independence from those of the Legislative and Executive Branches of the government. The specific provisions of the statute in question do not on its face give, or purport to give, either the Executive or Legislative branch any direct coercive power over the Judiciary for their judicial acts, but the threat, real or apparent, is blatantly present. There is no legitimate purpose served by reporting individual judges's performance to Congress. Congress does not have any direct oversight of the Judiciary. Although it is not clear whether the Mendoza decision will be upheld, the opinion articulates the proposition that there are limits to congressional oversight authority. Congress has a wide range of oversight tools available with respect to the Judicial Branch. However, the ability of the Congress to use these tools to investigate individual judges or Justices may be more limited. While these tools can be exercised in a variety of contexts, including nominations, judicial discipline, and impeachment, their use outside of these contexts has been relatively rare, and questions have been raised as to whether such exercise of congressional oversight could give rise to a violation of the doctrine of separation of powers.
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This report addresses Congress's oversight authority over individual federal judges or Supreme Court Justices. Congressional oversight authority, although broad, is limited to subjects related to the exercise of legitimate congressional power. While Congress has the power to regulate the structure, administration and jurisdiction of the courts, its power over the judicial acts of individual judges or Justices is more restricted. For instance, Congress has limited authority to remove or discipline a judge for decisions made on the bench. Article III, Section 1 of the Constitution provides that judges have "good behavior" tenure, which effectively has come to mean lifetime tenure for Article III judges subject to removal only through conviction on impeachment. However, impeachment of a judge or Justice requires a finding that such judge or Justice has engaged in a "High Crime or Misdemeanor." Thus, an investigation into decisions or other actions by a particular judge pursuant to an impeachment would appear to require some connection between an alleged "High Crime or Misdemeanor" and a particular case or cases. Of course, review and consideration of particular court decisions or other judicial acts are well within the purview of Congress's legislative authority. For instance, Congress has the legislative authority to amend statutes that it believes were misinterpreted by court cases, or to propose amendments to the Constitution that it believes would rectify erroneous constitutional decisions. However, investigating the judge or Justices behind such decisions may require something more. This report reviews a number of circumstances in which Congress may be authorized to either pursue or otherwise influence an investigation of individual federal judges or Supreme Court Justices. First the report addresses the general powers and limitations on Congress's oversight authority. Second, the report examines the Senate approval process for the nominations of individual judges or Justices, and the Senate's ability to obtain information on judges or Justices during that process. The report also considers the limits of existing statutory authority for judicial discipline and how Congress has influenced such procedures. It discusses the issue of how far the congressional investigatory powers can be exercised regarding possible judicial impeachments. Finally, it treats investigations regarding the individual actions of a judge outside of the above contexts, such as how a judge imposes sentences under the United States Sentencing Guidelines. A separate report, CRS Report RL32926, Congressional Authority Over the Federal Courts, by [author name scrubbed], [author name scrubbed], and [author name scrubbed], addresses Congress's legislative authority over the courts.
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On January 16, 2017, U.S. and Cuban officials signed a memorandum of understanding to deepen bilateral law enforcement cooperation and information sharing. (See " Advancing Engagement ," below.) On January 12, 2017, the Obama Administration announced a major change in U.S. immigration policy by ending the so-called wet foot/dry foot policy in which thousands of undocumented Cuban migrants have entered the United States in recent years. The Administration also announced it was ending the 10-year-old Cuban Medical Professional Parole program, which allowed Cuban medical professionals in third countries to be approved for admittance into the United States. (See " Migration Issues ," below.) On January 9, 2017, U.S. and Cuban officials signed an oil spill preparedness and response agreement for cooperation and coordination to prevent, contain, and clean up marine oil and other hazardous pollution. (See " Advancing Engagement ," below.) On January 5, 2017, the Cuban Commission for Human Rights and National Reconciliation (CCDHRN) reported that there were at least 9,940 short-term detentions for political reasons in 2016, higher than annual levels over the past several years. (See " Human Rights ," below.) On December 23, 2016, President Obama signed into law the National Defense Authorization Act for FY2017 ( P.L. 114-328 ), which continued prohibitions on funding for the closure of the U.S. Naval Station at Guantanamo Bay, Cuba, and restricted FY2017 funding for Cuba's participation in certain joint or multilateral exercises or related security conferences. (See " Diplomatic and Military Engagement " and Appendix A , below.) On December 10, 2016, President Obama signed into law a continuing resolution ( P.L. 114-254 ) providing FY2017 appropriations for most programs at the FY2016 level, minus an across-the-board reduction of almost 0.2% through April 28, 2017. This law affects human rights and democracy funding for Cuba, as well as funding for the Office of Cuba Broadcasting, both of which are funded through Department of State, Foreign Operations, and Related Programs appropriations. The 115 th Congress will face completing action on FY2017 appropriations. (See " U.S. Funding to Support Democracy and Human Rights " and " Radio and TV Martí ," below.) On December 7, 2016, the United States and Cuba held a fifth Bilateral Commission meeting in Havana, with the objective of advancing the normalization process. (See " Advancing Engagement ," below.) On November 25, 2016, Cuba's former long-time ruler Fidel Castro died at 90 years of age. (See " Death of Fidel Castro ," below, and CRS Insight IN10616, Fidel Castro's Death: Implications for Cuba and U.S. Policy .) On October 26, 2016, the U.N. General Assembly approved (as it has since 1991) a resolution urging the United States to lift the embargo on Cuba. For the first time, the United States abstained (along with Israel) and 191 other nations voted in favor. (See " Cuba's Foreign Relations ," below.) On October 14, 2016, President Obama issued a presidential policy directive on the normalization of relations with Cuba, which set forth medium-term objectives and the roles and responsibilities for various U.S. departments and agencies to move forward in the normalization process. (See " Advancing Engagement ," below.) On October 14, 2016, the Treasury and Commerce Departments announced a sixth round of regulatory changes to the Cuban Assets Control Regulations and the Export Administration Regulations that further eased certain economic sanctions. Among the changes were removal of the value limit for the importation of Cuban products (including cigars and rum) by authorized travelers as accompanied baggage for personal use; general authorization waiving the restriction prohibiting foreign vessels from entering a U.S. port for trade for 180 days after calling on a Cuban port for trade purposes; general authorizations for transactions incident to obtaining U.S. Food and Drug Administration (FDA) approval of Cuban-origin pharmaceuticals and for the importation of such pharmaceuticals into the United States; and general authorization to enter into contingent contracts for transactions currently prohibited by the embargo. (See " Increase in Travel, Commerce, and the Flow of Information ," below.) On September 14, 2016, the House Committee on Agriculture held a hearing on "American Agricultural Trade with Cuba." (See " U.S. Exports and Sanctions ," below). On September 29, 2016, President Obama signed into law a full-year FY2017 military construction appropriations measure (Division A of P.L. 114-223 , H.R. 5325 , approved by the Senate and House on September 28, 2016) with a provision continuing a prohibition against funding to carry out the closure or realignment of the United States Naval Station at Guantánamo Bay, Cuba. (See Appendix A .) On September 27, 2016, President Obama nominated Jeffrey DeLaurentis, the current chargé d'affaires of the U.S. Embassy in Havana, to be U.S. ambassador to Cuba. (See " Diplomatic and Military Engagement ," below.) On August 31, 2016, the Department of Transportation finalized a decision for eight U.S. airlines to provide up to 20 regularly scheduled roundtrip flights between Havana and 10 U.S. cities. Regular flights from the United States to Cuban cities other than Havana began in late August, and American Airlines reportedly will be the first to begin direct flights to Havana from Miami in late November. (See " Restrictions on Travel and Remittances ," below.) Political and economic developments in Cuba and U.S. policy toward the island nation, located just 90 miles from the United States, have been significant congressional concerns for many years. Especially since the end of the Cold War, Congress has played an active role in shaping U.S. policy toward Cuba, first with the enactment of the Cuban Democracy Act (CDA) of 1992 ( P.L. 102-484 , Title XVII) and then with the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 ( P.L. 104-114 ). Both measures strengthened U.S. economic sanctions on Cuba that had first been imposed in the early 1960s but also provided roadmaps for a normalization of relations dependent upon significant political and economic changes in Cuba. A decade ago, Congress partially modified its sanctions-based policy toward Cuba when it enacted the Trade Sanctions Reform and Export Enhancement Act of 2000 or TSRA ( P.L. 106-387 , Title IX) allowing for U.S. agricultural exports to Cuba. Over the past decade, much of the debate in Congress over U.S. policy has focused on U.S. sanctions, especially over U.S. restrictions on travel to Cuba. In 2009, Congress took legislative action in an appropriations measure ( P.L. 111-8 ) to ease restrictions on family travel and travel for the marketing of agricultural exports, marking the first congressional action easing Cuba sanctions in almost a decade. The Obama Administration took further action in April 2009 by lifting all restrictions on family travel and on cash remittances by family members to their relatives in Cuba. In January 2011, the Administration announced the further easing of restrictions on educational and religious travel to Cuba and on non-family remittances. In December 2014, just after the adjournment of the 113 th Congress, President Obama announced a major shift in U.S. policy toward Cuba, moving away from a sanctions-based policy aimed at isolating Cuba to a policy of engagement and a normalization of relations. This report is divided into three major sections analyzing Cuba's political and economic environment, U.S. policy, and selected issues in U.S.-Cuban relations. Legislative initiatives in the 114 th Congress are noted throughout the report, and four appendixes provide a listing of enacted measures and approved resolutions ( Appendix A ), bills receiving some action in 2015 and 2016 ( Appendix B ), and additional bills and resolution introduced in the 114 th Congress ( Appendix C ). For more on Cuba from CRS, see CRS In Focus IF10045, Cuba: U.S. Policy Overview , by [author name scrubbed]; CRS Insight IN10616, Fidel Castro's Death: Implications for Cuba and U.S. Policy , by [author name scrubbed]; CRS Insight IN10466, President Obama's Historic Visit to Cuba , by [author name scrubbed]; CRS Insight IN10369, Pope Francis in Cuba , by [author name scrubbed]; CRS Report R43888, Cuba Sanctions: Legislative Restrictions Limiting the Normalization of Relations , by [author name scrubbed] and [author name scrubbed]; CRS Report RL31139, Cuba: U.S. Restrictions on Travel and Remittances , by [author name scrubbed]; CRS Insight IN10514, Financing U.S. Agricultural Exports to Cuba , by [author name scrubbed]; CRS Report R44119, U.S. Agricultural Trade with Cuba: Current Limitations and Future Prospects , by [author name scrubbed]; CRS Legal Sidebar WSLG1586, House Approves Measure to Prevent Return of GTMO to Cuba without Congress's Say So , by [author name scrubbed]; CRS Report R44137, Naval Station Guantanamo Bay: History and Legal Issues Regarding Its Lease Agreements , by [author name scrubbed] and [author name scrubbed]; CRS Legal Sidebar WSLG1405, Can Creditors Enforce Terrorism Judgments Against Cuba? , by [author name scrubbed]; and CRS Report R44714, U.S. Policy on Cuban Migrants: In Brief , by [author name scrubbed]. Cuba became an independent nation in 1902. From its discovery by Columbus in 1492 until the Spanish-American War in 1898, Cuba was a Spanish colony. In the 19 th century, the country became a major sugar producer, with slaves from Africa arriving in increasing numbers to work the sugar plantations. The drive for independence from Spain grew stronger in the second half of the 19 th century, but it only came about after the United States entered the conflict when the USS Maine sank in Havana Harbor after an explosion of undetermined origin. In the aftermath of the Spanish-American War, the United States ruled Cuba for four years until Cuba was granted its independence in 1902. Nevertheless, the United States still retained the right to intervene in Cuba to preserve Cuban independence and maintain stability in accordance with the Platt Amendment that became part of the Cuban Constitution of 1901. The United States subsequently intervened militarily three times between 1906 and 1921 to restore order, but in 1934, the Platt Amendment was repealed. Cuba's political system as an independent nation was often dominated by authoritarian figures. Gerardo Machado (1925-1933), who served two terms as president, became increasingly dictatorial until he was ousted by the military. A short-lived reformist government gave way to a series of governments that were dominated behind the scenes by military leader Fulgencio Batista until he was elected president in 1940. Batista was voted out of office in 1944 and was followed by two successive presidents in a democratic era that ultimately became characterized by corruption and increasing political violence. Batista seized power in a bloodless coup in 1952, and his rule progressed into a brutal dictatorship. This fueled popular unrest and set the stage for Fidel Castro's rise to power. Castro led an unsuccessful attack on military barracks in Santiago, Cuba, on July 26, 1953. He was jailed, but subsequently freed and went into exile in Mexico, where he formed the 26 th of July Movement. Castro returned to Cuba in 1956 with the goal of overthrowing the Batista dictatorship. His revolutionary movement was based in the Sierra Maestra mountains in eastern Cuba and joined with other resistance groups seeking Batista's ouster. Batista ultimately fled the country on January 1, 1959, leading to 47 years of rule under Fidel Castro until he stepped down from power provisionally in July 2006 because of poor health. While Castro had promised a return to democratic constitutional rule when he first took power, he instead moved to consolidate his rule, repress dissent, and imprison or execute thousands of opponents. Under the new revolutionary government, Castro's supporters gradually displaced members of less radical groups. Castro moved toward close relations with the Soviet Union while relations with the United States deteriorated rapidly as the Cuban government expropriated U.S. properties. In April 1961, Castro declared that the Cuban revolution was socialist, and in December 1961, he proclaimed himself to be a Marxist-Leninist. Over the next 30 years, Cuba was a close ally of the Soviet Union and depended on it for significant assistance until the dissolution of the Soviet Union in 1991. From 1959 until 1976, Castro ruled by decree. In 1976, however, the Cuban government enacted a new Constitution setting forth the Cuban Communist Party (PCC) as the leading force in state and society, with power centered in a Political Bureau headed by Fidel Castro. Cuba's Constitution also outlined national, provincial, and local governmental structures. Since then, legislative authority has been vested in a National Assembly of People's Power that meets twice annually for brief periods. When the Assembly is not in session, a Council of State, elected by the Assembly, acts on its behalf. According to Cuba's Constitution, the president of the Council of State is the country's head of state and government. Executive power in Cuba is vested in a Council of Ministers, also headed by the country's head of state and government, that is, the president of the Council of State. Fidel Castro served as head of state and government through his position as president of the Council of State from 1976 until February 2008. While he had provisionally stepped down from power in July 2006 because of poor health, Fidel still officially retained his position as head of state and government. National Assembly elections were held in January 2008, and Fidel Castro was once again among the candidates elected to the 614-member legislative body. (As in the past, voters were offered a single slate of candidates.) On February 24, 2008, the new Assembly was scheduled to select from among its ranks the members of the Council of State and its president. Many observers had speculated that because of his poor health, Fidel would choose not to be reelected as president of the Council of State, which would confirm his official departure from heading the Cuban government. Statements from Castro himself in December 2007 hinted at his potential retirement. That proved true on February 19, 2008, when Fidel announced that he would not accept the position as president of the Council of State, essentially confirming his departure as titular head of the Cuban government. After Fidel stepped down from power, Cuba's political succession from Fidel to Raúl Castro was characterized by considerable stability. After two and a half years of provisionally serving as president, Raúl Castro officially became Cuba's president in February 2008, when Cuba's legislature selected him as president of the 31-member Council of State. While Raúl Castro began implementing economic reforms in 2008, there has been no change to his government's tight control over the political system, and few observers expect such changes to occur with the government backed up by a strong security apparatus. The Cuban Communist Party (PCC) held its sixth congress in April 2011. While the party concentrated on making changes to Cuba's economic model, some political changes also occurred. As expected, Raúl became first secretary of the PCC, officially replacing his brother Fidel. Most significantly, Raúl proposed two five-year term limits for top positions in the party and in the government, calling for systematic rejuvenation, a change that was confirmed by a January 2012 national PCC conference. Also at the 2012 conference, the PCC approved a resolution by which its Central Committee would be allowed to replace up to 20% of its 115 members within its five-year mandate. In February 2013, Cuba held elections for over 600 members of the National Assembly of People's Power, the national legislature, as well as over 1,600 provincial government representatives, both for five-year terms. Under Cuba's one-party system, the overwhelming majority of officials elected are PCC members. Critics maintain that elections in Cuba are a sham and entirely controlled by the PCC. The new National Assembly selected Raúl Castro for a second five-year term as president of the Council of State (Cuba's head of government). In conformity with the new two-term limit for top officials, Castro indicated that this would be his last term, which means that he would serve until February 2018, when he would be 86 years of age. Most significantly, a much younger official, Miguel Díaz-Canel Bermúdez (currently aged 56), was selected to serve as first vice president of the Council of State, replacing then 82-year-old José Ramón Machado, part of the older generation of so-called históricos of the 1959 Cuban revolution. The position of first vice president is significant because, according to the Cuban Constitution, the person holding the office is the official successor to the president. Prior to his appointment, Díaz-Canel—an engineer by training—was serving as one of the Council of State's six other vice presidents. His appointment as the official constitutional successor to Castro represents a move toward bringing about generational change in Cuba's political system. Díaz-Canel became a member of the Politburo in 2003 and also held top PCC positions in the provinces of Villa Clara and Holguín. He became education minister in 2009 until he was tapped to be a vice president of the Council of State. Díaz-Canel has been described in media reports as an experienced manager with good relations with the military and as someone that worked his way up through the party. Some Cuba watchers maintain that Díaz-Canel is still very much in the shadow of Raúl, and has not yet taken on a prominent role, and contend that the Cuban military is perhaps the most important institution to watch as the transition to a post-Castro government unfolds. Under Raúl, who served as defense minister from the beginning of the Cuban revolution until 2008, the Cuban military has played an increasing role in government, with several military officers and confidants of Raúl serving as ministers. Speaking on the 60 th anniversary of the start of the Cuban revolution on July 26, 2013, President Castro asserted that a generational transfer of power had already begun, stating that "there is a slow and orderly transfer of the leadership of the revolution to the new generations." In October 2015, however, Castro stayed with the historical leadership when, after the resignation of 76-year-old Minister of the Interior (MININT) General Abelardo Colomé Ibarra because of health reasons, he replaced Colomé with 77-year-old MININT First Vice Minister General Carlos Fernández Gondín. In September 2015, the Council of State had given Fernández the honorific title of Hero of the Republic because of his role fighting in Angola. The PCC's seventh party congress was held April 16-19, 2016. Few details were made public ahead of the congress, prompting criticism over the lack of information and consultation compared with the 2011 party congress. While some observers expected there to be a preview of forthcoming economic changes, no new reform measures were announced. Raúl Castro noted, however, that Cuba must reestablish a single currency as soon as possible in order to resolve wage and other economic distortions. Castro reported that just 21% of the more than 300 economic guidelines adopted at the 2011 party congress had been implemented. He said that for the 2016-2021 period, 268 guidelines were being proposed for updating the country's economic model, including 193 modified since the 2011 party congress, 31 the same, and 44 new guidelines. Castro reasserted that Cuba would move forward updating its economic model "without haste, but without pause." The slow pace of Cuba's economic reform process, however, demonstrates the government's extreme cautiousness in taking economic actions could have negative social or political consequences. Castro also proposed 60 years of age as the maximum age to join the Central Committee and 70 years of age as the maximum age to assume a leadership position in the party and in state and government institutions and mass organizations. He noted that these changes would be implemented through future reforms to the constitution and that there would be a five-year period of transition for the introduction of these age limits for top positions. In contrast, on the last day of the congress, Castro (currently 85 years of age) and José Ramón Machado Ventura (currently 86 years of age) were reelected as first and second secretaries of the PCC. Both will continue to serve on the 17-member Political Bureau (Politburo)—10 other Politburo members will continue to serve on the ruling body, while 5 new members, including 3 women, were elected, bringing the total number of women to 4. The membership of the Central Committee grew from 116 to 142, with 55 new members younger than 60 years of age. While Castro reiterated his intention to step down as President in February 2018, at this juncture it appears that he will retain his position as first secretary of the PCC. Cuba's former long-time ruler Fidel Castro died on November 25, 2016, at 90 years of age. Although Fidel Castro's historical legacy is significant—regardless of whether one views him positively or negatively—he has not held formal power since he stepped down in 2006. After stepping down, Fidel continued to author essays published in Cuban media that cast a shadow on Raúl's rule. Many Cubans reportedly believe that Fidel encouraged so-called hardliners in Cuba's Communist Party and government bureaucracy to slow the pace of reforms. With Fidel's passing, some Cuban entrepreneurs hope that the pace of reforms might accelerate. Fidel's death points to the generational change that has already begun in the Cuban government and a passing of the older generation of the 1959 revolution. Upon Fidel's passing, President Obama issued a statement extending condolences to Fidel's family and extending "a hand of friendship to the Cuban people." He said that "history will record and judge the enormous impact of this singular figure on the people and world around him." The President acknowledged that while the United States and Cuba have had profound political disagreements, his Administration has "worked hard to put the past behind us, pursuing a future in which the relationship between our two countries is defined not by our differences but by the many things that we share as neighbors and friends...." The Cuban government has a poor record on human rights, with the government sharply restricting freedoms of expression, association, assembly, movement, and other basic rights since the early years of the Cuban revolution. The government has continued to harass members of human rights and other dissident organizations. These include the Ladies in White ( Damas de Blanco ), currently led by Berta Soler, formed in 2003 by the female relatives of the so-called "group of 75" dissidents arrested that year; and the Patriotic Union of Cuba (UNPACU), led by José Daniel Ferrer García, established in 2011 by several dissident groups with the goal of fighting peacefully for civil liberties and human rights. Two Cuban political prisoners conducting hunger strikes have died in recent years, Orlando Zapata Tamayo in February 2010 and Wilman Villar Mendoza in January 2012. Tamayo died after an 85-day hunger strike that he had initiated to protest inhumane conditions in Cuba's prisons. Villar Mendoza died following a 50-day hunger strike after he was convicted of "contempt" of authority and sentenced to four years in prison. Other hunger strikers have included Vladimir Morera Bacallao, discussed below, who conducted a hunger strike for more than 80 days in late 2015, and Guillermo Fariñas, who ended an almost two-month hunger strike in October 2016. While the human rights situation in Cuba remains poor, the country has made some advances in recent years. In 2008, Cuba lifted a ban on Cubans staying in hotels that previously had been restricted to foreign tourists in a policy that had been pejoratively referred to as "tourist apartheid." In recent years, as the government has enacted limited economic reforms, it has been much more open to debate on economic issues. In January 2013, Cuba took the significant step of eliminating its long-standing policy of requiring an exit permit and letter of invitation for Cubans to travel abroad. The change has allowed prominent dissidents and human rights activists to travel abroad and return to Cuba. Political Prisoners. The Cuban government has released a number of political prisoners in recent years. With the intercession of the Cuban Catholic Church, the Cuban government released some 125 political prisoners in 2010 and 2011, including the remaining members of the "group of 75" that were still in prison. In the aftermath of the December 2014 shift in U.S. policy toward Cuba, the Cuban government released another 53 political prisoners (although as noted below, six were rearrested in 2015). Among the 53 released were five jailed dissidents whom Amnesty International (AI) had named as prisoners of conscience in 2013 as well as several other dissidents whose cases AI was following. Two of the five prisoners of conscience, Emilio Planas Robert and Iván Fernández Depestre, had been imprisoned since September 2012 and July 2013, respectively, and had been convicted of "dangerousness" (a preemptive measure defined as the special proclivity of a person to commit crimes). The other three "prisoners of conscience," brothers Alexeis, Django, and Vianco Vargas Martín, were members of UNPACU. They were detained in late 2012 and convicted in June 2014 after a summary trial in which they were charged with "public disorder." Three other dissidents whose cases were followed by AI were released from prison on December 9, 2014—Ladies in White member Sonia Garro Alfonso; her husband, Ramón Alejandro Muñoz González; and a neighbor, Eugenio Hernández. They had been held since March 2012. In 2015, the Cuban government released two additional political prisoners named as prisoners of conscience by Amnesty International, but one of them was rearrested in late 2016. Ciro Alexis Casonova Pérez, who had been placed under house arrest in June 2014 after demonstrating in the streets, was convicted in December 2014 of public disorder and sentenced to one year in prison. In April 2015, AI declared Casonova Pérez a prisoner of conscience, and he was ultimately released in June 2015. Danilo Maldonado Machado (known as El Sexto), a graffiti artist, was unconditionally released from prison in October 2015, after almost 10 months in prison. Although he was never formally charged, Maldonado reportedly was accused of "aggravated contempt" for painting the names Fidel and Raúl on two pigs that he intended to release in Havana's Central Park as part of an art show. Maldonado, who had attended Miami Dade College in 2014 on a scholarship program, went on a hunger strike before his release. On November 26, 2016, however, Maldonado was arrested again after he made a video celebrating the death of Fidel Castro, and he was subsequently again declared a prisoner of conscience by AI, which has called for his immediate and unconditional release. As noted above, 6 of the 53 political prisoners released in December 2014 at the time of the improvement in U.S.-Cuban relations were rearrested in 2015. One of the prisoners, Vladimir Morera Bacallao, detained in April 2015 for hanging a sign outside his home in protest of municipal elections, began a hunger strike in early October 2015 that endured more than 80 days. Going beyond AI's narrow definition of prisoners of conscience, the Cuban government has held a larger number of political prisoners, generally defined as a person imprisoned for his or her political activities. In April 2016, the Havana-based Cuban Commission for Human Rights and National Reconciliation (CCDHRN) estimated that the Cuban government held 82 people imprisoned for political motives (up from 60 people in June 2015), with 11 others released from prison but still on parole—for a total of 93 convicted for political reasons. CCDHRN's report includes dozens of opposition activists, a number of whom are members of UNPACU, as well as those convicted on such charges as hijacking, terrorism, sabotage, other acts of violence, and espionage. The State Department's human rights report on Cuba covering 2015 stated that it was difficult to determine an accurate number of political prisoners because of the Cuban government's lack of transparency, its systematic violation of due process rights, and its continued denial of access to Cuban jails to independent monitors. The report noted, however, that two independent organizations estimated that there were 60 to 70 political prisoners. Short- T erm Detentions. Short-term detentions for political reasons have increased significantly over the past several years, a reflection of the government's change of tactics in repressing dissent away from long-term imprisonment. The CCDHRN reports that there were at least 2,074 such detentions in 2010, 4,123 in 2011, 6,602 in 2012, and 6,424 in 2013. For 2014, the group reported that there were at least 8,899 such detentions, almost 39% higher than the previous year. In 2015, the CCDHRN reported at least 8,616 short-term detentions, with 1,447 in November alone. In 2016, there were at least 9,940 short-term arbitrary detentions for political reasons, higher than annual levels over the past several years. In March 2016, for example, there were 1,416 detentions, including almost 500 detentions during President Obama's visit. Bloggers and Civil Society Groups. Over the past several years, numerous independent Cuban blogs have been established that are often critical of the Cuban government. Cuban blogger Yoani Sánchez has received considerable international attention since 2007 for her website, Generación Y , which includes commentary critical of the Cuban government. In May 2014, Sánchez launched an independent digital newspaper in Cuba, 14 y medio , available on the Internet, distributed through a variety of methods in Cuba, including CDs, USB flash drives, and DVDs. The Catholic Church, which, as noted above, played a prominent role in the release of political prisoners in 2010 and 2011, has been active in broadening the debate on social and economic issues through its publications Palabra Nueva (New Word) and Espacio Laical (Space for Laity). The Church has also played an increasing role in providing social services, including soup kitchens, services for the elderly and other vulnerable groups, after-school programs, job training, and even college coursework. In 2014, the two former editors of Espacio Laical , Roberto Veiga and Lenier Gonzalez, launched an online forum known as Cuba Posible . Estado de SATS , a forum founded in 2010 by human rights activist Antonio Rodiles, has had the goal of encouraging open debate on cultural, social, and political issues. The group has hosted numerous events and human rights activities over the years, but has also been the target of government harassment. In November 2012, Rodiles was arrested and held for 19 days on charges with "resisting authority," but he was released after Amnesty International issued an urgent appeal on his case. In early July 2015, Rodiles was severely beaten for attempting to participate in the weekly protest march of the Ladies in White. Trafficking in Persons. The State Department released its 2016 Trafficking in Persons (TIP) Report on June 30, 2016, and for the second consecutive year Cuba was placed on the Tier 2 Watchlist (in prior years, Cuba had Tier 3 status). Tier 3 status refers to countries whose governments do not fully comply with the minimum standards for combatting trafficking and are not making significant efforts to do so. In contrast, Tier 2 Watchlist status refers to countries whose governments, despite making significant efforts, do not fully comply with the minimum standards and still have some specific problems (an increasing number of victims or failure to provide evidence of increasing anti-trafficking efforts) or whose governments have made commitments to take additional anti-trafficking steps over the next year. The State Department maintained in its 2015 report that Cuba was upgraded to Tier 2 Watchlist status because of its progress in addressing and prosecuting sex trafficking, including the provision of services to sex trafficking victims, and its continued efforts to address sex tourism and the demand for commercial sex. In its 2016 report, the State Department maintained that Cuba remained on the Tier 2 Watchlist for the second consecutive year because the country did not demonstrate overall increasing anti-trafficking efforts compared to 2015. Nevertheless, the 2016 report noted that the Cuban government continued efforts to address sex trafficking, including prosecution and conviction, and the provision of services to victims. The State Department noted that the Cuban government released a report on its anti-trafficking efforts in October 2015; that multiple government ministries were engaged in anti-trafficking efforts; and that the government funded child protection centers and guidance centers for women and families, which served crime victims, including trafficking victims. However, the report also noted that the Cuban government did not prohibit forced labor, report efforts to prevent forced labor, or recognize forced labor as a possible issue affecting Cubans in medical missions abroad. Cuba's economy is largely state-controlled, with the government owning most means of production and employing a majority of the workforce. Key sectors of the economy that generate foreign exchange include the export of professional services (largely medical personnel to Venezuela); tourism, which has grown significantly since the mid-1990s, with 3.5 million tourists visiting Cuba in 2015; nickel mining, with the Canadian mining company Sherritt International involved in a joint investment project; and a biotechnology and pharmaceutical sector that supplies the domestic health care system and has fostered a significant export industry. Remittances from relatives living abroad, especially from the United States, have also become an important source of hard currency, amounting to some $3 billion in 2015. The once-dominant sugar industry has declined significantly over the past 20 years; in 1990, Cuba produced 8.4 million tons of sugar, while in 2016 it produced just 1.6 million tons (compared to 1.9 million tons in 2015). Cuba is highly dependent on Venezuela for its oil needs. In 2000, the two countries signed a preferential oil agreement that until recently provided Cuba with some 90,000 barrels of oil per day, about two-thirds of its consumption. Cuba's goal of becoming a net oil exporter with the development of its offshore deepwater oil reserves was set back significantly in 2012, when the drilling of three exploratory oil wells was unsuccessful. The setback in Cuba's offshore oil development combined with political and economic difficulties in Venezuela have raised concerns among Cuban officials about the security of the support received from Venezuela. Cuba is increasingly focusing on the need to diversify its trading partners and to seek alternative energy suppliers in the case of a cutback or cutoff of Venezuelan oil. Over the years, Cuba has expressed pride for the nation's accomplishments in health and education. According to the United Nations Development Program's 2015 Human Development Report, Cuba is ranked 67 out of 188 countries worldwide and is characterized as having "high human development," with life expectancy at 79.4 years and adult literacy estimated at almost 100%. In terms of economic growth, Cuba experienced severe economic deterioration from 1989 to 1993, with an estimated decline in gross domestic product ranging from 35% to 50% when the Soviet Union collapsed and Russian financial assistance to Cuba practically ended. Since then, however, there has been considerable improvement. From 1994 to 2000, as Cuba moved forward with some limited market-oriented economic reforms, economic growth averaged 3.7% annually. Economic growth was especially strong in the 2004-2007 period, registering an impressive 11% and 12%, respectively, in 2005 and 2006 (see Figure 2 ). The economy benefitted from the growth of the tourism, nickel, and oil sectors and support from Venezuela and China in terms of investment commitments and credit lines. However, the economy was hard hit by several hurricanes and storms in 2008 and the global financial crisis in 2009, with the government having to implement austerity measures. As a result, economic growth slowed significantly. Growth improved modestly from 2010-2014, averaging 2.4% annually during the period, although growth was just 1% in 2014 because of Cuba's challenges in shifting from a centrally planned to a more decentralized economy. Stronger growth of 4.4% returned in 2015, but the Economist Intelligence Unit (EIU) maintains that economic growth dropped to an estimated 0.5% economic growth in 2016 because of austerity measures, lower export earnings, and reduced support from Venezuela. (At the end of 2016, Cuba's economic minister reportedly said that the economy had shrunk 0.9% during the year.) The economic crisis in Venezuela has affected Venezuela's oil exports to Cuba. Looking ahead, the EIU forecasts economic growth of 1% in 2017 and 2.4% in 2018, far less than the 5% that the government and some economists maintain is needed to develop the economy and create new jobs. The government of Raúl Castro has implemented a number of economic policy changes, but there has been some disappointment that more far-reaching reforms have not been forthcoming. As noted above, the government employs a majority of the labor force, almost 80%, but it has been allowing more private sector activities. In 2010, the government opened up a wide range of activities for self-employment and small businesses. There are now almost 200 categories of work allowed, and the number of self-employed has risen from some 156,000 at the end of 2010 to some 507,000 in 2016. Analysts contend, however, that the government needs to do more to support the development of the private sector, including an expansion of authorized activities to include more white-collar occupations and state support for credit to support small businesses. A major challenge for the development of the private sector is the lack of money in circulation. Most Cubans do not make enough money to support the development of small businesses; those private sector activities catering to tourists and foreign diplomats have fared better than those serving the Cuban market. Among Cuba's significant economic challenges are low wages (whereby workers cannot satisfy basic human needs) and the related problem of how to unify Cuba's two official currencies circulating in the country. Most people are paid in Cuban pesos (CUPs), and the minimum monthly wage in Cuba is 225 pesos (U.S. $9), but for increasing amounts of consumer goods, convertible pesos (CUCs) are used. (For personal transactions, the exchange rate for the two currencies is CUP24/CUC1.) Cubans with access to foreign remittances or who work in jobs that give them access to convertible pesos are far better off than those Cubans who do not have such access. In October 2013, the Cuban government announced that it would move toward ending its dual-currency system and move toward monetary unification, but the action has been delayed for several years. In March 2014, the government had provided insight about how monetary unification would move forward when it published instructions for when the CUC is removed from circulation; no date was provided, but it was referred to as "day zero." Currency reform is ultimately expected to lead to productivity gains and improve the business climate, but an adjustment would create winners and losers. As noted above, at the PCC's April 2016 Congress, Raúl Castro called for moving toward a single currency as soon as possible to resolve economic distortions. A significant reform effort under Raúl Castro has focused on the agricultural sector, a vital issue because Cuba reportedly imports some 70%-80% of its food needs according to the World Food Programme. In an effort to boost food production, the government has turned over idle land to farmers and given farmers more control over how to use their land and what supplies to buy. Despite these and other efforts, overall food production has been significantly below targets. In March 2014, Cuba approved a new foreign investment law with the goal of attracting needed foreign capital to the country. The law cuts taxes on profits by half, to 15%, and exempts companies from paying taxes for the first eight years of operation. Employment or labor taxes are also eliminated, although companies still must hire labor through state-run companies, with agreed-upon wages. A fast-track procedure for small projects reportedly will streamline the approval process, and the government has agreed to improve the transparency and time of the approval process for larger investments. It remains to be seen to what extent the new law will attract investment. Over the past several years, Cuba has closed a number of joint ventures with foreign companies and has arrested several executives of foreign companies reportedly for corrupt practices. According to some observers, investors will want evidence, not just legislation, that the government is prepared to allow foreign investors to make a profit in Cuba. In October 2014, the Cuban government issued a list of some 246 projects in which it was seeking some $8.7 billion in investment in such sectors as energy, tourism, agriculture, and industry. Cuban Minister of Foreign Trade and Investment Rodrigo Malmierca reportedly maintained in November 2015 that 40 of these projects were in "advanced negotiations" and that Cuba has signed 36 foreign investment projects since the 2014 investment law was approved, but did not indicate the value of these projects. In November 2015, Malmierca announced a list of 326 projects in which it is seeking $8.2 billion in foreign investment, including new opportunities in health care, tourism, transportation, construction, agriculture, and renewable energy. In December 2015, Cuba reached a Paris Club arrangement with a group of 14 creditor countries to forgive $8.5 billion out of $11.1 billion of debt owed, including late interest. Pursuant to the agreement, Cuba will pay $2.6 billion over a period of 18 years. The creditor countries include Australia, Austria, Belgium, Canada, Denmark, Finland, Italy, Japan, the Netherlands, Spain, Sweden, Switzerland, and the United Kingdom. The agreement resolves an outstanding economic challenge for the Cuban government and could make it easier for Cuba to gain access to credit and attract investment. (In 2014, Russia wrote off 90% of Cuba's $32 billion Soviet-era debt. See " Cuba's Foreign Relations " below.) As noted above, no new economic measures emanated from the PCC's seventh party congress held April 16-19, 2016. After the party congress, press articles reported that one of Cuba's leading advocates for economic reforms, Omar Everleny Pérez, was dismissed from his position at the Center for the Study of the Cuban Economy, spreading concern about the Cuban government's retrenchment from its commitment to reform. A number of Cuba's economists are pressing for the government to enact more far-reaching reforms and embrace competition for key parts of the economy and state-run enterprises. They criticize the government's continued reliance on central planning and its monopoly on foreign trade. Cuba's economic potential, according to one analysis, is held back by several factors, including the lack of political will; dilapidated infrastructure; a transportation sector in need of repair and modernization; an inefficient and poorly resourced construction sector; and a government bureaucracy that suffers from morale problems, a weak decisionmaking process, and a lack of familiarity with international practice. During the Cold War, Cuba had extensive relations with and support from the Soviet Union, with billions of dollars in annual subsidies to sustain the Cuban economy. This subsidy system helped fund an activist foreign policy and support for guerrilla movements and revolutionary governments abroad in Latin America and Africa. With an end to the Cold War, the dissolution of the Soviet Union, and the loss of Soviet financial support, Cuba was forced to abandon its revolutionary activities abroad. As its economy reeled from the loss of Soviet support, Cuba was forced to open up its economy and economic relations with countries worldwide. In 2014, Cuba's leading trading partners in terms of Cuban exports were Venezuela (almost 43%), Canada, the Netherlands, and China, while the leading sources of Cuba's imports were Venezuela (almost 40%), China, Spain, Brazil, Mexico, Canada, Italy, the United States, Argentina, and Germany. Russia. Relations with Russia, which had diminished significantly in the aftermath of the Cold War, have been strengthened somewhat over the past several years. In 2008, then-Russian President Dmitry Medvedev visited Havana, while Raúl Castro visited Russia in 2009 and again in 2012. Current Russian President Vladimir Putin visited Cuba in July 2014 on his way to attend the BRICS summit in Brazil. Just before arriving in Cuba, Putin signed into law an agreement writing off 90% of Cuba's $32 billion Soviet-era debt, with some $3.5 billion to be paid back by Cuba over a 10-year period that would fund Russian investment projects in Cuba. In the aftermath of Putin's trip, there were press reports alleging that Russia would reopen its signals intelligence facility at Lourdes, Cuba, which had closed in 2002, but President Putin denied reports that his government would reopen the facility. While trade relations between Russia and Cuba are not significant, two Russian energy companies have been involved in oil exploration in Cuba, and a third announced its involvement in 2014. Gazprom had been in a partnership with the Malaysian state oil company, Petronas, that conducted unsuccessful deepwater oil drilling off Cuba's western coast in 2012. The Russian oil company Zarubezhneft began drilling in Cuba's shallow coastal waters east of Havana in December 2012, but stopped work in April 2013 because of disappointing results. During President Putin's July 2014 visit to Cuba, Russian energy companies Rosneft and Zarubezhneft signed an agreement with Cuba's state oil company CubaPetroleo (Cupet) for the development of an offshore exploration block, and Rosneft agreed to cooperate with Cuba in studying ways to optimize existing production at mature fields. Some energy analysts are skeptical about the prospects for the offshore project given the unsuccessful attempts by foreign oil companies drilling wells in Cuba's deepwaters. In January 2015, as U.S.-Cuba normalization talks were beginning in Havana, a Russian intelligence ship docked in Havana. U.S. officials downplayed the arrival of the ship, maintaining that it was legal and not out of the ordinary. Russian officials publicly welcomed the improvement in U.S.-Cuban relations, although the change in U.S. policy could be viewed as a potential setback for Russian overtures in the region. In early October 2016, a Russian military official maintained that Russia was reconsidering reestablishing a military presence in Cuba (and Vietnam), although there was no indication that Cuba would be open to the return of the Russian military. China. Relations with China have also strengthened in recent years. During the Cold War, the two countries did not have close relations because of Sino-Soviet tensions, but bilateral relations have grown close in recent years, with Chinese trade and investment in Cuba increasing. Chinese President Hu Jintao visited Cuba in 2004 and again in 2008, while Chinese Vice President Xi Jinping visited Cuba in June 2011 and again in July 2014, this time as China's president, after attending the BRICS summit in Brazil. Raúl Castro had also visited China in 2012 on a four-day visit, in which the two countries reportedly signed cooperation agreements focusing on trade and investment issues. During Xi Jinping's 2014 visit, the two countries reportedly signed 29 trade, debt, credit, and other agreements. While in Cuba, the Chinese president said that "China and Cuba being socialist countries, we are closely united by the same missions, ideals, and struggles." European Union. The European Union (EU) and Cuba held seven rounds of talks—two in 2014, four in 2015, and one on March 3-4, 2016—on a Political Dialogue and Cooperation Agreement covering political, trade, and development issues. Ultimately, an agreement was reached after the last round of talks and initialed by Cuba and the EU in Havana on March 11, 2016. In 1996, the EU adopted a Common Position on Cuba, stating that the objective of EU relations with Cuba included encouraging "a process of transition to pluralist democracy and respect for human rights and fundamental freedoms." The position also stipulated that full EU economic cooperation with Cuba would depend upon improvements in human rights and political freedom. The new cooperation agreement, which has to be officially approved by EU governments, would replace the 1996 Common Position. It includes political dialogue and a framework to deepen relations in a number of areas, including trade. Venezuela and Other Latin American Countries. For more than 15 years, Venezuela has been a significant source of support for Cuba. Dating back to 2000 under populist President Hugo Chávez, Venezuela began providing subsidized oil (some 100,000 barrels per day) and investment. For its part, Cuba has sent thousands of medical personnel to Venezuela. In the aftermath of Chávez's death in March 2013, Venezuela's mounting economic challenges since mid-2014 because of the rapid decline in oil prices, and the defeat of the ruling party in Venezuela's December 2015 legislative elections, Cuba has been concerned about the future of Venezuelan financial support. Cuba's economic growth has slowed to a projected 0.5% in 2016, to a large extent due to the decrease in Venezuelan support. With El Salvador's restoration of relations with Cuba in June 2009, all Latin American nations now have official diplomatic relations with Cuba. Cuba has increasingly become more engaged in Latin America beyond the already close relations with Venezuela. Cuba is a member of the Bolivarian Alliance for the Americas (ALBA), a Venezuelan-led integration and cooperation scheme founded in 2004. In August 2013, Cuba began deploying thousands of doctors to Brazil in a program aimed at providing doctors to rural areas of Brazil, with Cuba earning some $225 million a year for supplying the medical personnel. Brazil also has been a major investor in the development of the port of Mariel west of Havana. Since 2012, Cuba has hosted peace talks between the Colombian government and the Revolutionary Armed Forces of Colombia. In early November 2015, Raúl Castro visited Mexico on a trip designed to warm relations and increase economic linkages. C ommunity of Latin American and Caribbean States (C ELAC ) . Cuba became a full member of the Rio Group of Latin American and Caribbean nations in November 2008, and a member of the succeeding CELAC that was officially established in December 2011 to boost regional cooperation, but without the participation of the United States or Canada. In January 2013, Raúl Castro assumed the presidency of the organization for one year, and Cuba hosted the group's second summit in January 2014 in Havana, attended by leaders from across the hemisphere as well as United Nations Secretary General Ban Ki-moon. The Secretary General reportedly raised human rights issues with Cuban officials, including the subject of Cuba's ratification of U.N. human rights accords and "arbitrary detentions" by the Cuban government. Summit s of the Americas. Cuba had expressed interest in attending the sixth Summit of the Americas in April 2012 in Cartagena, Colombia, but ultimately was not invited to attend. The United States and Canada expressed opposition to Cuba's participation. Previous summits were limited to the hemisphere's 34 democratically elected leaders, and the Organization of American States (OAS) (in which Cuba does not participate) has played a key role in summit implementation and follow-up activities. Several Latin American nations vowed not to attend the seventh Summit of the Americas to be held in Panama on April 10-11, 2015, unless Cuba was allowed to participate, and as a result, Panama announced in August 2014 that it would invite Cuba to attend. Cuba's participation was a looming challenge for the Obama Administration, but in December 2014, when President Obama announced a new policy approach toward Cuba, he said that the United States was prepared to have Cuba participate in the summit. Cuba ultimately participated in the summit in Panama, with a historic sidelines meeting between President Obama and President Raúl Castro. (For more on the summit, see CRS Report R43952, Seventh Summit of the Americas: In Brief , by [author name scrubbed].) OAS. Cuba was excluded from participation in the OAS in 1962 because of its identification with Marxism-Leninism, but in 2009, the OAS overturned the 1962 resolution in a move that could eventually lead to Cuba's reentry into the regional organization in accordance with the practices, purposes, and principles of the OAS. While the Cuban government welcomed the OAS vote to overturn the 1962 resolution, it asserted that it would not return to the OAS. International Organizations. Cuba is an active participant in international forums, including the United Nations (U.N.) and the controversial United Nations Human Rights Council. Cuba also has received support over the years from the United Nations Development Programme (UNDP) and the United Nations Educational, Scientific, and Cultural Organization (UNESCO), both of which have offices in Havana. The U.N. has played a significant role in providing relief and recovery from Hurricane Sandy that struck in October 2012. Since 1991, the U.N. General Assembly has approved a resolution each year criticizing the U.S. economic embargo and urging the United States to lift it. In 2015, the vote calling for the United States to lift the embargo occurred on October 27, with 191 votes in favor and 2 votes (Israel and the United States) against. Leading up to the vote, there had been speculation that the United States would abstain. In 2016, the vote on the U.N. resolution took place on October 26, with 191 votes in favor and—for the first time—the United States (and Israel) abstaining. In remarks at the U.N. General Assembly session, Ambassador Samantha Power, the U.S. Permanent Representative to the United Nations, stated that the resolution was "a perfect example of why the U.S. policy of isolation toward Cuba was not working" and that U.S. policy instead had isolated the United States, including at the United Nations. She stated, however, that "abstaining on the resolution does not mean that the United States agrees with all the policies and practices of the Cuban government," adding that the United States was "profoundly concerned by the serious human rights violations that the Cuban government continues to commit with impunity against its own people." Among other international organizations, Cuba was a founding member of the World Trade Organization, but it is not a member of the International Monetary Fund, the World Bank, or the Inter-American Development Bank. In January 2016, the executive president of the Development Bank of Latin America (CAF) stated in an interview that the bank was in the process of looking at a way for Cuba to become a member; the CAF's current membership includes 17 Latin American and Caribbean countries as well as Spain and Portugal. In September 2016, Cuba signed a memorandum of understanding with the CAF with the objective of supporting technical cooperation programs for Cuba's social and economic development and laying the foundation for Cuba's future memberships in the CAF. Compliance with U.N. Sanctions on North Korea. In July 2013, the discovery of a weapons shipment aboard a North Korean ship that had left Cuba on its way back to North Korea raised questions about the nature of Cuban-North Korean relations and about Cuba's compliance with U.N. sanctions against North Korea. Panama had detained the North Korean ship as it prepared to enter the Panama Canal due to suspicion that the ship was carrying illicit narcotics; instead, the ship was found to be carrying military weapons. The U.N. Security Council's Panel of Experts for North Korea visited Panama in August 2013 and issued a report on the incident in March 2014. The Panel of Experts concluded that both the shipment and the transaction between Cuba and North Korea were violations of U.N. sanctions banning weapons transfers to North Korea. In July 2014, the U.N. Security Council imposed sanctions on the operator of the North Korean ship, and the company is now subject to an international asset freeze. U.S. Ambassador to the United Nations Samantha Power described the North Korean ship incident as a "cynical, outrageous and illegal attempt by Cuba and North Korea to circumvent United Nations sanctions." In the early 1960s, U.S.-Cuban relations deteriorated sharply when Fidel Castro began to build a repressive communist dictatorship and moved his country toward close relations with the Soviet Union. The often tense and hostile nature of the U.S.-Cuban relationship is illustrated by such events and actions as U.S. covert operations to overthrow the Castro government culminating in the ill-fated April 1961 Bay of Pigs invasion; the October 1962 missile crisis in which the United States confronted the Soviet Union over its attempt to place offensive nuclear missiles in Cuba; Cuban support for guerrilla insurgencies and military support for revolutionary governments in Africa and the Western Hemisphere; the 1980 exodus of around 125,000 Cubans to the United States in the so-called Mariel boatlift; the 1994 exodus of more than 30,000 Cubans who were interdicted and housed at U.S. facilities in Guantánamo and Panama; and the 1996 shootdown by Cuban fighter jets of two U.S. civilian planes operated by the Cuban-American group Brothers to the Rescue, which resulted in the deaths of four U.S. crew members. Beginning in the early 1960s, U.S. policy toward Cuba consisted largely of isolating the island nation through comprehensive economic sanctions, including an embargo on trade and financial transactions. President Kennedy proclaimed an embargo on trade between the United States and Cuba in February 1962, citing Section 620(a) of the Foreign Assistance Act of 1961 (FAA), which authorizes the President "to establish and maintain a total embargo upon all trade between the United States and Cuba." At the same time, the Department of the Treasury issued the Cuban Import Regulations to deny the importation into the United States of all goods imported from or through Cuba. The authority for the embargo was later expanded in March 1962 to include the Trading with the Enemy Act (TWEA). In July 1963, the Department of the Treasury revoked the Cuban Import Regulations and replaced them with the more comprehensive Cuban Assets Control Regulations (CACR)— 31 C.F.R. Part 515 —under the authority of TWEA and Section 620(a) of the FAA. The CACR, which include a prohibition on most financial transactions with Cuba and a freeze of Cuban government assets in the United States, remain the main body of Cuba embargo regulations and have been amended many times over the years to reflect changes in policy. They are administered by the Department of the Treasury's Office of Foreign Assets Control (OFAC) and prohibit financial transactions as well as trade transactions with Cuba. The CACR also require that all exports to Cuba be licensed by the Department of Commerce, Bureau of Industry and Security, under the provisions of the Export Administration Act of 1979, as amended. The Export Administration Regulations (EAR) are found at 15 C.F.R. Sections 730-774 . Congress subsequently strengthened sanctions on Cuba with enactment of the Cuban Democracy Act (CDA) of 1992 ( P.L. 102-484 , Title XVII), the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 ( P.L. 104-114 ), and the Trade Sanctions Reform and Export Enhancement Act of 2000 or TSRA ( P.L. 106-387 , Title IX). Among its provisions, the CDA prohibits U.S. foreign subsidiaries from engaging in trade with Cuba and prohibits entry into the United States for any seaborne vessel to load or unload freight if it has been involved in trade with Cuba within the previous 180 days, except pursuant to a Treasury Department license. (In October 2016, the Treasury Department issued a general license for vessels involved in trade with Cuba.) The LIBERTAD Act ( P.L. 104-114 ), enacted in the aftermath of Cuba's shooting down of two U.S. civilian planes in February 1996, combines a variety of measures to increase pressure on Cuba and provides for a plan to assist Cuba once it begins the transition to democracy. Most significantly, the law codified the Cuban embargo, including all restrictions under the CACR. This provision is noteworthy because of its long-lasting effect on U.S. policy options toward Cuba. The executive branch is prevented from lifting the economic embargo without congressional concurrence until certain democratic conditions set forth in the law are met, although the President retains broad authority to amend the regulations therein. Another significant sanction in Title III of the law holds any person or government that traffics in U.S. property confiscated by the Cuban government liable for monetary damages in U.S. federal court. Acting under provisions of the law, however, Presidents Clinton, Bush, and Obama have suspended the implementation of Title III at six-month intervals. Although TSRA authorizes U.S. commercial agricultural exports to Cuba, it also includes prohibitions on U.S. assistance and financing and requires "payment of cash in advance" or third-country financing for the exports. The act also prohibits tourist travel to Cuba. In addition to these acts, Congress enacted numerous other provisions of law over the years that impose sanctions on Cuba, including restrictions on trade, foreign aid, and support from international financial institutions. The government of Cuba also was designated by the State Department as a state sponsor of international terrorism in 1982 under Section 6(j) of the Export Administration Act and other laws because of its alleged ties to international terrorism. (For additional information, see CRS Report R43888, Cuba Sanctions: Legislative Restrictions Limiting the Normalization of Relations , by [author name scrubbed] and [author name scrubbed].) In addition to sanctions, another component of U.S. policy has consisted of support measures for the Cuban people. This includes U.S. private humanitarian donations, medical exports to Cuba under the terms of the CDA, U.S. government support for democracy-building efforts, and U.S.-sponsored radio and television broadcasting to Cuba. The enactment of TSRA by the 106 th Congress also led to the United States becoming one of Cuba's largest suppliers of agricultural products. Authorization for purposeful travel to Cuba and cash remittances to Cuba have constituted important means to support the Cuban people, although there has been significant congressional debate over these issues for many years. Despite the poor state of U.S.-Cuban relations, there have been several examples of bilateral cooperation over the years in areas of shared national interest. Three areas that stand out are alien migrant interdiction (with migration accords negotiated in 1994 and 1995), counternarcotics cooperation (with increased cooperation dating back to 1999), and cooperation on oil spill preparedness and prevention (since 2011). During its first six years, the Obama Administration continued the dual-track policy approach toward Cuba that has been in place for many years. It maintained U.S. economic sanctions and continued measures to support the Cuban people, such as U.S. government-sponsored radio and television broadcasting and funding for democracy and human rights projects. At the same time, however, the Obama Administration initiated a significant shift in policy toward Cuba beginning in 2009. As part of the policy of reaching out to the Cuban people, President Obama fulfilled a campaign pledge by lifting all restrictions on family travel and remittances. At the April 2009 Summit of the Americas, President Obama announced that "the United States seeks a new beginning with Cuba." While recognizing that it would take time to "overcome decades of mistrust," the President said "there are critical steps we can take toward a new day." He stated that he was prepared to have his Administration "engage with the Cuban government on a wide range of issues—from drugs, migration, and economic issues, to human rights, free speech, and democratic reform." In the aftermath of the Summit in 2009, there was some momentum toward improved relations: in July, the two countries restarted semi-annual migration talks that had been suspended by the United States five years earlier; in September, the two countries held talks on resuming direct mail service. The Obama Administration introduced new measures in 2011 to further reach out to the Cuban people through increased purposeful travel (including people-to-people educational travel) and an easing of restrictions on non-family remittances. Beginning in mid-2013, there was also renewed engagement with Cuba on several fronts, including direct mail service talks, resumed migration talks (that had not taken place for 18 months), and air and maritime search and rescue. In remarks made in November 2013 on policy toward Cuba, President Obama maintained that "we have to be creative ... we have to be thoughtful ... and we have to continue to update our policies." He contended that "the notion that the same policies that we put in place in 1961 would somehow still be as effective as they are today in the age of the Internet and Google and world travel doesn't make sense." Throughout the Obama Administration's first six years, human rights violations in Cuba remained a fundamental concern. President Obama and the State Department continued to issue statements expressing concern about violations as they occurred, including the death of hunger strikers in 2010 and 2012 and targeted repression against dissidents and human rights activists. As noted above, securing the release of Alan Gross from prison in Cuba also remained a top U.S. priority. The State Department maintained that it was using every appropriate channel to press for his release, including the Vatican. On December 17, 2014, just after the adjournment of the 113 th Congress, President Obama announced major developments in U.S.-Cuban relations and unveiled a new policy approach toward Cuba. First, he announced that the Cuban government had released Alan Gross on humanitarian grounds after five years of imprisonment. The President also announced that, in a separate action, the Cuban government released "one of the most important intelligence assets that the United States has ever had in Cuba" in exchange for three Cuban intelligence agents who had been imprisoned in the United States since 1998. Media reports identified the U.S. intelligence asset as Rolando Sarraff Trujillo, a cryptographer in Cuba's Directorate of Intelligence, who reportedly provided information that helped the FBI dismantle three Cuban spy networks in the United States. Most significantly, in the aftermath of having secured the release of Gross and the U.S. intelligence asset, President Obama announced a major shift in U.S. policy toward Cuba, moving away from a sanctions-based policy aimed at isolating Cuba to a policy of engagement. The President said that his Administration will end an outdated approach that, for decades, has failed to advance our interests, and instead we will begin to normalize relations between our two countries. Through these changes, we intend to create more opportunities for the American and Cuban people, and begin a new chapter among the nations of the Americas. The President maintained that the United States would continue to raise concerns about democracy and human rights in Cuba but stated that "we can do more to support the Cuban people and promote our values through engagement." According to the President, "After all, these 50 years have shown that isolation has not worked. It's time for a new approach." The President outlined three major steps to move toward normalization: (1) the reestablishment of diplomatic relations with Cuba; (2) a review of Cuba's designation by the Department of State as a state sponsor of international terrorism; and (3) an increase in travel, commerce, and the flow of information to and from Cuba. When President Obama announced his Cuba policy change, he also indicated that his Administration was prepared to have Cuba participate in the Summit of the Americas to be held April 10-11, 2015, in Panama. The White House emphasized that human rights and democracy would be key themes of the summit and asserted that Cuban civil society must be allowed to participate with civil society from other countries. Cuba's potential participation in the summit had been a policy challenge for the Administration since it had opposed Cuba's participation in the 2012 Summit of the Americas in Colombia. Cuba ultimately participated in the summit in Panama, with President Obama and Cuban President Raúl Castro holding a historic bilateral meeting in Panama on April 11. President Obama stated that "there are still going to be deep and significant differences between our two governments," with the United States continuing to raise concerns around democracy and human rights and Cuba raising concerns about U.S. policy. He maintained, however, that "what we have both concluded is that we can disagree with the spirit of respect and civility, and that over time it is possible for us to turn the page and develop a new relationship in our two countries." Several Cuban dissidents attended and participated in the Civil Society and Social Actors Forum, although there were problems with a reported attack on anti-Castro protestors by Cuban government supporters just ahead of the summit and efforts by Cuban government supporters to disrupt an event in which Cuban dissidents were scheduled to speak. As U.S.-Cuban relations deteriorated in the early 1960s, relations were severed by the Eisenhower Administration in January 1961 in response to the Cuban government's demand to decrease the number of U.S. Embassy staff within 48 hours. In 1977, under the Carter Administration, both countries established Interests Sections in each other's capitals. In 2015, four rounds of talks were held on reestablishing relations, with the U.S. delegation headed by Assistant Secretary of State for Western Hemisphere Affairs Roberta Jacobson and the Cuban delegation led by Josefina Vidal, director of the North American division of Cuba's Ministry of Foreign Relations. The first round took place on January 22, 2015, in Havana, a day after previously scheduled semi-annual migration talks, and focused on the required steps for the reestablishment of relations, the opening of embassies, and expectations on how the U.S. Embassy in Havana would operate. Subsequent rounds took place on February 27 in Washington, DC; March 16 in Havana; and May 21-22, 2015, in Washington, DC. Issues discussed included staffing numbers, lifting in-country travel restrictions on diplomats, unimpeded shipments for the diplomatic post, and access to the post by Cubans. In other developments, a U.S. government delegation visited Havana March 24-26, 2015, focusing on the development of telecommunications and Internet connections between the United States and Cuba. On March 31, U.S. and Cuban delegations met in Washington, DC, to discuss how they would proceed on a future human rights dialogue. Ultimately, on July 1, 2015, President Obama announced that the United States and Cuba agreed to reestablish diplomatic relations, effective July 20, and to reopen embassies in their respective capitals on the same day. The President maintained that "this is a historic step forward in our efforts to normalize relations with the Cuban government and people." On the same day, Secretary of State Kerry notified Congress, pursuant to Section 7015(a) of the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2015 (Division J, P.L. 113-235 ), of the plan to redesignate the U.S. Interests Section in Havana as an embassy. That provision of law required congressional notification 15 days in advance before closing or opening a mission or post. On July 20, the U.S. and Cuban Interests Sections in Washington, DC, and Havana, respectively, were converted to embassies. Cuba held a flag-raising ceremony on that day at its embassy attended by Cuban Foreign Minister Bruno Rodriguez. Secretary of State John Kerry visited Havana on August 14, 2015, for a flag-raising ceremony at the U.S. Embassy. This marked the first visit of a U.S. Secretary of State to Cuba since 1945. Cuba had been on the list since 1982 pursuant to Section 6(j) of the Export Administration Act (EAA) of 1979 ( P.L. 96-72 ; 50 U.S.C. Appendix 2405(j) ) and other laws because of its alleged ties to international terrorism and support for terrorist groups in Latin America. On December 17, 2014, President Obama directed Secretary of State Kerry to review Cuba's designation "guided by the facts and the law." The President stated that "at a time when we are focused on threats from al Qaeda to ISIL, a nation that meets our conditions and renounces the use of terrorism should not face this sanction." On April 9, 2015, during a trip to Jamaica ahead of the Summit of the Americas in Panama, President Obama said that the State Department had completed its review and he would soon be making his decision. That occurred on April 14, when the President transmitted to Congress a report justifying the rescission of Cuba's designation as a state sponsor of terrorism. No resolutions of disapproval were introduced in Congress to block the rescission, which took place on May 29, 2015, 45 days after the submission of the report to Congress. Subsequently, to reflect the rescission of Cuba's designation as a state sponsor of terrorism in U.S. regulations, the Treasury Department's Office of Foreign Assets Control (OFAC) amended the Cuban Assets Control Regulations (CACR) in June 2015 and the Commerce Department's Bureau of Industry and Security (BIS) amended the Export Administration Regulations in July 2015. (For additional information, see " State Sponsor of Terrorism Designation ," below.) The White House announced a number of policy changes to implement this third step. The changes build upon previous steps that President Obama took in 2009, when he lifted all restrictions on family travel and remittances to family members in Cuba, and in 2011, when he took action to increase purposeful travel to Cuba, such as people-to-people educational trips. Just as in 2009 and 2011, the President's new initiative required changes to U.S. embargo regulations administered by the Treasury Department's OFAC (CACR; 31 C.F.R. Part 515 ) and the Department of Commerce's BIS (EAR; 15 C.F.R. Parts 730-774 ). Such changes fall within the scope of the President's discretionary licensing authority to make changes to the embargo regulations. To implement the policy changes to increase travel and commerce, the two agencies issued five rounds of amendments to the CACR and the EAR in January 2015, September 2015, January 2016, March 2016, and October 2016; this was in addition to the regulatory changes noted above related to the rescission of Cuba's designation as a state sponsor of terrorism. The regulations included changes in the following areas: Travel and Remittances. The amended Treasury regulations authorize a general license for the existing 12 categories of authorized travel in the CACR, meaning that travelers who fall under these categories do not have to apply to the Department of the Treasury for permission. Travel agents and air and vessel carriers are also able to provide services for travel to Cuba under a general license. Authorized travelers will also be permitted to use U.S. credit and debit cards as U.S. financial institutions offer these services. Donative remittances to Cuban nationals are authorized without limit; initially the cap was increased from $500 to $2,000 per quarter in January 2015, and then it was removed altogether in September 2015. The regulations also authorize without limit remittances for certain activities related to humanitarian projects, the promotion of civil society, and the development of private businesses. In March 2016, the CACR were amended to permit individuals to travel to Cuba for individual, people-to-people education travel (previously, such trips had to take place under the auspices of an organization). Authorized travelers to Cuba, as well as U.S. travelers to third countries, can bring back Cuban products to the United States for personal use, including alcohol and tobacco products. (Also see " Restrictions on Travel and Remittances ," below.) Trade and Telecommunications. The Commerce regulations expand commercial exports to Cuba of certain goods and services to empower Cuba's nascent private sector, including authorization for certain building materials for private residential construction, goods for use by private-sector Cuban entrepreneurs, and agricultural equipment for small farmers. To implement this change, Commerce's Bureau of Industry and Security (BIS) created a license exception in the Export Administration Regulations (EAR) for "support to the Cuban people," authorizing the export without license of such items described above. This license exception also included the export to Cuba of items for telecommunications, including access to the Internet, use of Internet services, infrastructure creation, and upgrades. The Treasury regulations also revise the definition of "payment of cash in advance" required by TSRA for authorized trade with Cuba to specify that it means "cash before transfer of title" for payment. Certain goods and services produced by independent Cuban entrepreneurs (as determined by the State Department) are eligible to be imported into the United States. In October 2016, OFAC amended the regulations to allow for transactions to obtain U.S. Food and Drug Administration approval of Cuban-origin pharmaceuticals. OFAC also authorized transactions for importation into the United States of FDA-approved Cuban-origin drugs, including marketing, sales, or other distribution. The Commerce regulations permit the commercial export of certain consumer communication devices, related software, applications, hardware, and services, and items for the establishment and update of communications-related systems; previously such exports were limited to donations. They also permit the export of items for telecommunications, including access to the Internet, use of Internet services, infrastructure creation, and upgrades. An expanded Treasury Department general license authorizes transactions to provide commercial telecommunications services in Cuba or link third countries and Cuba. U.S. companies may establish joint ventures with entities in Cuba to provide telecommunication and Internet-based services and to enter into licensing agreements related to, and to market, such services. An updated general license allows for U.S. persons to make payments to a telecommunications operator located in Cuba for services provided to Cuban individuals. In January 2015, BIS revised the EAR to state a general policy of approval for license applications to export items to Cuba necessary for the environmental protection of U.S. and international air quality, waters, and coastlines, including items related to renewable energy or energy efficiency. In January 2016, BIS expanded the categories of exports that fall under a "general policy of approval" license policy to include certain items for civil aviation and commercial aircraft safety; telecommunications; U.S. news bureaus; human rights organizations and nongovernmental organizations; and agricultural commodities (such as insecticides, pesticides, and herbicides) that fall outside the scope of those allowed under the existing BIS license exception for agricultural commodities covered by TSRA. In January 2016, BIS amended the EAR to include a new category of exports for which licenses will be considered on a case-by-case basis. The new category includes items exported to state-owned enterprises, agencies, and other organizations of the Cuban government that provide goods and services for the use and benefit of the Cuban people. (For more details, see " U.S. Exports and Sanctions ," below.) In October 2016, OFAC added a general license for authorization to enter into contingent contracts for transactions currently prohibited by the embargo. It also added a general license waiving the restriction in the Cuban Democracy Act of 1992 prohibiting foreign vessels from entering U.S. ports for purposes of loading or unloading freight for 180 days after calling on a Cuban port for trade purposes. BIS also generally authorized by license exception the export of certain consumer goods sold directly to eligible individuals in Cuba for their personal use. Banking and Financial Services. The Treasury regulations permit U.S. financial institutions to open correspondent accounts at Cuban financial institutions to facilitate the processing of authorized transactions, including payment for U.S. exports and for travel services. In January 2016, U.S. private export financing was authorized for all authorized nonagricultural export trade to Cuba. In March 2016, Treasury permitted U.S. banking institutions to authorize U-turn payments through the U.S. financial system for transactions in which Cuba or a Cuban national has an interest (whereby funds from a bank outside of the United States may pass through one or more U.S. financial institutions before being transferred to a bank outside the United States). Physical Presence. Companies or entities in the following categories are authorized to have a physical presence in Cuba, such as an office, retail outlet, or warehouse: news bureaus; exporters of authorized goods to Cuba; entities providing mail or parcel transmission services; telecommunication or Internet-based service providers; entities organizing or conducting certain educational activities; religious organizations; and carrier and travel service providers. U.S. exports to establish, operate, or support such a physical presence are authorized under a license exception. When the President unveiled his policy changes, he acknowledged that he does not have the authority to lift the embargo because it was codified into law (Section 102(h) of the LIBERTAD Act). However, the President maintained that he looks forward to engaging Congress in a debate about lifting the embargo. As noted above, the LIBERTAD Act ties the lifting of the embargo to conditions in Cuba (including that a democratically elected government is in place). Lifting the overall economic embargo at this time would require amending or repealing the LIBERTAD Act as well as other statutes that have provisions impeding normal economic relations with Cuba, such as the Foreign Assistance Act of 1961, the Cuban Democracy Act of 1992, and the Trade Sanctions Reform and Export Enhancement Act of 2000. For example, as noted above, TSRA denies U.S. exporters access to U.S. government support, prohibits U.S. private commercial financing or credit for agricultural exports, and prohibits tourist travel to Cuba. President Obama traveled to Cuba from March 20 to 22, 2016—the first visit of a U.S. President since Calvin Coolidge visited in 1928. Before the trip, the White House set forth the goals of the visit, stating that the President would build on progress toward normalizing relations, including advancing commercial and people-to-people ties and expressing support for human rights. During his visit (which included Secretary of State Kerry, Agriculture Secretary Vilsack, and Commerce Secretary Pritzker), President Obama announced additional initiatives, including support for collaboration between the U.S. and Cuban agricultural sectors; Cuban participation in the Administration's 100,000 Strong in the Americas Initiative to increase student exchanges; and new partnerships in health, science, and the environment. The President attended an event with Cuban entrepreneurs to demonstrate support for the country's nascent private sector. At the event, he noted such commercial plans as General Electric selling aviation and energy equipment, the Alabama-based Cleber company building tractors in Cuba (this project ultimately was rejected by the Cuban government), Starwood and Marriott planning to operate hotels in joint ventures with Cuba, and Carnival beginning cruise service in May. The President also attended a baseball game between the Tampa Bay Rays and the Cuban national team in a significant demonstration of sports diplomacy. As a reflection of the momentous shift in his Administration's policy toward Cuba, President Obama said during the trip that he had "come here to bury the last remnant of the Cold War in the Americas." The policy shift on Cuba, which has been lauded throughout Latin America, has helped to bolster the image of the United States in the region and solidify the Administration's message that it is committed to sustained engagement and partnership in the Americas. Respect for human rights was a major focus of the visit, and President Obama spoke out strongly on the issue. Just a day before the President's arrival, the Cuban government disrupted the weekly peaceful protest march of the Ladies in White human rights group, again demonstrating the government's severe repression of political dissent. In a joint press conference with President Raúl Castro, President Obama said that the United States would "continue to speak up on behalf of democracy, including the right of the Cuban people to decide their own future" and to "speak out on behalf of universal human rights, including freedom of speech, and assembly, and religion." In contrast, President Castro became defensive when asked about political prisoners in Cuba. President Obama spoke out most forcefully for advancing human rights during his televised speech to the Cuban nation. While maintaining that the United States "will not impose our political or economic system on you," the President said: I believe citizens should be free to speak their mind without fear—to organize, and to criticize their government, and to protest peacefully, and that the rule of law should not include arbitrary detentions of people who exercise those rights. I believe that every person should have the freedom to practice their faith peacefully and publicly. And, yes, I believe voters should be able to choose their governments in free and democratic elections. Speaking directly to President Castro, President Obama said: I am also confident that you need not fear the different voices of the Cuban people—and their capacity to speak, and assemble, and vote for their leaders. In fact, I'm hopeful for the future because I trust that the Cuban people will make the right decisions. President Obama met for almost two hours with 13 prominent human rights and political activists, including Berta Soler, leader of the Ladies in White; José Daniel Ferrer, leader of the Patriotic Union of Cuba; Elizardo Sánchez, president of the Cuban Commission for Human Rights and National Reconciliation (CCDHRN); and Antonio Rodiles, coordinator of Estado de Sats, a forum to promote cultural, social, and political debate. The meeting itself signaled recognition of the activists. Another participant, human rights activist and independent journalist Miriam Leiva, commented that no head of state visiting Cuba had met with prominent dissidents, "not even the popes." Looking ahead, the extent to which President Obama's trip will spur the pace of the normalization process will depend on several factors. These include, as the President acknowledged during the trip, the extent to which the Cuban government makes progress on human rights issues and the extent to which Cuba takes advantage of the recent regulatory changes to the U.S. embargo. Moreover, as President Obama noted, even if the United States lifted the embargo tomorrow, "Cubans would not realize their potential without change in Cuba." He pointed to such needed changes as making it easier to open a business, allowing workers to get jobs directly with companies that invest in Cuba, eliminating the use of two currencies that separate the types of salaries that Cubans can earn, and expanding Internet access so that Cubans can connect to the wider world. U.S. and Cuban officials have held five Bilateral Commission meetings, the most recent in December 2016, to coordinate efforts to advance the normalization process. These meetings have included a review of progress on shared priorities, such as regulatory issues, telecommunications, science and technology, U.S. property claims, environmental protection and cooperation, human trafficking, human rights, migration, law enforcement, civil aviation, agriculture, culture and education, nonproliferation, and maritime borders. The next Bilateral Commission meeting is scheduled to take place in Havana in December 2016. Among the numerous meetings and agreements that have occurred are the following: U.S. and Cuban officials have held three regulatory dialogues —in October 2015, February 2016, and July 2016—with the U.S. delegations consisting of officials from Commerce, Treasury, and State. According to the State Department, the delegations presented information on the U.S. regulatory changes and addressed ways the two countries can work together within the existing framework of U.S. laws and regulations. With regard to law enforcement cooperation , an inaugural Law Enforcement Dialogue took place in November 2015 in Washington, DC, focusing on such areas of cooperation as counterterrorism, counternarcotics, transnational crime, cybercrime, secure travel and trade, and fugitives. Bilateral technical talks on cybercrime and online fraud took place in February 2016, in Havana. A second Law Enforcement Dialogue took place in Havana in May 2016. Also under the rubric of the Law Enforcement Dialogue, U.S. and Cuban officials held technical exchanges on human smuggling and fraud prevention in February and September 2016, as well as a technical exchange on legal cooperation in September 2016. On January 16, 2017, U.S. and Cuban officials signed a memorandum of understanding to deepen bilateral law enforcement cooperation and information sharing. In June 2016, the United States and Cuba held the first counterterrorism technical exchange in Cuba, which included U.S. officials from several agencies: the State Department, FBI, and Homeland Security (U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement's Homeland Security Investigations). In the environmental arena , the United States and Cuba signed an environmental memorandum on November 18, 2015, for the protection of fish and coral resources. On November 24, 2015, both countries signed a joint statement on environmental cooperation designed to facilitate and guide cooperation on a range of issues, including coastal and marine protection, the protection of biodiversity, climate change, disaster risk reduction, and marine pollution. U.S. and Cuban delegations met June 28-July 1, 2016, in Cuba to advance cooperation on issues affecting the marine environment. With regard to maritime issues , the United States and Cuba signed a memorandum of understanding on hydrography and nautical charting in March 2016 to improve maritime navigation safety. In July 2016, U.S., Cuban, and Mexican delegations met in Mexico to discuss delimiting maritime boundaries of the continental shelf that are more than 200 nautical miles from each country's shore in the eastern Gulf of Mexico, often referred to as the Eastern Gap. On counternarcotics issues , U.S. and Cuban officials held a second dialogue in Washington, DC, in December 2015 (the first occurred in April 2014). At a third counternarcotics meeting held in Havana in July 2016, Cuba and the United States singed a Counternarcotics Arrangement to facilitate additional cooperation and information sharing in efforts against illicit narcotics trafficking. (See " Antidrug Cooperation ," below.) U.S. and Cuban officials have held three discussions on claims , in December 2015, July 2016, and most recently on January 12, 2017. Outstanding U.S. claims include those of U.S. nationals certified by the Foreign Claims Settlement Commission, claims related to unsatisfied U.S. court judgments against Cuba, and claims held by the U.S. government. (See " U.S. Property Claims ," below.) On December 11, 2005, Cuban and U.S. officials announced that they had finalized plans for direct mail service . The service began on March 16, 2016, for the first time in more than 50 years. U.S. and Cuban officials reached a bilateral civil aviation arrangement on December 16, 2015 (signed in February 2016), which will allow U.S. commercial airlines to operate regular flights to Cuba. (See " Restrictions on Travel and Remittances ," below.) With regard to health cooperation , the U.S. Department of Health and Human Services and the Cuban government signed a memorandum of understanding on June 13, 2016, to facilitate cooperation on such diseases as cancer and the Zika virus. On human rights , U.S. and Cuban officials traveled to Havana for the first U.S.-Cuban human rights dialogue in October 2016. U.S. and Cuban officials held an inaugural economic dialogue in Washington, DC, in September 2016, and discussed trade and investment, labor and employment, renewable energy and energy efficiency, small business, intellectual property rights, economic policy, regulatory and banking matters, and telecommunications and Internet access. U.S. and Cuban officials signed an oil spill preparedness and response agreement on January 9, 2017, for cooperation and coordination in an effort to prevent, contain, and clean up marine oil and other hazardous pollution. President Obama issued a presidential policy directive on the normalization of relations with Cuba on October 14, 2016. The directive set forth the Administration's vision for normalization of relations and laid out six medium-term objectives: (1) government-to-government interaction; (2) engagement and connectivity; (3) expanded commerce; (4) economic reform; (5) respect for universal human rights, fundamental freedoms, and democratic values; and (6) Cuba's integration into international and regional systems. The directive also outlined the roles and responsibilities for various U.S. departments and agencies to move the normalization process forward. It noted that the Administration will seek to build support in Congress to lift the embargo and other statutory provisions constraining efforts to normalize economic relations with Cuba. The directive can be viewed as an attempt to keep up the momentum toward normalizing relations in the next Administration and to protect the changes that have been made to date in policy toward Cuba. Over the years, although U.S. policymakers have agreed on the overall objectives of U.S. policy toward Cuba—to help bring democracy and respect for human rights to the island—there have been several schools of thought about how to achieve those objectives. Some have advocated a policy of keeping maximum pressure on the Cuban government until reforms are enacted, while continuing efforts to support the Cuban people. Others argue for an approach, sometimes referred to as constructive engagement, that would lift some U.S. sanctions that they believe are hurting the Cuban people and move toward engaging Cuba in dialogue. Still others call for a swift normalization of U.S.-Cuban relations by lifting the U.S. embargo. Legislative initiatives introduced over the past decade have reflected these three policy approaches. Dating back to 2000, there have been efforts in Congress to ease U.S. sanctions, with one or both houses at times approving amendments to appropriations measures that would have eased U.S. sanctions on Cuba. Until 2009, these provisions were stripped out of final enacted measures, in part because of presidential veto threats. In 2009, Congress took action to ease some restrictions on travel to Cuba, marking the first time that Congress has eased Cuba sanctions since the approval of the Trade Sanctions Reform and Export Enhancement Act of 2000. In light of Fidel Castro's departure as head of government and the gradual economic changes being made by Raúl Castro, some observers had called for a reexamination of U.S. policy toward Cuba. In this new context, two broad policy approaches were advanced to contend with change in Cuba: an approach that called for maintaining the U.S. dual-track policy of isolating the Cuban government while providing support to the Cuban people and an approach aimed at influencing the attitudes of the Cuban government and Cuban society through increased contact and engagement. The Obama Administration's December 2014 change of U.S. policy from one of isolation to one of engagement and moving toward the normalization of relations has highlighted divisions in Congress over Cuba policy. Some Members of Congress lauded the Administration's actions as in the best interests of the United States and a better way to support change in Cuba, while other Members strongly criticized the President for not obtaining concessions from Cuba to advance human rights. Some Members vowed to oppose the Administration's efforts toward normalization, while others have, as in the past, introduced legislation to normalize relations with Cuba by lifting the embargo in its entirety or in part easing some aspects of it. In general, those who advocate easing U.S. sanctions on Cuba make several policy arguments. They assert that if the United States moderated its policy toward Cuba—through increased travel, trade, and dialogue—then the seeds of reform would be planted, which would stimulate forces for peaceful change on the island. They stress the importance to the United States of avoiding violent change in Cuba, with the prospect of a mass exodus to the United States. They argue that since the demise of Cuba's communist government does not appear imminent, even without Fidel Castro at the helm, the United States should espouse a more pragmatic approach in trying to bring about change in Cuba. Supporters of changing policy also point to broad international support for lifting the U.S. embargo, to the missed opportunities for U.S. businesses because of the unilateral nature of the embargo, and to the increased suffering of the Cuban people because of the embargo. Proponents of change also argue that the United States should be consistent in its policies with the world's few remaining communist governments, including China and Vietnam. On the other side, opponents of lifting U.S. sanctions maintain that the two-track policy of isolating Cuba, but reaching out to the Cuban people through measures of support, is the best means for realizing political change in Cuba. They point out that the Cuban Liberty and Democratic Solidarity Act of 1996 sets forth the steps that Cuba needs to take in order for the United States to normalize relations. They argue that softening U.S. policy without concrete Cuban reforms would boost the Castro government, politically and economically, and facilitate the survival of the communist regime. Opponents of softening U.S. policy argue that the United States should stay the course in its commitment to democracy and human rights in Cuba and that sustained sanctions can work. Opponents of loosening U.S. sanctions further argue that Cuba's failed economic policies, not the U.S. embargo, are the causes of Cuba's difficult living conditions. Public opinion polls show a majority of Americans support normalizing relations with Cuba, including a majority of the Cuban American community in South Florida. Statements from President-elect Trump suggest that he might reverse some of the Obama Administration's Cuba policy changes. After Fidel Castro's death in November 2016, the President-elect issued a statement referring to Castro as a "brutal dictator who oppressed his own people for nearly six decades." This statement was followed by a longer message maintaining that "If Cuba is unwilling to make a better deal for the Cuban people, the Cuban/American people and the U.S. as a whole, I will terminate [the] deal." At this juncture, it remains unclear what actions might be taken by the incoming Administration. During the electoral campaign, candidate Trump said he would cancel or reverse President Obama's policy on Cuba unless Cuba took action to improve political and religious freedom and free political prisoners. Since President Obama's policy shift on Cuba was done largely by executive action, President-elect Trump could reverse many of those policies, including the reestablishment of diplomatic relations, the rescission of Cuba's designation as a state sponsor of terrorism, and actions taken to ease restrictions on travel and commerce. As described above, this third step involved regulatory changes to the economic embargo taken by the Treasury and Commerce Departments. The Administration could decide to reverse some or all these changes or to ease or tighten other aspects of the embargo regulations. The Administration also could make changes to other aspects of bilateral government-to-government cooperation and dialogues that have occurred under the Obama Administration. These include a variety of agreements and dialogues on such issues as telecommunications, science and technology, U.S. property claims, environmental protection, human rights, migration, law enforcement, civil aviation, and maritime borders. As noted above, opinion polls have shown that the policy of engagement has largely been popular, which could make it difficult for the incoming Administration to reverse the U.S. policy completely. Burgeoning U.S. business linkages also could make it difficult to reverse current policy. Given that much of the economic embargo on Cuba remains in place (and can be lifted only by Congress), the incoming Administration could choose to let the changes that have already been made remain but refrain from approving any additional easing of restrictions pending economic or political changes in Cuba. For many years, Congress has played an active role in U.S. policy toward Cuba through the enactment of legislative initiatives and oversight on the numerous issues that comprise policy toward Cuba. These include U.S. economic sanctions on Cuba, such as restrictions on travel, remittances, and agricultural and medical exports; terrorism issues, including Cuba's designation as a state sponsor of international terrorism; human rights issues, including funding and oversight of U.S.-government sponsored democracy and human rights projects; funding and oversight for U.S.-government sponsored broadcasting to Cuba (Radio and TV Martí); migration issues; bilateral antidrug cooperation; and U.S. claims for property confiscated by the Cuban government. In reaction to the Administration's Cuba policy changes, some Members attempted to restrict operations of the U.S. Embassy in Havana and U.S. military engagement with the Cuban military through appropriations and defense authorization legislation. U.S. Embassy Operations. At least two U.S. Senators said they would put a hold on any nominee for U.S. ambassador to Cuba, effectively blocking the Senate from voting on a nominee. The absence of a U.S. ambassador at a U.S. Embassy, however, is not an unusual occurrence, with the senior ranking State Department official assuming the title of chargé d'affaires ad interim and responsibility for the day-to-day functioning of the diplomatic post. With the reestablishment of relations, the chief of the U.S. Interests Section in Havana, Jeffrey DeLaurentis, became chargé d'affaires of the U.S. Embassy in Havana. On September 27, 2016, President Obama officially nominated DeLaurentis to become U.S. ambassador to Cuba, although the Senate Foreign Relations Committee did not take up nomination by the end of the 114 th Congress. In its FY2016 budget request, the State Department asked for just over $6 million for the Western Hemisphere Affairs Bureau (WHA) to support expanded operations in Havana, including increased engagement with Cuban civil society and new demands on staff likely to result from an increase in visitors to Cuba. The House Appropriations Committee's FY2016 State Department and Foreign Operations appropriations bill, H.R. 2772 , had a provision in Section 7045(c)(3) that would have prohibited funds for the establishment or operation of a U.S. diplomatic presence in Cuba beyond that which was in existence prior to December 17, 2014, until the President determined and reported to Congress that the requirements and factors specified in the LIBERTAD Act (related to democratic conditions in Cuba) had been met. The Senate Appropriations Committee-approved version of the bill did not include such a provision, and ultimately the FY2016 omnibus appropriations bill, H.R. 2029 , did not include such a provision. The Administration opposed the provision as interfering with its ability to make the best decisions consistent with U.S. national security. In its FY2017 budget request, the State Department requested $3.8 million for WHA to fill nine additional positions and update aging infrastructure at the U.S. Embassy in Havana. According to the request, the positions would include a mix of reporting and support positions to deepen understanding of Cuba's political, social, and economic environment; oversee maintenance upgrades; conduct human rights monitoring and advocacy; and strengthen law enforcement cooperation. The House Appropriations Committee version of the FY2017 State Department and Foreign Operations appropriations measure, H.R. 5912 ( H.Rept. 114-693 ) reported on July 15, 2016, had a provision in Section 7045(c)(1) that would have prohibited funding for the establishment or operation of a U.S. diplomatic presence in Cuba beyond what was in place prior to December 17, 2014. In contrast, the Senate Appropriations Committee-reported version of the measure— S. 3117 ( S.Rept. 114-290 ), reported on June 29, 2016—would, in Section 7045(c)(4), have funded the operation of and infrastructure and security improvements to U.S. diplomatic facilities in Cuba. It also would have funded costs associated with additional diplomatic personnel in Cuba. For FY2017, the U.S. Department of Agriculture also requested $1.5 million for the Foreign Agricultural Service to establish an overseas post in Cuba. The report to the Senate version of the FY2017 agriculture appropriations measure ( S.Rept. 114-259 to S. 2956 ) recommended full funding for the Administration's request. As previously noted, the 114 th Congress did not complete action on FY2017 foreign operations appropriations, but in December 2016 approved a continuing resolution ( P.L. 114-254 ) funding most programs at the FY2016 level, minus an across-the-board reduction of almost 0.2%, through April 28, 2017. Bilateral Military Engagement. Both the House- and Senate-passed versions of the National Defense Authorization Act (NDAA) for FY2017 had different provisions restricting U.S. military interaction with the Cuban military, effectively curbing the Administration's changed policy toward Cuba. The House bill, H.R. 4909 , had a provision in Section 1259B that would have prohibited funds authorized in the act for FY2017 for any bilateral military-to-military contact or cooperation pending certification from the Secretaries of State and Defense, in consultation with the Director of National Intelligence (DNI), that Cuba has fulfilled numerous conditions regarding democracy and human rights, outstanding claims and judgements of U.S. nationals, support to the military and security forces of Venezuela, cessation of the demand for the return of the U.S. Naval Station at Guantanamo Bay, U.S. fugitives, and requirement that Cuban military officials indicted in the United States for the murder of U.S. citizens killed during the 1996 shoot down of two U.S. civilian planes be brought to justice. The Senate version of the NDAA, S. 2943 , had a provision in Section 1204 prohibiting the use of any funds by the Secretary of Defense to invite, assist, or otherwise assure the participation of Cuba in certain joint or multilateral exercises or related security conferences between the United States and Cuba until the Secretary of Defense, in coordination with the DNI, submits to Congress written assurances regarding some of the same conditions cited above in the House bill. These include the Cuban military and security forces' involvement in human rights abuses; Cuban military support to the Venezuelan military and security forces; Cuba's demand for the United States to relinquish control of Guantanamo; and that Cuban military officials indicted in the United States for the 1996 killing of U.S. citizens during the shoot down of two U.S. civilian planes are brought to justice. Both the White House's statement of policy on S. 2943 , issued June 7, 2016, and the Secretary of Defense's letter to Congress on the NDAA strongly objected to the restrictions on U.S.-Cuban military-to-military interactions in Section 1204. Both maintained that restrictions "would hamper pragmatic, expert-level coordination between the United States and Cuba on issues that benefit the United States." As noted, this coordination includes counternarcotics exercises and operations, participation of the Cuban government in security conferences, and monthly talks between the commanding officer of the U.S. Naval Station at Guantánamo Bay and his Cuban counterpart to share information about activities on both sides of the fence to reduce the risk of accidental escalation. According to both documents, "It is in the U.S. national security interest to maintain flexibility in U.S. military-to-military engagement with Cuba due to Cuba's proximity and the many shared challenges faced by the United States and Cuba." Ultimately, in the final version of the FY2017 NDAA ( P.L. 114-328 ) enacted in December 2016, Section 1286 prohibits the Secretary of Defense from authorizing FY2017 funds for the Department of Defense to invite, assist, or otherwise assure the participation of Cuba in certain joint or multilateral exercises or related security conference between the governments of the United States and Cuba until the Secretaries of Defense and State, in consultation with the Director of National Intelligence, submit to Congress written assurances regarding Cuba's fulfillment of conditions for Cuba related to human rights, support to the security forces of Venezuela, cessation of Cuba's demand that the United States relinquish control of the U.S. Naval Station at Guantánamo Bay, and requirement that Cuban military officials indicted in the United States for the murder of U.S. citizens killed during the 1996 shoot down of two U.S. civilian planes are brought to justice. The provision provides exceptions to the funding prohibition for any payments related to the lease agreement or other financial transactions for maintenance and improvements of the military base at Guantanamo Bay, Cuba; any assistance or support of democracy-building efforts; customary and routine financial transactions necessary for the maintenance, improvements, or regular duties of the U.S. mission in Havana; or any joint or multilateral exercise or operation related to humanitarian assistance or disaster response. The conference report to FY2017 NDAA ( H.Rept. 114-840 ) stated that it is the intent of the conferees that the exception related to the Guantanamo base includes periodic contact between appropriate U.S. and Cuban officials concerning the security and management of the naval station commonly referred to as "fence-line talks." Restrictions on travel to Cuba have been a key and often contentious component of U.S. efforts to isolate Cuba's communist government for much of the past 50+ years. Over time there have been numerous changes to the restrictions and for five years, from 1977 until 1982, there were no restrictions on travel. Restrictions on travel and remittances to Cuba are part of the Cuban Assets Control Regulations (CACR), the overall embargo regulations administered by the Department of the Treasury's Office of Foreign Assets Control. Under the George W. Bush Administration, enforcement of U.S. restrictions on Cuba travel increased, and restrictions on travel and on private remittances to Cuba were tightened. Under the Obama Administration, Congress took legislative action in March 2009 easing restrictions on family travel and on travel related to U.S. agricultural and medical sales to Cuba ( P.L. 111-8 , Sections 620 and 621 of Division D). In April 2009, the Obama Administration went further when the President announced that he was lifting all restrictions on family travel as well as restrictions on cash remittances to family members in Cuba. In January 2011, the Obama Administration made a series of changes further easing restrictions on travel and remittances to Cuba. The measures (1) increased purposeful travel to Cuba related to religious, educational, and journalistic activities, including people-to-people travel exchanges; (2) allowed any U.S. person to send remittances to non-family members in Cuba (up to $500 per quarter) and made it easier for religious institutions to send remittances for religious activities; and (3) allowed U.S. international airports to become eligible to provide services to licensed charter flights to and from Cuba. In most respects, these new measures were similar to policies that were undertaken by the Clinton Administration in 1999 but subsequently curtailed by the Bush Administration in 2003 and 2004. As noted above, just after the adjournment of the 113 th Congress, President Obama announced major changes in U.S. policy toward Cuba on December 17, 2014. These changes included the provision for general licenses for the 12 existing categories of travel to Cuba set forth in the CACR: (1) family visits; (2) official business of the U.S. government, foreign governments, and certain intergovernmental organizations; (3) journalistic activity; (4) professional research and professional meetings; (5) educational activities; (6) religious activities; (7) public performances, clinics, workshops, athletic and other competitions, and exhibitions; (8) support for the Cuban people; (9) humanitarian projects (now including microfinancing projects); (10) activities of private foundations or research or educational institutes; (11) exportation, importation, or transmission of information or information materials; and (12) certain export transactions that may be considered for authorization under existing regulations and guidelines. Despite the easing of travel restrictions, travel to Cuba solely for tourist activities remains prohibited. Section 910(b) of TSRA prohibits travel-related transaction for tourist activities, which are defined as any activity not expressly authorized in the 12 categories of travel in the CACR ( 31 C.F.R. 515.560 ). Before the policy change, travelers under several of these categories had to apply for a specific license from the Department of the Treasury before traveling. Under the new regulations, both travel agents and airlines are able to provide services for travel to Cuba without the need to obtain a specific license. U.S. credit and debit cards are permitted for use by authorized travelers to Cuba, but the State Department advises U.S. travelers to check with their financial institution to determine whether the institution has established the necessary mechanisms for its issued credit and debit cards to be used in Cuba. Authorized travelers no longer have a per diem limit for expenditures, as in the past, and can bring back goods from Cuba as accompanied baggage for personal use, including alcohol and tobacco. In January 2016, the Treasury Department made additional changes to the travel regulations. Among the changes, authorization for travel and other transactions for transmission of informational materials now includes professional media or artistic productions in Cuba (movies, television, music recordings, and creation of artworks). Authorization for travel and other transactions for professional meetings, public performances, clinics, workshops, athletic and nonathletic competitions, and exhibitions now includes permission to organize these events, not just participation. In March 2016, the Treasury Department again amended the travel regulations to permit travel to Cuba for individual, people-to-people education provided the traveler engages in a full-time schedule of educational exchange activities intended to enhance contact with the Cuban people, support civil society in Cuba, or promote the Cuban people's independence from Cuban authorities. Previously, such trips had to take place under the auspices of an organization that sponsors such travel. According to the Treasury Department, the change was intended to make authorized educational travel to Cuba more accessible and less expensive for U.S. citizens and will increase opportunities for direct engagement between Cubans and Americans. Regular Air Service. After several rounds of talks in 2015, U.S. and Cuban officials reached a bilateral arrangement (in a memorandum of understanding, or MOU) on December 16, 2015, permitting regularly scheduled air flights as opposed to charter flights that have operated between the two countries for many years. Transportation Secretary Anthony Foxx traveled to Cuba on February 16, 2016, to sign the arrangement, providing an opportunity for U.S. carriers to operate up to a total of 110 daily roundtrip flights between the United States and Cuba, including up to 20 daily roundtrip flights to and from Havana. On June 10, 2016, the Department of Transportation announced that six U.S. airlines were authorized to provide air service for up to 90 daily flights between five U.S. cities (Miami, Fort Lauderdale, Chicago, Philadelphia, and Minneapolis-St. Paul) and nine Cuban cites other than Havana. JetBlue became the first U.S. airline to begin regularly scheduled flights on August 31, 2016. On July 7, 2016, the department announced a tentative decision for eight U.S. airlines to provide up to 20 regularly scheduled roundtrip flights between Havana and 10 U.S. cities (Atlanta, Charlotte, Fort Lauderdale, Houston, Los Angeles, Miami, Newark, New York [JFK], Orlando, and Tampa); a final decision was made on August 31, 2016. American Airlines became the first to begin direct flights to Havana from Miami in late November 2016. In May 2016, the House Committee on Homeland Security, Subcommittee on Transportation Security, held a hearing on potential security risks from the resumption of regularly scheduled flights from Cuba. Some Members of Congress have expressed concerns that Cuba's airport security equipment and practices are insufficient and that the Administration is rushing plans to establish regular air service to Cuba; other Members views such concerns as a pretext to slow down or block the Administration's efforts to normalize relations with Cuba. Officials from the Department of Homeland Security (including Customs and Border Protection and the Transportation Security Administration) testified at the hearing regarding their work to facilitate and ensure security of the increased volume of commercial air travelers from Cuba. Initially, the Transportation Security Administration (TSA) announced on August 9, 2016, that the United States and Cuba had entered into an aviation security agreement setting forth the legal framework for the deployment of U.S. In-Flight Security Officers, more commonly known as Federal Air Marshals, on board certain flights to and from Cuba. However, during a House Homeland Security hearing on September 14, 2016, a TSA official maintained that the Cuban government had not yet signed the agreement for the regularly scheduled flights but rather only for the charter flights. Ultimately, on September 30, 2016, the initial agreement for the charter flights was amended to make it applicable to the regularly scheduled flights. In July 2016, OFAC granted a license to Bangor International Airport in Maine to provide refueling and services for foreign air carriers making flights to and from Cuba. (Legislation had been introduced in May that would have prohibited restrictions from providing such services [ S. 2990 ].) Ferry and Cruise Ship Service. In May 2015, the Department of the Treasury reportedly issued licenses to several companies to operate ferry services between the United States and Cuba; the services still required Cuban approval, and Cuban facilities need to be developed to handle the services. With regard to cruise ships, the Carnival cruise ship company began direct cruises to Cuba from the United States on May 1, 2016. Carnival had announced in March 2016, that it would offer cruises to Cuba beginning in May. The company had received a Treasury Department license in July 2015 to operate cruises to Cuba and was waiting for Cuban approval to begin such services. It uses smaller ship, accommodating about 700 passengers, under its cruise brand Fathom, which targets people-to-people educational travel. Under the embargo regulations, passengers on cruise ships to Cuba must fall under one of the permissible categories of travel, which does not include tourist travel. In April 2016, controversy ensued over the Carnival cruises when it became known that the Cuban government was not going to allow those born in Cuba to be passengers on cruise ships sailing to Cuba. (A Cuban government regulation dating back to the 1990s prohibited Cuban-born individuals from traveling to and from Cuba by ship.) Protests began against Carnival for agreeing to the terms of the cruises, and a class action lawsuit was filed in federal court in Miami. Secretary of State Kerry called on Cuba to change its "policy and to recognize that if they want a full relationship, a normal relationship, with the United States, they have to live by international law and not exclusively by their own." Carnival subsequently reversed its policy, maintaining that it would accept bookings from all travelers and would delay the start of its cruises unless Cuban authorities allowed cruise ships to operate in the same fashion as air flights. On April 22, the Cuban government ultimately announced that it was changing its policy to allow the entry and exit of Cuban citizens by cruise ship and merchant vessel, an action that allowed Carnival to go forward with its cruises to Cuba. In December 2016, several other cruise ship companies—Royal Caribbean, Norwegian, Azamara Club Cruises, Oceana Cruises, Regent Seven Seas Cruises, and Pearl Seas Cruises—announced that they would be offering cruises to Cuba from the United States in 2017. Remittances. The Obama Administration's change in policy also lifted the cap on the amount of remittances that can be sent by any U.S. person to non-family members in Cuba, so-called donative remittances. Initially the cap was increased from $500 to $2,000 per quarter in January 2015, and then it was removed altogether in September 2015. Authorized travelers may carry an unlimited amount of remittances to Cuba (initially the cap was increased from $3,000 to $10,000, and then removed). Remittances to individuals and independent nongovernmental organizations (NGOs) in Cuba are authorized without limit for humanitarian projects; activities of recognized human rights organizations, independent organizations designed to promote a rapid peaceful transition to democracy, and of individuals and NGOs that promote independent activity to strengthen civil society; and the development of private businesses, including small farms. Pro/Con Arguments. Major arguments made for lifting the Cuba travel ban altogether are that it abridges the rights of ordinary Americans to travel; it hinders efforts to influence conditions in Cuba and may be aiding the Cuban government by helping restrict the flow of information; and Americans can travel to other countries with communist or authoritarian governments. Major arguments in opposition to lifting the Cuba travel ban are that more American travel would support the Cuban government with potentially millions of dollars in hard currency; that there are legal provisions allowing travel to Cuba for humanitarian purposes that are used by thousands of Americans each year; and that the President should be free to restrict travel for foreign policy reasons. With regard to remittances, supporters of the Obama Administration's recent action argue that it can help support civil society and the country's nascent private sector. Those opposed contend that the Cuban regime benefits from increased remittances by the money it accrues from taxes on private sector activity as well as fees for the exchange of U.S. dollars. Legislative Activity. Several legislative initiatives introduced in the 114 th Congress would have lifted remaining restrictions on travel and remittances. Three bills would have lifted the overall embargo, H.R. 274 (Rush), H.R. 403 (Rangel), and H.R. 735 (Serrano) including restrictions on travel and remittances. One bill, H.R. 635 (Rangel), would have facilitated the export of U.S. agricultural and medical exports to Cuba and also lift travel restrictions. Three bills would have focused solely on prohibiting restrictions on travel to Cuba: H.R. 634 (Rangel), H.R. 664 (Sanford), and S. 299 (Flake). A Senate amendment— S.Amdt. 3557 (Flake) to H.R. 636 , the Federal Aviation Administration Reauthorization Act, which was filed but never considered—would have prohibited restrictions on travel to Cuba and related travel transactions. In contrast, two other introduced bills, S. 1388 and H.R. 2466 , would have required the President to submit a plan for resolving all outstanding claims relating to property confiscated by the government of Cuba before taking action to ease restrictions on travel to or trade with Cuba. Two similar bills, H.R. 5728 (reported, amended, by the House Homeland Security Committee on September 13, 2016) and S. 3289 , would have prohibited scheduled passenger air transportation between the United States and Cuba until a study had been completed regarding Cuba's airport security and agreements have been reached with Cuba allowing the U.S. Federal Air Marshal Service to conduct of missions on regularly scheduled flights and providing inspectors of the Transportation Security Administration access to all areas of last point of departure airports in Cuba for security assessments. Efforts to ease and tighten travel restrictions played out in the FY2016 appropriations process, but ultimately no such provisions were included in the FY2016 omnibus appropriations measure ( P.L. 114-113 ). (For more details, see Appendix B below.) In the FY2017 appropriations process, the House and Senate versions of the Financial Services appropriations measure contained contrasting provisions on travel. As noted above, the 114 th Congress did not complete action on FY2017 appropriations. In the House-passed bill, H.R. 5485 ( H.Rept. 114-624 ), Section 132 would have prohibited funding that licenses, facilitates, or otherwise allows people-to-people travel. The measure would have had a significant impact on the expansion of U.S. travel to Cuba that has occurred in recent years, including the recently begun cruise ship travel to Cuba. Another provision in the House bill, Section 134, would have prohibited funding to approve, license, facilitate, authorize, or otherwise allow any financial transaction with an entity controlled, in whole or in part, by the Cuban military or intelligence service or with any officer or immediate family member thereof. This provision could have had a significant effect on U.S. travel to Cuba because the Cuban military has an important role in hotel and other travel services in Cuba. A potential Sanford amendment that had been ruled in order by the House Rules Committee (amendment 47 in H.Rept. 114-639 ) would have prohibited funds in the act from being used to administer or enforce the Cuba embargo regulations or the statutory prohibition on tourist travel. The amendment was ultimately introduced as H.Amdt. 1264 on July 7, 2016, but was subsequently withdrawn. In the Senate version of the FY2017 Financial Services appropriations measure, S. 3067 ( S.Rept. 114-280 ), Section 635 would have prohibited funding in any act to implement any law, regulation, or policy that restricts travel to Cuba. The provision would have had the effect of lifting all restrictions on travel to Cuba. Another provision in the Senate bill, Section 637, would have prohibited funds in the act or any act from being used to implement any law, regulation, or policy that prohibits the provision of technical services otherwise permitted under an international air transportation agreement in the United States for an aircraft of a foreign carrier that is en route to or from Cuba based on the restrictions set forth in the Cuban Assets Control Regulations. (As noted above, OFAC granted a license to Bangor International Airport in Maine in July 2016 to provide refueling and services for foreign air carriers making flights to and from Cuba.) U.S. commercial medical exports to Cuba have been authorized since the early 1990s pursuant to the Cuban Democracy Act of 1992 (CDA; P.L. 102-484 , Title XVII), and commercial agricultural exports have been authorized since 2001 pursuant to the Trade Sanctions Reform and Export Enhancement Act of 2000 or TSRA ( P.L. 106-387 , Title IX), but with numerous restrictions and licensing requirements. For medical exports to Cuba, the CDA requires on-site verification that the exported item is to be used for the purpose for which it was intended and only for the use and benefit of the Cuban people. TSRA allows for one-year export licenses for selling agricultural commodities to Cuba, although no U.S. government assistance, foreign assistance, export assistance, credits, or credit guarantees are available to finance such exports. TSRA also denies exporters access to U.S. private commercial financing or credit; all transactions must be conducted in cash in advance or with financing from third countries. Cuba purchased more than $5.2 billion in U.S. products from 2001 to 2015, largely agricultural products. For many of those years, the United States was Cuba's largest supplier of agricultural products. U.S. exports to Cuba rose from about $7 million in 2001 to a high of $712 million in 2008, far higher than in previous years. This increase was in part because of the rise in food prices and because of Cuba's increased food needs in the aftermath of several hurricanes and tropical storms that severely damaged the country's agricultural sector. U.S. exports to Cuba declined considerably from 2009 through 2011, rose again in 2012, and have fallen every year since then, amounting to just $180 million in 2015, the lowest level since 2002 (see Figure 3 ). The level of exports in 2015 dropped 40% from the previous year. Looking at the composition of U.S. exports to Cuba from 2012 to 2015, the leading products were poultry, soybean oilcake, soybeans, and corn, although corn exports declined considerably in this period. Poultry has been the leading U.S. export since 2012—accounting for more than 40% of U.S. exports—but the value of poultry exports declined almost 48% in 2015 from the previous year. According to press reports, Cuba reportedly suspended U.S. poultry imports in August and September 2015 because of concerns about the outbreak of bird flu in the United States but resumed purchases in October 2015. In the first nine months of 2016, however, U.S. exports to Cuba amounted to $176 million, a 14% increase compared to the same period in 2015. Poultry exports increased 31% from the same period in 2015 and accounted for almost 47% of total U.S. exports to Cuba. Among the reasons for the overall decline in U.S. exports to Cuba in recent years, analysts cite Cuba's shortage of hard currency; financial support from Venezuela; credits and other arrangements offered by other governments to purchase their countries' products; Cuba's preferences to purchase products from government-controlled entities; and efforts by Cuba to increase the motivation of U.S. companies, organizations, local and state officials, and some Members of Congress to push for further changes in U.S. sanctions policy toward Cuba. Some agricultural experts are skeptical as to whether the Obama Administration's recent changes in policy will lead to a significant increase in U.S. agricultural exports to Cuba, pointing out that other countries will still be able to offer better terms to Cuba than the United States because of restrictions on financing and credit. President Obama's policy changes, as set forth in regulatory changes made to the CACR and EAR, included several measures designed to facilitate commercial exports to Cuba. U.S. financial institutions are permitted to open correspondent accounts at Cuban financial institutions to facilitate the processing of authorized transactions. (In July 2015, the Florida-based Stonegate Bank became the first U.S. financial institution to sign a correspondent agreement with a Cuban bank.) U.S. private export financing is permitted for all authorized export trade to Cuba, except for agricultural goods exported pursuant to TSRA. The definition of the term "cash in advance" for payment for U.S. exports to Cuba was revised to specify that it means "cash before transfer of title." In 2005, the Department of the Treasury's Office of Foreign Assets Control had clarified that "payment of cash in advance" meant that the payment for the goods had to be received prior to the shipment of the goods from the port at which they were loaded in the United States. For FY2010 and FY2011, Congress had temporarily overturned OFAC's clarification of the term in omnibus appropriations legislation (Division C, Section 619 of P.L. 111-117 , and continued by reference in Division B, Section 1101 of P.L. 112-10 ). The change means that payment can once again occur before an export shipment is offloaded in Cuba, rather than before the shipment leaves a U.S. port. Commercial exports to Cuba of certain goods and services to empower Cuba's nascent private sector are authorized, including for certain building materials for private residential construction, goods for use by private sector Cuban entrepreneurs, and agricultural equipment for small farmers. Licenses for certain categories of exports are included under a "general policy of approval." These categories include exports for civil aviation and commercial aircraft safety; telecommunications; U.S. news bureaus; human rights organizations and nongovernmental organizations; environmental protection of U.S. and international air quality, waters, and coastlines; and agricultural commodities (such as insecticides, pesticides, and herbicides) that fall outside the scope of those exports already allowed under TSRA. Licenses for exports that will be considered on a case-by-case basis include certain items exported to state-owned enterprises, agencies, and other organizations of the Cuban government that provide goods and services for the use and benefit of the Cuban people. These items include exports for agricultural production, artistic endeavors, education, food processing, disaster preparedness, relief and response, public health and sanitation, residential construction and renovation, public transportation, wholesale and retail distribution for domestic consumption by the Cuban people, construction of facilities for treating public water supplies, facilities for supplying electricity or other energy to the Cuban people, sports and recreation facilities, and other infrastructure that directly benefit the Cuban people. The commercial export of certain consumer communication devices, related software, applications, hardware, and services, and items for the establishment and update of communications-related systems is authorized; previously such exports were limited to donations. The export of items for telecommunications, including access to the Internet, use of Internet services, infrastructure creation, and upgrades, is also authorized. Companies exporting authorized goods to Cuba are authorized to have a physical presence in Cuba, such as an office, retail outlet, or warehouse. In October 2016, OFAC amended the CACR to add an expanded general license authorizing persons subject to U.S. jurisdiction to enter into certain contingent contracts for transactions currently prohibited by the embargo and BIS generally authorized certain consumer goods sold directly to eligible individuals in Cuba for their personal use. USDA Reports. In a June 2015 report, the U.S. Department of Agriculture's (USDA) Foreign Agricultural Service noted that "the U.S. share of the Cuban market has slipped dramatically, from a high of 42% in FY2009 to only 16% in FY2014." The report contends that the recent decline in U.S. market share in Cuba "is largely attributable to a decrease in bulk commodity exports from the United States in light of favorable credit terms offered by key competitors." It maintains that the United States has lost market share to those countries able to provide export credits to Cuba. The report concludes that lifting U.S. restrictions on travel and capital flow to Cuba, and the ability for USDA to conduct market development and credit guarantee programs in Cuba, would help the United States recapture its market share in Cuba. Another USDA report published in June 2015 by its Economic Research Service maintained that a more normal economic relationship between the United States and Cuba would allow "U.S. agricultural exports to develop commercial ties in Cuba that approximate their business relationship in other parts of the world" (such as the Dominican Republic) and could "feature a much larger level of U.S. agricultural exports to Cuba." According to the report, increased U.S. exports could include such commodities as milk, wheat, rice, and dried beans, and intermediate and consumer-oriented commodities. USITIC Reports. The U.S. International Trade Commission (USITC) has issued three studies since 2007 examining the effects of U.S. restrictions on trade with Cuba. The agency issued its third and most recent report on April 18, 2016. The Senate Finance Committee initially requested the report in December 2014 to examine effects of U.S. restrictions on trade and travel to Cuba on the export of U.S. goods and services. The USITC held a public hearing on June 2, 2015, that featured private sector and academic witnesses as well as a Member of Congress. In August 2015, the committee asked the that study be expanded to include analysis of existing Cuban non-tariff measures, institutional and infrastructural factors, and other Cuban barriers; the extent to which these barriers would affect the export of goods and services to Cuba; and the aggregate effects of Cuban tariff and non-tariff measures on the ability of foreign firms to conduct business in and with Cuba. According to the findings of the report: U.S. restrictions on trade and travel have reportedly shut U.S. suppliers out of a market in which they could be competitive on price, quality, and proximity. The most problematic U.S. restrictions cited are the inability to offer credit, travel to or invest in Cuba, and use funds sourced and administered by the U.S. government. Cuban nontariff measures and other factors may limit U.S. exports to and investment in Cuba if U.S. restrictions are lifted. These include Cuban government control of trade and distribution, legal limits on foreign investment and property ownership, and politically motivated decisionmaking regarding trade and investment. Absent U.S. restrictions, U.S. exports in several sectors would likely increase somewhat in the short term, with prospects for larger increases in the longer term, subject to changes in Cuban policy and economic growth. U.S. exports could increase further if Cuban import barriers were lowered. If U.S. restrictions were removed, U.S. agricultural and manufactured exports to Cuba could increase to almost $1.8 billion, while if both U.S. restrictions were removed and Cuban barriers lowered, U.S. exports could approach $2.2 billion annually. Legislative Activity. Several legislative initiatives introduced in the 114 th Congress would have lifted or eased restrictions on exports to Cuba. Three bills— H.R. 274 (Rush), H.R. 403 (Rangel), and H.R. 735 (Serrano)—would have lifted the overall embargo, including restrictions on exports to Cuba in the CDA and TSRA. H.R. 635 (Rangel), among its various provisions, had the goal of facilitating the export of U.S. agricultural and medical exports to Cuba by permanently redefining the term "payment of cash in advance" to mean that payment was received before the transfer of title and release and control of the commodity to the purchaser; authorizing direct transfers between Cuban and U.S. financial institutions for products exported under the terms of TSRA; establishing an export promotion program for U.S. agricultural exports to Cuba; prohibiting restriction on travel to Cuba; and repealing the on-site verification requirement for medical exports to Cuba under the CDA. S. 491 (Klobuchar) would have removed various provisions of law restricting trade and other relations with Cuba, including certain restrictions in the CDA, the LIBERTAD Act, and TSRA. S. 1049 (Heitkamp) would have amended TSRA to allow for the financing of agricultural commodities to Cuba. S. 1543 (Moran)/ H.R. 3238 (Emmer) would have repealed or amended various provisions of law restricting trade and other relations with Cuba, including certain restrictions in the CDA, the LIBERTAD Act, and TSRA. The bills would have repealed restrictions on private financing for Cuba in TSRA but would have continued to prohibit U.S. government foreign assistance or financial assistance, loans, loan guarantee, extension of credit, or other financing for export to Cuba, albeit with presidential waiver authority for national security or humanitarian reasons. Under the initiative, the federal government would have been prohibited from expending any funds to promote trade with or develop markets in Cuba, although certain federal commodity promotion programs would be allowed. H.R. 3306 (Rush), would have authorized the export of energy resources, technologies, and related services to Cuba. H.R. 3687 (Crawford), would have permitted U.S. government assistance for U.S. agricultural exports to Cuba as long as the recipient of the assistance was not controlled by the Cuban government; authorized the financing of sales of agricultural commodities; and authorized investment for the development of an agricultural business in Cuba as long as it was not controlled by the Cuban government or did not traffic in property of U.S. nationals confiscated by the Cuban government. In contrast, two other introduced bills, S. 1388 and H.R. 2466 , would have required the President to submit a plan for resolving all outstanding claims relating to property confiscated by the government of Cuba before taking action to ease restrictions on travel to or trade with Cuba. Efforts to ease or tighten restrictions on U.S. exports to Cuba played out in the FY2016 appropriations process, but ultimately no such provisions were included in the FY2016 omnibus appropriations measure ( P.L. 114-113 ). S. 1910 (Boozman), the FY2016 Financial Services appropriations bill, had three provisions easing Cuba sanctions (on financing for U.S. agricultural sales, travel, and vessels trading with Cuba) that could have affected U.S. exports to Cuba. In contrast, House-passed H.R. 2578 , the FY2016 Commerce, Justice, and Science appropriations bill, had a provision that would have attempted to prevent additional categories of exports to Cuba authorized as part of the Administration's policy change on Cuba. (See Appendix B for details.) In the FY2017 appropriations process, House and Senate bills again had provisions that would have tightened and eased economic sanctions on Cuba, but the 114 th Congress did not complete action on FY2017 appropriations. Two FY2017 House appropriations bills ( H.R. 5393 , Commerce, and H.R. 5485 , Financial Services) had provisions that would have again attempted to impose new sanctions that place restrictions on U.S. exports to Cuba. A provision in H.R. 5393 would prohibit funding to facilitate, permit, license, or promote exports to the Cuban military or intelligence service or to any officer of the Cuban military or intelligence service, or an immediate family member thereof. A provision of H.R. 5485 would have prohibited funding to approve, license, facilitate, authorize, or otherwise allow any financial transaction with an entity controlled, in whole or in part, by the Cuban military or intelligence service or with any officer or immediate family member thereof. Neither provision would have affected financial transactions for exports permitted under TSRA. Both provisions could have significantly affected the expansion of U.S. exports to Cuba given that the Cuban military, since the 1990s, has become increasingly involved in Cuba's economy and in running numerous companies. The House Rules Committee had made in order a potential amendment to H.R. 5485 (Crawford, listed as amendment 24 in H.Rept. 114-639 ) that would have prohibited funds in the act from being used to implement, administer, or enforce Section 908(b) of TSRA, prohibiting private financing for agricultural sales to Cuba. Ultimately, the amendment was not introduced. In contrast to the House, the Senate version of the FY2017 Senate Financial Services appropriations bill, S. 3067 , had provisions that would have lifted restrictions on financing for agricultural exports to Cuba and on seaborne vessel entry into the United States if the vessel had been involved in trade with Cuba within the previous 180 days, except pursuant to a DOT license. As noted above, in December 2014, President Obama called for the Secretary of State to review Cuba's designation as a state sponsor of terrorism. As set forth in the three terrorist-list provisions of law—Section 6(j) of the Export Administration Act (EAA) of 1979 ( P.L. 96-72 ; 50 U.S.C. Appendix 2405(j) ); Section 620A of the Foreign Assistance Act (FAA) of 1961 ( 22 U.S.C. 2371 ); and Section 40 of the Arms Export Control Act (AECA) ( 22 U.S.C. 2780 )—a country's retention on the state sponsors of terrorism list may be rescinded by the President in two ways. The first option is for the President to submit a report to Congress certifying that there has been a fundamental change in the leadership and policies of the government and that the government is not supporting acts of international terrorism and is providing assurances that it will not support such acts in the future. The second option is for the President to submit a report to Congress, at least 45 days in advance, justifying the rescission and certifying that the government has not provided any support for international terrorism during the preceding six months and has provided assurances that it will not support such acts in the future. President Obama utilized the second option when submitting his report to Congress on April 14, 2015. According to the terrorist-list laws, the rescission would take effect 45 days after the report is submitted to Congress. Of the three terrorist-list statutes, only the AECA has an explicit provision allowing Congress to block, via the enactment of a joint resolution, a removal of a country on the list. The law sets forth an expedited procedure process for the joint resolution, which would have to be approved within the 45-day period. Such a measure would be subject to presidential veto and require a two-thirds vote in each body to override the veto. No resolutions of disapproval were introduced in Congress within the 45-day period, and, accordingly, Secretary of State Kerry rescinded Cuba's designation as a state sponsor of terrorism on May 29, 2015. Notably, on May 11, 2015, Secretary of State Kerry also dropped Cuba from the annual determination, pursuant to Section 40A of the Arms Export Control Act and due by May 15 of each year, identifying countries that are not fully cooperating with United States antiterrorism efforts. Cuba had been designated annually since that annual determination was established in 1997. Countries currently designated as not cooperating fully on antiterrorism efforts are Eritrea, North Korea, Iran, Syria, and Venezuela. Cuba was added to the State Department's list of states sponsoring international terrorism in 1982 pursuant to Section 6(j) of the EAA because of its alleged ties to international terrorism and support for terrorist groups in Latin America, and it remained on the list pursuant to the EAA, the AECA, and the FAA. A range of sanctions are imposed on countries on the terrorism list, including requirements for validated exports licenses (with presumption of denial) for dual-use goods or technology controlled by the Department of Commerce for national security of foreign policy reasons (EAA); a ban on arms-related exports and sales (AECA); and prohibitions on most foreign aid, food aid, or Export-Import Bank or Peace Corps programs (FAA). Despite Cuba's removal from the terrorism list, the extensive array of economic sanctions imposed on Cuba imposed pursuant to other provisions of law, including an embargo on most trade and financial transactions, remain in place. Cuba had a long history of supporting revolutionary movements and governments in Latin America and Africa, but in 1992, Fidel Castro said that his country's support for insurgents abroad was a thing of the past. Cuba's change in policy was in large part due to the breakup of the Soviet Union, which resulted in the loss of billions of dollars in annual subsidies to Cuba and led to substantial Cuban economic decline. In the April 14, 2015, report to Congress, President Obama, following the process set forth in the three terrorist-list provisions of law cited above, certified that the Cuban government "has not provided any support for international terrorism during the preceding 6-month period" and "has provided assurances that it will not support acts of international terrorism in the future." The memorandum of justification accompanying the report maintained that Cuba has taken steps in recent years to fully distance itself from international terrorism and to strengthen its counterterrorism laws. The justification noted that Cuba is a party to 15 international instruments related to countering terrorism and has deposited its instrument of ratification or accession to three additional instruments that have not yet entered into force. The justification stated that in 2013, Cuba committed to work with the multilateral Financial Action Task Force (FATF) to address its anti-money laundering/counterterrorism finance (AML/CTF) deficiencies. Since 2012, Cuba has been a member of the Financial Action Task Force of Latin America (GAFILAT, formerly known as the Financial Action Task Force of South America), a regional group associated with the FATF. As a member, Cuba committed to adopting and implementing the 40 recommendations of the FATF pertaining to AML/CTF standards. In early 2014, Cuba adopted legislation providing for the freezing of assets linked to money laundering or terrorist financing. In October 2014, the FATF welcomed Cuba's progress in improving its regulatory regime to combat money laundering and terrorist financing and addressing strategic deficiencies that the FATF had identified. As a result, the FATF noted that Cuba was no longer subject to the FATF's monitoring and compliance process, but that the country would continue to work with GAFILAT to strengthen its regulatory regime. The justification cited various instances in which Cuba has condemned terrorist attacks around the world, including the 2013 Boston Marathon bombing and the 2015 Charlie Hebdo terrorist attack in Paris. It noted that in 2010, the Cuban government provided information to the U.S. government reiterating its commitment to its international obligations regarding both counterterrorism and nonproliferation, noting instances of information sharing with the United States regarding planned terrorist attacks, and providing assurances that Cuban territory would not be used to organize, finance, or carry out terrorist acts. Most significantly, the justification stated that direct engagement with Cuba permitted the United States to secure additional assurances, delivered April 3, 2015, of Cuba's commitment to renounce international terrorism. According to the justification: In the assurances, Cuba reiterated its commitment to cooperate in combating terrorism, rejected and condemned all terrorist acts, methods, and practices in all their forms and manifestations, and condemned any action intended to encourage, support, finance, or cover up any terrorist acts. The Government of Cuba further committed to never supporting any act of international terrorism, and never allowing its territory to be used to organize, finance, or execute terrorist act against any other country, including the United States. Members of Foreign Terrorist Organizations in Cuba. For a number of years in its annual Country Reports on Terrorism , the State Department has discussed Cuba's provision of safe haven for members of the Basque Fatherland and Liberty (ETA) and the Revolutionary Armed Forces of Colombia (FARC), both U.S.-designated foreign terrorist organizations (FTOs). In the April 2015 justification, the Administration maintained that there was no credible evidence that Cuba has, within the preceding six months, provided specific material support, services, or resources, to members of the FARC or members of the National Liberation Army (ELN), another Colombian FTO, outside of facilitating the peace process between those organizations and the government of Colombia. The Cuban government has been supporting and hosting peace negotiations between the FARC and the Colombian government since 2012. According to the justification, the Colombian government formally noted to the United States that it believes the Cuban government has played a constructive process in the peace talks, and that it has no evidence that Cuba has provided any political or military support in recent years to the FARC or ELN that has assisted in the planning or execution of terrorist activity in Colombia. With regard to ETA, the Administration maintained in the justification that the Cuban government continues to allow approximately two dozen members of ETA to remain in the country, with most of those entering Cuba following an agreement with the government of Spain. The Administration maintained that Spain has requested the extradition of two ETA members from Cuba, and that a bilateral process is underway for the two countries to resolve the matter. Press reports have identified the two ETA members as José Ángel Urtiaga and José Ignacio Etxarte. It maintained that the Spanish government has conveyed to the United States that it is satisfied with this process and that it has no objection to the rescission of Cuba's designation as a state sponsor of terrorism. For all three FTOs—the FARC, ELN, and ETA—the Cuban government maintained in its April 2015 assurances to the U.S. government that it would never permit these groups to use Cuban territory to engage in activities against any country. U.S. Fugitives from Justice. Another issue that has been mentioned for many years in the State Department's annual terrorism report is Cuba's harboring of fugitives wanted in the United States. The 2013 terrorism report (issued in April 2014) maintained that Cuba provided such support as housing, food ration books, and medical care for these individuals. This was reiterated in the Administration's April 2015 justification to Congress. U.S. fugitives from justice in Cuba include convicted murderers and numerous hijackers, most of whom entered Cuba in the 1970s and early 1980s. For example, Joanne Chesimard, also known as Assata Shakur, was added to the FBI's Most Wanted Terrorist list in May 2013. Chesimard was part of militant group known as the Black Liberation Army. In 1977, she was convicted for the 1973 murder of a New Jersey State Police officer and sentenced to life in prison. Chesimard escaped from prison in 1979 and, according to the FBI, lived underground before fleeing to Cuba in 1984. Another fugitive, William "Guillermo" Morales, who was a member of the Puerto Rican militant group known as the Armed Forces of National Liberation (FALN), reportedly has been in Cuba since 1988 after being imprisoned in Mexico for several years. In 1978, both of his hands were maimed by a bomb he was making. He was convicted in New York on weapons charges in 1979 and sentenced to 10 years in prison and 5 years' probation, but escaped from prison the same year. In addition to Chesimard and other fugitives from the past, a number of U.S. fugitives from justice wanted for Medicare and other types of insurance fraud reportedly have fled to Cuba in recent years. While the United States and Cuba have an extradition treaty in place dating to 1905, in practice the treaty has not been utilized. Instead, for more than a decade, Cuba has returned wanted fugitives to the United States on a case-by-case basis. For example, in 2011, U.S. Marshals picked up a husband and wife in Cuba who were wanted for a 2010 murder in New Jersey, while in April 2013, Cuba returned a Florida couple who had allegedly kidnapped their own children (who had been in the custody of the mother's parents) and fled to Havana. However, Cuba has generally refused to render to U.S. justice any fugitive judged by Cuba to be "political," such as Chesimard, who they believe could not receive a fair trial in the United States. Moreover, Cuba in the past has responded to U.S. extradition requests by stating that approval would be contingent upon the United States returning wanted Cuban criminals from the United States. These include the return of Luis Posada Carriles, whom Cuba accused of plotting the 1976 bombing of a Cuban jet that killed 73 people. The Administration's April 2015 justification for removing Cuba from the terrorism list maintains that Cuba agreed to enter into a law enforcement dialogue with the United States that will include discussions with the goal of resolving outstanding fugitive cases. It asserted that "the strong U.S. interest in the return of these fugitives will be best served by entering into this dialogue with Cuba." Pro/Con Arguments . Those supporting the Administration's decision to remove Cuba from the state sponsor of terrorism list maintain that retention on the list was anachronistic and a holdover from the Cold War. They argue that domestic political considerations kept Cuba on the terrorism list for many years, and that Cuba's presence on the list has diverted U.S. attention from struggles against serious terrorist threats. Some supporting the Administration's decision contend that it reinforces the President's broader Cuba policy shift of moving from isolation to engagement, and could result in increased engagement with Cuba on counterterrorism issues and the long-standing issue of U.S. fugitives from justice in Cuba. Some also maintain that Cuba's removal from the list will make it easier for the United States to work with other hemispheric nations on counterterrorism issues. Those who oppose removing Cuba from the terrorism list argue that there is enough evidence that Cuba continues to support terrorism. They point to the government's hosting of members of foreign terrorist organizations such as ETA and the FARC and U.S. fugitives from justice. In particular, some Members contend that Cuba should not come off the terrorist list as long it continues to harbor U.S. fugitives convicted of violent acts in the United States. They also point to Cuba's involvement in an attempted weapons transfer to North Korea in July 2013 in contravention of U.N. sanctions as evidence (see " Cuba's Foreign Relations ," above). Some maintain that the Administration rushed to complete its review of Cuba's designation as a state sponsor of terrorism without consulting Congress. Legislative Activity . In the 114 th Congress, before the rescission of Cuba's designation as a state sponsor of terrorism, H.R. 274 (Rush) had a provision that would have immediately rescinded any determination of the Secretary of State that Cuba has repeatedly provided support for acts of international terrorism. As noted above, no resolutions of disapproval were introduced to block the Administration's rescission of Cuba's designation as a state sponsor of terrorism. On the issue of U.S. fugitives from justice in Cuba, H.Res. 181 (King) would have called for the immediate extradition or rendering to the United States of convicted felon William Morales and all other fugitives from justice who are receiving safe harbor in Cuba in order to escape prosecution or confinement for criminal offenses committed in the United States. H.R. 4772 (Pearce) would have prohibited funding to accept commercial flight plans between the United States and Cuba until Cuba extradites U.S. fugitives from justice. For more than 15 years, the United States has imposed a trademark sanction specifically related to Cuba. A provision in the FY1999 omnibus appropriations measure (§211 of Division A, Title II, P.L. 105-277 , signed into law October 21, 1998) prevents the United States from accepting payment for trademark registrations and renewals from Cuban nationals that were used in connection with a business or assets in Cuba that were confiscated, unless the original owner of the trademark has consented. U.S. officials maintain that the sanction prohibits a general license under the CACR for transactions or payments for such trademarks. The provision also prohibits U.S. courts from recognizing such trademarks without the consent of the original owner. The measure was enacted because of a dispute between the French spirits company Pernod Ricard and the Bermuda-based Bacardi Limited. Pernod Ricard entered into a joint venture in 1993 with Cubaexport, a Cuban state company, to produce and export Havana Club rum. Bacardi maintains that it holds the right to the Havana Club name because in 1995 it entered into an agreement for the Havana Club trademark with the Arechabala family, who had originally produced the rum until its assets and property were confiscated by the Cuban government in 1960. Although Pernod Ricard cannot market Havana Club in the United States because of the trade embargo, it wants to protect its future distribution rights should the embargo be lifted. The European Union initiated World Trade Organization (WTO) dispute settlement proceedings in June 2000, maintaining that the U.S. law violates the Agreement on Trade-Related Aspects of Intellectual Property (TRIPS). In January 2002, the WTO ultimately found that the trademark sanction violated WTO provisions on national treatment and most-favored-nation obligations in the TRIPS Agreement. On March 28, 2002, the United States agreed that it would come into compliance with the WTO ruling through legislative action by January 3, 2003. That deadline was extended several times since no legislative action had been taken to bring Section 211 into compliance with the WTO ruling. On July 1, 2005, however, in an EU-U.S. understanding, the EU agreed that it would not request authorization to retaliate at that time, but reserved the right to do so at a future date, and the United States agreed not to block a future EU request. The U.S. Patent and Trademark Office (USPTO) did not process Cubaexport's 10-year renewal of the Havana Club trademark when it was due in 2006 because the Treasury Department's Office of Foreign Assets Control denied the company the specific license that it needed to pay the fee for renewal of the trademark registration. In providing foreign policy guidance to OFAC at the time, the State Department recommended denial of the license, maintaining that it would be consistent with "the U.S. approach toward non-recognition of trademark rights associated with confiscated property" and consistent with U.S. policy to deny resources to the Cuban government in order to hasten a transition to democracy. Almost a decade later, on January 11, 2016, OFAC issued a specific license to Cubaexport, allowing the company to pay fees for the renewal of the Havana Club trademark registration. In November 2015, OFAC had requested foreign policy guidance from the State Department for Cubaexport's request for a specific license. According to the State Department, in evaluating the case, it took into account the "landmark shift" in U.S. policy toward Cuba, U.S. foreign policy with respect to its key allies in Europe, and U.S. policy with regard to trademark rights associated with confiscated property. Two days later, on January 13, 2016, USPTO renewed Cubaexport's trademark registration for Havana Club for the 2006-2016 period. On February 16, 2016, the agency renewed the trademark registration for 10 additional years until 2026. State Department and USPTO officials maintain that the renewal of the Havana Club trademark registration does not resolve the trademark dispute. The State Department notes that there are pending federal court proceedings in which Bacardi has filed suit against Cubaexport to contest the Havana Club trademark ownership in the United States and that OFAC's issuance of a license permitting USPTO to renew the trademark registration will allow the two parties to proceed toward adjudication of the case. Legislative Activity. In Congress, two different approaches have been advocated for a number of years to bring Section 211 into compliance with the WTO ruling. Some want a narrow fix in which Section 211 would be amended so that it applies to all persons claiming rights in trademarks confiscated by Cuba, whatever their nationality, instead of being limited to designated nationals, meaning Cuban nationals. Advocates of this approach argue that it would treat all holders of U.S. trademarks equally. Others want Section 211 repealed altogether. They argue that the law endangers more than 5,000 trademarks of more than 400 U.S. companies registered in Cuba. In the 114 th Congress, identical bills S. 757 (Nelson) and H.R. 1627 (Issa) would have applied the narrow fix so that the trademark sanction applied to all nationals, while several broader bills were introduced with provisions that would have repealed Section 211: H.R. 274 (Rush); H.R. 403 (Rangel); H.R. 635 (Rangel); and H.R. 735 (Serrano). The House Judiciary Committee's Subcommittee on Courts, Intellectual Property, and the Internet held a hearing on February 11, 2016, on the trademark issue as well as on the issue of confiscated property. In the FY2017 appropriations process, two House bills had provisions that would have introduced new sanctions related to Cuba and trademarks, but the 114 th Congress did not complete action on the measures. The House Commerce appropriations bill, H.R. 5393 , had a provision that would have prohibited funds from being used to approve the registration, renewal, or maintenance of a mark, trade name, or commerce name used in commerce that is the same or substantially similar to one used in connection with a business or assets that were confiscated, unless the original owner has expressly consented. This provision would have prohibited the USPTO from spending funds to approve, maintain, or renew such a trademark. The House Financial Services appropriations bill, H.R. 5485 , had a provision that would have prohibited funds from being used to authorize a general or specific license with respect to a mark, trade name, or commerce name used in commerce that is the same or substantially similar to one used in connection with a business or assets that were confiscated unless the original owner has expressly consented. This provision would have prohibited Treasury's OFAC from issuing a general or specific license for the payment of trademark registration fees. However, with regard to the Havana Club case, as discussed above, OFAC issued a specific license in January 2016 for payments related to the renewal of the trademark and the USPTO subsequently renewed the trademark until 2026. In its statement of policy on the bill, the Administration strongly objected to the trademark and other Cuba provisions as undermining the President's policy on Cuba. Since 1996, the United States has provided assistance—through the U.S. Agency for International Development (USAID), the State Department, and the National Endowment for Democracy (NED)—to increase the flow of information on democracy, human rights, and free enterprise to Cuba. USAID and State Department efforts are largely funded through Economic Support Funds (ESF) in the annual foreign operations appropriations bill. From FY1996 to FY2015, Congress appropriated some $284 million in funding for Cuba democracy efforts. In recent years, this included $45.3 million for FY2008 and $20 million in each fiscal year from FY2009 through FY2012, $19.3 million in FY2013, and $20 million in each of FY2014 and FY2015. The Administration's request for FY2016 was $20 million in ESF, and the FY2016 omnibus appropriations measure, P.L. 114-113 , provided that amount in its explanatory statement. The House Appropriations Committee's FY2016 State Department and Foreign Operations appropriations bill, H.R. 2772 , would have provided $30 million to promote democracy and civil society in Cuba and would have provided that no funds could be obligated for business promotion, economic reform, entrepreneurship, or any other assistance that was not democracy-building as expressly authorized in the LIBERTAD Act. The report to the bill ( H.Rept. 114-154 ) would have provided that not less than $8 million would be for NED and that the remaining assistance would be administrated by the State Department and USAID. The Senate Appropriations Committee version of the bill, S. 1725 , would have provided $15 million in ESF for Cuba democracy programs, and $5 million in ESF (notwithstanding any other provision of law) for programs to support private Cuban entrepreneurs, except that no such assistance could be provided for the Cuban government. None of the directives in the House and Senate bills and reports were included in the FY2016 omnibus bill. For FY2017, the Administration requested $15 million in ESF for Cuba democracy and human rights programs, a 25% reduction from FY2016. According to the request, the assistance would support civil society initiatives that promote democracy, human rights, and fundamental freedoms, particularly freedoms of expression and association. The programs would "provide humanitarian assistance to victims of political repression and their families, strengthen independent civil society, support the Cuban people's desire to freely determine their future, reduced their dependence on the Cuban state, and promote the flow of uncensored information to, from and within the island." The House version of the FY2017 State Department and Foreign Operations appropriations bill, H.R. 5912 ( H.Rept. 114-693 ), reported July 15, 2015, would have provided $30 million for democracy promotion for Cuba, double the Administration's request. The bill would also have prohibited funding for business promotion, economic reform, entrepreneurship, or any other assistance that was not democracy building authorized by the LIBERTAD Act of 1996. In contrast, the Senate version of the FY2017 foreign operations appropriations bill, S. 3117 ( S.Rept. 114-290 ), reported June 29, 2016, would have recommended fully funding the Administration's request of $15 million. However, it also would have provided that $3 million be made available for USAID to support free enterprise and private business organizations and people-to-people educational and cultural activities. As noted previously, the 114 th Congress did not complete action on FY2017 appropriations, but it did approve a continuing resolution ( P.L. 114-254 ) in December 2016 funding most foreign aid at the FY2016 level, minus an across-the-board reduction of almost 0.2% through April 28, 2017. Generally, as provided in appropriations measures, ESF has to be obligated within two fiscal years. USAID in the past received the majority of this funding, but the State Department began receiving a portion in FY2004 and in recent years has been allocated more funding than USAID. The State Department generally has transferred a portion of the Cuba assistance that it administers to NED. For FY2014, Congress stipulated that no assistance may be obligated by USAID for any new programs or activities in Cuba ( P.L. 113-76 ). For FY2015 assistance, however, USAID is administering $6.25 million of Cuban democracy assistance, whereas the State Department is administering $13.75 million, with $6.25 million of that transferred to NED. USAID's Cuba program has supported a variety of U.S.-based nongovernmental organizations with the goals of promoting a rapid, peaceful transition to democracy, helping develop civil society, and building solidarity with Cuba's human rights activists. NED is not a U.S. government agency but an independent nongovernmental organization that receives U.S. government funding. Its Cuba program is funded by the organization's regular appropriations by Congress as well as by funding from the State Department. Until FY2008, NED's democratization assistance for Cuba had been funded largely through the annual Commerce, Justice, and State (CJS) appropriations measure, but is now funded through the State Department, Foreign Operations and Related Agencies appropriations measure. According to information provided by NED on its website, its Cuba funding in recent years has been as follows: $1.65 million in FY2011; $2.6 million in FY2012; $3.4 million in FY2013; $3 million in FY2014; and $3.68 million in FY2015. The U.S. Government Accountability Office (GAO) has issued several reports since 2006 examining USAID and State Department democracy programs for Cuba. In 2006, GAO issued a report examining programs from 1996 through 2005 and concluded that the U.S. program had significant problems and needed better management and oversight. According to GAO, internal controls, for both the awarding of Cuba program grants and the oversight of grantees, "do not provide adequate assurance that the funds are being used properly and that grantees are in compliance with applicable law and regulations." Investigative news reports on the program maintained that high shipping costs and lax oversight had diminished its effectiveness. GAO issued a second report in 2008 examining USAID's Cuba democracy program. The report lauded the steps that USAID had taken since 2006 to address problems with its Cuba program and improve oversight of the assistance. These included awarding all grants competitively since 2006, hiring more staff for the program office since January 2008, and contracting for financial services in April 2008 to enhance oversight of grantees. The GAO report also noted that USAID had worked to strengthen program oversight through pre-award and follow-up reviews, improving grantee internal controls and implementation plans, and providing guidance and monitoring about permitted types of assistance and cost sharing. The 2008 GAO report also maintained, however, that USAID had not staffed the Cuba program to the level needed for effective grant oversight. GAO recommended that USAID (1) ensure that its Cuba program office is staffed at the level that is needed to fully implement planned monitoring activities and (2) periodically assess the Cuba program's overall efforts to address and reduce grantee risks, especially regarding internal controls, procurement practices, expenditures, and compliance with laws and regulations. In January 2013, GAO issued its third report on Cuba democracy programs. The report concluded that USAID had improved its performance and financial monitoring of implementing partners' use of program funds, but found that the State Department's financial monitoring had gaps. Both agencies were reported to be taking steps to improve financial monitoring. GAO recommended that the Secretary of State take two actions to strengthen the agency's ability to monitor the use of Cuba democracy program funds: use a risk-based approach for program audits that considers specific indicators for program partners and obtain sufficient information to approve implementing partners' use of subpartners. In April 2014, an Associated Press investigative report alleged that USAID, as part of its democracy promotion efforts for Cuba, had established a "Cuban Twitter" known as ZunZuneo, a communications network designed as a "covert" program "to undermine" Cuba's communist government built with "secret shell companies" and financed through foreign banks. According to the press report, the project, which was used by thousands of Cubans, lasted more than two years until it ended in 2012. USAID, which strongly contested the report, issued a statement and facts about the ZunZuneo program. It maintained that program was not "covert," but rather that, just as in other places where it is not always welcome, the agency maintained a "discreet profile" on the project to minimize risk to staff and partners and work safely. Some Members of Congress strongly criticized USAID for not providing sufficient information to Congress about the program when funding was appropriated, while other Members strongly defended the agency and the program. In August 2014, the Associated Press reported on another U.S.-funded democracy program for Cuba in which a USAID contractor sent about a dozen youth from several Latin American countries (Costa Rica, Peru, and Venezuela) in 2010 and 2011 to Cuba to participate in civic programs, including an HIV-prevention workshop, with the alleged goal to "identify potential social-change actors" in Cuba. The AP report alleged that "the assignment was to recruit young Cubans to anti-government activism under the guise of civic programs." USAID responded in a statement maintaining that the AP report "made sensational claims against aid workers for supporting civil society programs and striving to give voice to these democratic aspirations." On December 22, 2015, USAID's Office of Inspector General issued a review report on USAID's Cuban Civil Society Support Program that examined both the ZunZuneo and HIV-prevention programs. The report cited a number of problems with USAID's management controls of the program and made a number of recommendations, including that USAID conduct an agency-wide analysis to determine whether a screening policy is needed to address intelligence and subversion threats, and if so, develop and implement one. U.S.-government-sponsored radio and television broadcasting to Cuba—Radio and TV Martí—began in 1985 and 1990, respectively. According to the Broadcasting Board of Governors (BBG) FY2017 Congressional Budget Request , Radio and TV Martí and the Martínoticias.com website "inform and engage the people of Cuba by providing a reliable and credible source of news and information." According to the BBG, it is estimated that at least 2.2 million Cubans listen to Radio Martí every week. The BBG maintains that this estimate is based on a Bendixen and Amandi International April 2015 poll that showed that 20% of respondents said they had listened to Radio Martí in the 7 days prior to the interviews. This is far higher than reported in the past for Radio Martí listenership. The BBG's Office of Cuba Broadcasting has significantly expanded its distribution through the Internet, mobile phones, and social media to help reach audiences in Cuba. Until October 1999, U.S.-government-funded international broadcasting programs had been a primary function of the United States Information Agency (USIA). When USIA was abolished and its functions were merged into the Department of State at the beginning of FY2000, the BBG became an independent agency that included such entities as the Voice of America (VOA), Radio Free Europe/Radio Liberty (RFE/RL), Radio Free Asia, and the Office of Cuba Broadcasting (OCB), which manages Radio and TV Marti. OCB is headquartered in Miami, FL. Legislation in the 104 th Congress ( P.L. 104-134 ) required the relocation of OCB from Washington, DC, to South Florida. The move began in 1996 and was completed in 1998. (For more information, see CRS Report R43521, U.S. International Broadcasting: Background and Issues for Reform , by [author name scrubbed].) According to the BBG, the OCB uses multiple web domains and anti-censorship tools such as web-based proxies to reach Internet users in Cuba. Since 2011, the OCB has used SMS messaging to communicate with audiences in Cuba, allowing OCB to "push" information to mobile phone users in Cuba in a manner that is difficult to filter. The OCB's website, martinoticias.com, began streaming Radio and TV Martí programming 24 hours a day in 2013. OCB also maintains an interactive social engagement strategy that utilizes a YouTube channel, Facebook, Twitter, and Google+. Funding. From FY1984 through FY2015, Congress appropriated about $797 million for broadcasting to Cuba. In recent years, funding amounted to $28 million in FY2012, $26 million in FY2013, and almost $27 million in FY2014. The FY2015 request was for $23 million, and Congress ultimately appropriated $27 million in the FY2015 omnibus appropriations measure ( P.L. 113-235 ). For FY2016, the BBG requested $30.3 million for Cuba broadcasting, almost $3.2 million over the amount appropriated in FY2015. This would have included funds for the OCB and the Voice of America (VOA) Latin America Division to begin the process of establishing a new de-federalized Spanish language international media operation that would merge the two entities. Under the plan, the process would be completed in early FY2017, and the new de-federalized organization would be fully operational by mid FY2017 and receive a BBG Grant. Ultimately, the explanatory statement to the FY2016 omnibus appropriations measure, P.L. 114-113 , provided $27.14 million for Cuba broadcasting, almost $3.2 million less than that requested. The explanatory statement noted that it did not include authority or funds requested for the merger of OCB and the Latin America Division of VOA by establishing an independent grantee organization. The report to the House Appropriations Committee's FY2016 State Department and Foreign Operations bill, H.R. 2772 ( H.Rept. 114-154 ), had recommended $28.130 million for Cuba broadcasting, almost $2.2 million less than the request and $1 million more than that provided in FY2015. Section 7045(c) of H.R. 2772 would have prohibited implementation of the proposed restructuring and merger of OCB and VOA's Latin America Division unless specifically authorized by a subsequent act of Congress. The report to the Senate Appropriations Committee version of the bill, S. 1725 ( S.Rept. 114-79 ), recommended $27.130 million for OCB and also did not support or include authority for the merger of OCB and VOA's Latin American Division. For FY2017, the Administration requested $27.1 million for the OCB, about the same amount appropriated in FY2016. The Administration also requested authority for the BBG to establish a new Spanish-language, nonfederal media organization that would receive a BBG grant and perform the functions of the current OCB. The House version of the FY2017 State Department and Foreign Operations Appropriations bill, H.R. 5912 ( H.Rept. 114-693 ), had a provision that would have blocked the Administration's request by prohibiting funding to establish an independent grantee organization to carry out any and all broadcasting and related programs to the Latin American and Caribbean region or otherwise substantially alter the structure of the OCB unless specifically authorized by a subsequent act of Congress. The funding prohibition pertained to merger of the OCB and the Voice of America Latin America Division. The Senate version of the bill, S. 3117 ( S.Rept. 114-290 ), would have provided $27.4 million for the OCB, $300,000 more than the Administration's request. The report to the bill stated that the committee did not support the proposed contractor reduction of $300,000 at the OCB. As previously noted, the 114 th Congress did not complete action on FY2017 appropriations, but it did approve a continuing resolution ( P.L. 114-254 ) providing funding at the FY2016 level for most programs through April 28, 2017, minus an across-the-board cut of almost 0.2%. Oversight. Both Radio and TV Martí have at times been the focus of controversies, including questions about adherence to broadcast standards. There have been various attempts over the years to cut funding for the programs, especially for TV Martí, which has not had much of an audience because of Cuban jamming efforts. From 1990 through 2008, there were numerous government studies and audits of the OCB, including investigations by the GAO, by a 1994 congressionally established Advisory Panel on Radio and TV Martí, by the State Department Office Inspector General (OIG), and by the combined State Department/BBG Office Inspector General. In 2009, GAO issued a report asserting that the best available research suggests that Radio and TV Martí's audience is small, and cited telephone surveys since 2003 showing that less than 2% of respondents reported tuning in to Radio or TV Martí during the past week. With regard to TV Martí viewership, according to the report, all of the IBB's telephone surveys since 2003 show that less than 1% of respondents said that they had watched TV Martí during the past week. According to the GAO report, the IBB surveys show that there was no increase in reported TV Martí viewership following the beginning of AeroMartí and DirecTV satellite broadcasting in 2006.The GAO report also cited concerns with adherence to relevant domestic laws and international standards, including the domestic dissemination of OCB programming, inappropriate advertisements during OCB programming, and TV Martí's interference with Cuban broadcasts. In 2010, the Senate Foreign Relations Committee majority issued a staff report that concluded that Radio and TV Martí "continue to fail in their efforts to influence Cuban society, politics, and policy." The report cited problems with adherence to broadcast standards, audience size, and Cuban government jamming. Among its recommendations, the report called for the IBB to move the Office of Cuba Broadcasting back to Washington, DC, and integrate it fully into the Voice of America. In 2011, GAO issued a report examining the extent to which the BBG's strategic plan for broadcasting required by the conference report to the FY2010 Consolidated Appropriations measure ( H.Rept. 111-366 to H.R. 3288 / P.L. 111-117 ) met the requirements established in the legislation. GAO found that BBG's strategic plan lacked key information and only partially addressed issues raised by Congress, including on estimated audience size and an analysis of other options for disseminating news and information to Cuba. The report stated that the BBG can develop and provide more information to Congress, including an analysis of the cost savings opportunities of sharing resources between Radio and TV Martí and the Voice of America's Latin America Division. On January 12, 2017, the Obama Administration announced another major Cuba policy shift by ending the so-called "wet foot/dry foot" policy in which thousands of undocumented Cuban migrants have entered the United States in recent years. As announced by the President and Secretary of Homeland Security Jeh Johnson, Cuban nationals who attempt to enter the United States illegally and do not qualify for humanitarian relief are now subject to removal. The Cuban government also agreed to begin accepting the return of Cuban migrants who have been ordered removed. The Administration also announced it was ending the special Cuban Medical Professional Parole program, a 10-year-old program allowing Cuban medical professionals in third countries to be approved for admittance into the United States. Background. Cuba and the United States reached two migration accords in 1994 and 1995 designed to stem the mass exodus of Cubans attempting to reach the United States by boat. On the minds of U.S. policymakers was the 1980 Mariel boatlift, in which 125,000 Cubans fled to the United States with the approval of Cuban officials. In response to Fidel Castro's threat to unleash another Mariel, U.S. officials reiterated U.S. resolve not to allow another exodus. Amid escalating numbers of fleeing Cubans, on August 19, 1994, President Clinton abruptly changed U.S. migration policy, under which Cubans attempting to flee their homeland were allowed into the United States, and announced that the U.S. Coast Guard and Navy would take Cubans rescued at sea to the U.S. naval base at Guantánamo Bay, Cuba. Despite the change in policy, Cubans continued fleeing in large numbers. As a result, in early September 1994, Cuba and the United States began talks that culminated in a September 9, 1994, bilateral agreement to stem the flow of Cubans fleeing to the United States by boat. In the agreement, the United States and Cuba agreed to facilitate safe, legal, and orderly Cuban migration to the United States, consistent with a 1984 migration agreement. The United States agreed to ensure that total legal Cuban migration to the United States would be a minimum of 20,000 each year, not including immediate relatives of U.S. citizens. In May 1995, the United States reached another accord with Cuba under which the United States would parole the more than 30,000 Cubans housed at Guantánamo into the United States, but would intercept future Cuban migrants attempting to enter the United States by sea and would return them to Cuba. The two countries would cooperate jointly in the effort. Both countries also pledged to ensure that no action would be taken against those migrants returned to Cuba as a consequence of their attempt to immigrate illegally. In January 1996, the Department of Defense announced that the last of some 32,000 Cubans intercepted at sea and housed at Guantánamo had left the U.S. Naval Station, most having been paroled into the United States. Maritime Interdictions. Since the 1995 migration accord, the U.S. Coast Guard has interdicted thousands of Cubans at sea and returned them to their country. Those Cubans who reach shore are allowed to apply for permanent resident status in one year, pursuant to the Cuban Adjustment Act of 1966 (CAA, P.L. 89-732). In short, most interdictions, even in U.S. coastal waters, resulted in a return to Cuba, while those Cubans who touch shore were allowed to stay in the United States. This so-called "wet foot/dry foot" policy had been criticized by some as encouraging Cubans to risk their lives in order to make it to the United States and as encouraging alien smuggling. Others maintained that U.S. policy should welcome those migrants fleeing communist Cuba whether or not they are able to make it to land. The number of Cubans interdicted at sea by the U.S. Coast Guard rose from 666 in FY2002 to 2,868 in FY2007. In the three subsequent years, maritime interdictions declined significantly to 422 by FY2010. Major reasons for the decline were reported to include the U.S. economic downturn, more efficient coastal patrolling, and more aggressive prosecution of migrant smugglers by both the United States and Cuba. From FY2011 through FY2016, however, the number of Cubans interdicted by the Coast Guard increased each year, from 985 in FY2011 to 5,228 in FY2016. For FY2016, the number of Cubans interdicted rose almost 79% over interdictions in FY2015 (see Figure 4 ). In FY2017, as of January 4, 2017, the Coast Guard had interdicted 1,265 Cuban migrants at sea. In 2015 and 2016, according to the Department of State, the increase in the flow of maritime migrants reportedly was caused by rumors of a possible change in immigration policy. The U.S. Coast Guard and U.S. Border Patrol have responded by increasing maritime and landside patrols, continuing timely repatriations of migrants interdicted at sea, and implementing a media campaign to dispel rumors about an alleged change in U.S. migration policy. The rise appears to be driven by concerns among Cubans that the favorable treatment granted to Cuban immigrants will end. Arrival of Undocumented Cuban Migrants. According to the State Department, Cubans continue to favor land-based entry at U.S. ports of entry, especially from Mexico. Over the past several years, the number of undocumented Cubans entering by land has increased significantly, with a majority entering through the southwest border. According to statistics from the Department of Homeland Security, the number of undocumented Cubans entering the United States rose from almost 8,170 in FY2010 to 56,178 in FY2016 (see Table 1 ). Between FY2014 and FY2015, the number of undocumented Cubans entering the United States increased by about 66%, while between FY2015 and FY2016, the number increased by just over 36%. In the first quarter of FY2017, from October through December 2016, the number of Cuban migrants amounted to 16,531, with the majority continuing to enter through the southwest border. Until recently, many of the Cuban migrants first flew to Ecuador, which until late November 2015 did not require Cubans to have a visa, and then made their way overland and by boat through Central America and Mexico to the United States (see Figure 5 ). The trip reportedly cost between $5,000 and $15,000, but Cubans resorted to this route because they viewed it as safer than attempting to travel by boat directly from Cuba to the United States. Although this trafficking route is not new for Cubans, the Cuban government's relaxation of its exit rules for its citizens in 2013 (discussed below) and concerns that the United States might change its liberal immigration policy for Cubans prompted a large increase in the number of Cubans making the overland journey. In late November 2015, Ecuador changed its policy of not requiring visas for Cubans in an attempt to stem the flow of Cubans who subsequently seek to travel to the United States. Ecuador's action sparked protests by Cubans at Ecuador's embassy in Havana, whereupon Ecuador decided to grant visas to those Cubans who had already purchased air tickets. In November 2015, tensions in relations between Costa Rica and Nicaragua grew over the issue of the Cuban migrants transiting the region. On November 10, 2015, Costa Rica broke up an alien smuggling ring involved in taking unauthorized Cubans through Costa Rica to the Nicaragua border. Costa Rica initially announced that it would not allow Cubans without visas to enter the country from Panama, but then changed its policy by providing Cubans with temporary visas to transit through Nicaragua. But on November 15, Nicaragua closed its border with Costa Rica to the Cubans headed to the United States, resulting in a swelling number of Cubans stranded in Costa Rica. Costa Rica called for a humanitarian corridor for the Cuban migrants to cross safely, while Nicaragua accused Costa Rica of "unleashing an invasion of illegal Cuban migrants" on Nicaragua. The Cuban government criticized U.S. immigration policy for "stimulating irregular emigration from Cuba toward the United States." Nicaragua echoed Cuba's position, placing blame for the wave of migration on the United States for its policy that attracts Cuban migrants. U.S. officials encouraged the countries involved to seek solutions and expressed concern about the human rights of the migrants, and the United States reportedly pledged up to $1 million (through the International Organization for Migration) to assist Costa Rica in providing for almost 8,000 Cuban migrants stranded in the country. In late December 2015, however, Central American representatives meeting in Guatemala agreed to fly the Cubans in Costa Rica to El Salvador, whereupon the migrants would travel by bus to Guatemala and then to Mexico and onward to the United States. That program began in January 2016, and direct flights to Mexico from Costa Rica were later added as well as flights for some 1,300 Cubans stranded in Panama. Press reports indicate that most of the Cuban migrants in Costa Rica and Panama had departed by mid-March 2016. In April 2016, another wave of Cuban migrants began entering Panama. The Costa Rican government said that it would reinforce its southern border with Panama to prevent the Cuban migrants from entering the country, and it criticized U.S. policy as a magnet attracting irregular Cuban migration. Panama, however, reached an agreement with Mexico in early May 2016 to transfer close to 4,000 Cuban migrants to Mexico by air. Migration Talks. Semiannual bilateral talks are held on the implementation of the 1994-1995 migration accords, alternating between Havana and Washington, DC. According to a State Department press release, the July 2016 round of talks included discussions on maritime and overland migration trends, cooperation between the Centers for Disease Control and Prevention and Cuban physicians, and cooperation between the U.S. Coast Guard and the Cuban Border Guard. The U.S. delegation reiterated its position that Cuba should accept the return of Cuban nationals who have been ordered removed from the United States. In April 2016, the State Department noted an existing backlog of around 28,000 Cuban nationals (with criminal convictions) with unexecuted final orders of removal. For years, the Cuban government has said that that it would not consider the repatriation of additional Cuban nationals until a 1984 repatriation list of 2,746 Cuban excludable aliens is exhausted. The State Department maintains that there are no cases remaining on that list that are viable for removal. The Cuban delegation reiterated its positon that the United States and Cuba would not be able to establish normal migration relations as long as the so-called "wet foot/dry foot" policy existed. Cuba traditionally contended that U.S. policy encourages illegal, unsafe, and disorderly migration as well as alien smuggling and Cubans' irregular entry into the United States from third countries. The delegation also reiterated its opposition to the Cuban Medical Professional Parole Program, a program permitting Cuban doctors and other health personnel on missions in third countries to migrate to the United States. In January 2016, a White House official indicated that the Administration was considering ending the program. Under the program, which began in 2006, more than 7,000 Cuban medical personnel working in third countries have been approved for admittance into the United States. As noted above, the Obama Administration announced on January 12, 2017, that it was ending the "wet foot/dry foot" policy and that Cubans attempting to enter the United State illegally would be subject to removal unless they qualified for humanitarian relief. Cuba agreed to receive back those Cuban nationals ordered removed. The Administration also announced that it was ending the Cuban Medical Professional Parole Program. Cuban Travel Policy Changes. In January 2013, the Cuban government changed its long-standing policy of requiring an exit permit and a letter of invitation from abroad for Cubans to travel abroad. Cubans are now able to travel abroad with just an updated passport and a visa issued by the country of destination, if required. Under the change in policy, Cubans can travel abroad for up to two years without forgoing their rights as Cuban citizens. The practice of requiring an exit permit had been extremely unpopular in Cuba, and the government had been considering doing away with the practice for some time. According to the Department of State, the Cuban government still requires some individuals, such as high-level government officials, doctors, lawyers, and technicians, to obtain permission to travel. In addition, some dissidents out on parole or facing court action have not been permitted to travel aboard, although many prominent dissidents have traveled abroad and returned to Cuba. Ahead of President Obama's visit to Cuba in March 2016, seven dissidents on parole were granted a one-time permission to travel outside the country. Effective August 1, 2013, the State Department made nonimmigrant B-2 visas issued to Cubans for family visits, tourism, medical treatment, or other personal travel valid for five years with multiple entries. Previously these visas had been restricted to single entry for six months, and an extensive visa interview backlog had developed at the U.S. Interests Section in Havana. State Department officials maintain that the change increased people-to-people ties and removed procedural and financial burdens on Cuban travelers. Legislative Activity. In light of Cuba's new travel policy initiated in 2013 making it easier for Cubans to travel abroad and the Administration's efforts to normalize relations with Cuba, some analysts raised questions as to whether the United States should review its policy toward Cuban migrants as set forth in the CAA. Some argued that the normalization of relations would make a special immigration policy for Cubans difficult to sustain. Some critics of current policy also argued that the law was being abused by some recent Cuban immigrants receiving U.S. benefits who travel back and forth between Cuba and the United States regularly. Others pointed to the increasing flow of Cubans into the United States by land and the problems that it has caused in Central America. In the 114 th Congress, H.R. 3818 (Gosnar), would have repealed the Cuban Adjustment Act. The bill would also have prohibited any funding to implement, administer, enforce, or carry out the Cuban Family Reunification Parole Program established in 2007. That program allows certain eligible U.S. citizens and lawful permanent residents to apply for parole for their family members in Cuba. Another initiative, H.R. 4247 (Curbelo)/ S. 2441 (Rubio), introduced in December 2015 and January 2016, respectively, would have provided that certain Cuban entrants would be ineligible to receive refugee/parolee assistance. Finally, H.R. 4847 (Farenthold), introduced in March 2016, would have both repealed the Cuban Adjustment Act and made certain Cuban entrants ineligible to receive refugee/parolee assistance. Cuba is not a major producer or consumer of illicit drugs, but its extensive shoreline and geographic location make it susceptible to narcotics smuggling operations. Drugs that enter the Cuban market are largely the result of onshore wash-ups from smuggling by high-speed boats moving drugs from Jamaica to the Bahamas, Haiti, and the United States or by small aircraft from clandestine airfields in Jamaica. For a number of years, Cuban officials have expressed concerns over the use of their waters and airspace for drug transit and about increased domestic drug use. The Cuban government has taken a number of measures to deal with the drug problem, including legislation to stiffen penalties for traffickers, increased training for counternarcotics personnel, and cooperation with a number of countries on antidrug efforts. Since 1999, Cuba's Operation Hatchet has focused on maritime and air interdiction and the recovery of narcotics washed up on Cuban shores. Since 2003, Cuba has aggressively pursued an internal enforcement and investigation program against its incipient drug market with an effective nationwide drug prevention and awareness campaign. According to the State Department's 2016 International Narcotics Control Strategy Report ( INCSR ), issued March 2, 2016, Cuba has a number of antidrug-related agreements in place with other countries, including 36 bilateral agreements for counterdrug cooperation and 27 policing cooperation agreements. As reported in the INCSR , Cuba reported seizing 962 kilograms of drugs (largely marijuana) in the first eight months of 2015 and detected 33 suspected "go-fast" boats on its southeastern coast. Over the years, there have been varying levels of U.S.-Cuban cooperation on antidrug efforts. In 1996, Cuban authorities cooperated with the United States in the seizure of 6.6 tons of cocaine aboard the Miami-bound Limerick , a Honduran-flag ship. Cuba turned over the cocaine to the United States and cooperated fully in the investigation and subsequent prosecution of two defendants in the case in the United States. Cooperation has increased since 1999, when U.S. and Cuban officials met in Havana to discuss ways of improving antidrug cooperation. Cuba accepted an upgrading of the communications link between the Cuban Border Guard and the U.S. Coast Guard as well as the stationing of a U.S. Coast Guard Drug Interdiction Specialist (DIS) at the U.S. Interests Section in Havana. The Coast Guard official was posted to the U.S. Interests Section in September 2000, and since that time, coordination has increased. According to the 2016 INCSR , Cuban authorities and the U.S. Coast Guard share tactical information related to vessels transiting through Cuban territorial waters suspected of trafficking. The report noted that Cuba also shares real-time tactical information with the Bahamas, Mexico, and Jamaica. It reported that such bilateral cooperation has led to multiple interdictions. In August 2015, for example, Cuban cooperation with the U.S. Coast Guard led to arrest of three Bahamians involved in drug trafficking and the seizure of their go-fast boat. As in past years, the State Department asserted in the INCSR that "Cuba has demonstrated an increased willingness to apprehend and turnover U.S. fugitives and to assist in U.S. judicial proceedings by providing documentation, witnesses, and background for cases in U.S. state and federal courts." Cuba maintains that it wants to cooperate with the United States to combat drug trafficking and, on various occasions, has called for a bilateral antidrug cooperation agreement with the United States. In the 2011 INCSR (issued in March 2011), the State Department acknowledged that Cuba had presented the U.S. government with a draft bilateral accord for counternarcotics cooperation that is still under review. According to the State Department, "Structured appropriately, such an accord could advance the counternarcotics efforts undertaken by both countries." This was reiterated in the INCSR for 2012 through 2014. In the 2015 INCSR , the State Department maintained that the United States and Cuba held technical discussions on counternarcotics in April 2014 and shared information on trends and enforcement procedures. In the 2016 INCSR , the State Department noted that the United States and Cuba held bilateral discussions on law enforcement and counternarcotics cooperation in late 2015 that included current information on trends and enforcement procedures. This second counternarcotics dialogue was held at the headquarters of the Drug Enforcement Administration in Washington, DC, on December 1, 2015, with delegations discussing ways to stop the illegal flow of narcotics and exploring ways to cooperate on the issue. As in the past, the State Department contended in the 2016 INCSR that "enhanced communication and cooperation between the United States, international partners, and Cuba, particularly in terms of real-time information-sharing, will likely lead to increased interdictions and disruptions of illegal drug trafficking." In April 2016, Cuban security officials toured the U.S. Joint Interagency Task Force South (JIATF-South) based in Key West, FL. JIATF-South has responsibility for detecting and monitoring illicit drug trafficking in the region and for facilitating international and interagency interdiction efforts. U.S. and Cuban officials held a third counternarcotics meeting on July 21, 2016, in Havana, with the U.S. side represented by officials from the State Department, the Drug Enforcement Administration (DEA), the U.S. Coast Guard, and Immigration and Customs Enforcement/Homeland Security Investigations. At the meeting, the two sides signed a Counternarcotics Arrangement to further cooperation and information on antidrug efforts. An issue in the process of normalizing relations is Cuba's compensation for the expropriation of thousands of properties of U.S. companies and citizens in Cuba. The Foreign Claim Settlement Commission (FCSC), an independent agency within the Department of Justice, has certified 5,913 claims for expropriated U.S. properties in Cuba valued at $1.9 billion in two different claim programs; with accrued interest, the value of the properties would be some $8 billion. In 1972, the FCSC certified 5,911 claims of U.S. citizens and companies that had their property confiscated by the Cuban government through April 1967, with 30 U.S. companies accounting for almost 60% of the claims. In 2006, the FCSC certified two additional claims in a second claims program covering property confiscated after April 1967. Many of the companies that originally filed claims have been bought and sold numerous times. There are a variety of potential alternatives for restitution/compensation schemes to resolve the outstanding claims, but resolving the issue would likely entail considerable negotiation and cooperation between the two governments. While Cuba has maintained that it would negotiate compensation for the U.S. claims, it does not recognize the FCSC valuation of the claims or accrued interest. Instead, Cuba has emphasized using declared taxable value as an appraisal basis for expropriated U.S. properties, which would amount to almost $1 billion, instead of the $1.9 billion certified by the FCSC. Moreover, Cuba has generally maintained that any negotiation should consider losses that Cuba has accrued from U.S. economic sanctions. Cuba estimates cumulative damages of the U.S. embargo at $121 billion in current prices. Several provisions in U.S. law specifically address the issue of compensation for properties expropriated by the Cuban government. Section 620(a)(2) of the Foreign Assistance Act of 1961 prohibits foreign assistance, a sugar quota authorizing the importation of Cuban sugar into the United States, or any other benefit under U.S. law until the President determines that the Cuban government has taken appropriate steps to return properties expropriated by the Cuban government to U.S. citizens and entities not less than 50% owned by U.S. citizens, or to provide equitable compensation for the properties. The provision, however, authorizes the President to waive its restrictions if he deems it necessary in the interest of the United States. The LIBERTAD Act ( P.L. 104-114 ) includes the property claims issue as one of the many factors that the President needs to consider in determining when a transition government is in power in Cuba and when a democratically elected government is in power. These determinations are linked, respectively, to the suspension and termination of the economic embargo on Cuba. For a transition government, as set forth in Section 205(b)((2) of the law, the President shall take into account the extent to which the government has made public commitments and is making demonstrable progress in taking steps to return to U.S. citizens (and entities that are 50% or more beneficially owned by U.S. citizens) property taken by the Cuban government on or after January 1, 1959, or to provide equitable compensation for such property. A democratically elected government, as set forth in Section 206 of the law, is one that, among other conditions, has made demonstrable progress in returning such property or providing full compensation for such property in accordance with international law standards and practice. Section 103 of the LIBERTAD Act also prohibits a U.S. person or entity from financing any transaction that involves confiscated property in Cuba where the claim is owned by a U.S. national. The sanction may be suspended once the President makes a determination that a transition government is in power, and shall be terminated when the President makes a determination that a democratically elected government is in power. In the 114 th Congress, two House hearings focused on the property claims issue. The House Western Hemisphere Subcommittee of the Committee on Foreign Affairs held a hearing in June 2015, and the House Judiciary Committee's Subcommittee on Courts, Intellectual Property, and the Internet held a hearing in February 2016. To date, U.S. and Cuban officials have held three meetings on claims issues. The first meeting took place in December 2015 in Havana, with the U.S. delegation led by Marcy McLeod, the State Department's Acting Legal Advisor. According to the State Department, the talks included discussions of the FCSC-certified claims of U.S. nationals, claims related to unsatisfied U.S. court judgments against Cuba (reportedly 10 U.S. state and federal judgments totaling about $2 billion), and some claims of the U.S. government. The Cuban delegation raised the issue of claims against the United States related to the U.S. embargo. A second claims meeting was held in July 2016, in Washington, DC, with the U.S. delegation led by Brian Egan, the State Department's legal adviser. According to the State Department, the talks allowed for an exchange of views on historical claims settlement practices and processes going forward. The State Department maintained that the resolution of these claims is a top priority for the normalization of bilateral relations. A third claims meeting was held in Havana on January 12, 2017. Although any change to the government's one-party communist political system appears unlikely, Cuba is moving toward a post-Castro era. Raúl Castro has said that he would step down from power once his term of office is over in February 2018. Moreover, generational change in Cuba's governmental institutions has already begun. Under Raúl and beyond, the Cuban government is likely to continue its gradual economic policy changes, moving toward a more mixed economy with a stronger private sector, although it is uncertain whether the pace of reform will produce major improvements to the Cuban economy. The Cuban Communist Party's seventh congress, held in April 2016, confirmed that Cuba will continue its gradual pace toward economic reform. The Obama Administration's shift in U.S. policy toward Cuba opened up engagement with the Cuban government in a variety of areas. Economic linkages with Cuba will likely increase because of the policy changes, although to what extent is uncertain given that the overall embargo and numerous other sanctions against Cuba remain in place. Moreover, the direction of U.S. policy toward Cuba under the incoming Trump Administration is uncertain, with some statements by President-elect Trump suggesting that he might reverse some of the Obama Administration's policy changes. The human rights situation in Cuba is likely to remain a key congressional concern. Just as there were diverse opinions in the 114 th Congress over U.S. policy toward Cuba, debate over Cuba policy will likely continue in the 115 th Congress, especially with regard to U.S. economic sanctions. Appendix A. Enacted Measures and Approved Resolutions in the 114 th Congress P.L. 114-92 ( S. 1356 ) . National Defense Authorization Act for Fiscal Year 2016. S. 1356 was originally was introduced and passed in the Senate on May 14, 2015, as a bill amending the Border Patrol Agent Pay Reform Act of 2014, but the bill, combined with H.Con.Res. 90 (which directs the Secretary of the Senate to make a technical correction in the enrollment of S. 1356 ), became a vehicle for the National Defense Authorization Act for Fiscal Year 2016. The House approved S. 1356 , amended (370-58) November 5, 2015. The Senate agreed (91-3) to the House amendment of S. 1356 November 10, 2015. The House passed H.Con.Res. 90 November 5; Senate passed, amended, November 10; House agreed to Senate amendment November 16, 2015. S. 1356 was signed into law November 25, 2015. The Joint Explanatory Statement to accompany S. 1356 included the same policy provision regarding the U.S. Naval Station at Guantánamo Bay, Cuba, that was in Section 1036 of the final enrolled version of H.R. 1735 discussed below. The provision prohibits any FY2016 funding for the Department of Defense to be used to (1) close or abandon the U.S. Naval Station at Guantánamo Bay, Cuba; (2) relinquish control of Guantánamo Bay to the Republic of Cuba; or (3) to implement a material modification to the Treaty Between the United States of America and Cuba signed at Washington, DC, on May 29, 1934, that constructively closes the U.S. Naval Station. The provision also requires a report within 180 days from the Secretary of Defense assessing the military implications of the United States Naval Station at Guantánamo Bay, Cuba. P.L. 114-113 ( H.R. 2029 ) . Consolidated Appropriations Act, 2016. H.R. 2029 originally was introduced and reported ( H.Rept. 114-92 ) by the House Appropriations Committee as the Military Construction and Veteran Affairs and Related Agencies Appropriations Act, 2016 on April 24, 2015. The House passed (255-163) the bill on April 30. The Senate Committee on Appropriations reported ( S.Rept. 114-57 ) its version of the bill on May 21, and the Senate passed (93-0) the bill on November 10, 2015. During April 29 House floor consideration, the House approved H.Amdt. 129 by voice vote, which would prohibit the use of funds to carry out the closure or transfer of the U.S. Naval Station at Guantánamo Bay, Cuba. The language became Section 515 of the House bill. The Senate version of the bill did not have a similar provision. H.R. 2029 subsequently became the vehicle for the FY2016 omnibus appropriations bill. On December 16, 2015, the House Appropriations Committee released the text of the Consolidated Appropriations Act, 2016 (House Amendment #1) that provided funding for the 12 annual appropriations bills through FY2016 and also included, among other bills, the FY2016 intelligence authorization measure (nearly identical to H.R. 4127 described below). On December 18, 2015, the House and Senate completed final action on H.R. 2029 , and the President signed the bill into law. With regard to Cuba, the omnibus did not contain any of the controversial Cuba policy riders contained in individual House and Senate appropriation bills ( H.R. 2577 , H.R. 2578 , H.R. 2772 / S. 1910 , H.R. 2995 , and H.R. 3128 , discussed below). The omnibus, did, however, have several Cuba-related provisions (in addition to provisions related to Guantánamo detainees not covered in this report). Division J (Military Construction and Veterans Affairs), Section 13, provides that no funds in the act may be used to carry out the closure or transfer of the United States Naval Station at Guantánamo Bay, Cuba. Division K (State Department and Foreign Operations), Section 7007, continued a long-standing provision prohibiting direct funding for the government of Cuba. Section 7015(f) continued to require that foreign aid for Cuba not be obligated or expended except as provided through the regular notification procedures of the Committees on Appropriations. The explanatory statement to the omnibus measure provided $27.140 million for the Office of Cuba Broadcasting (compared to the Administration's request of $30.3 million). It noted that the agreement did not include authority or funds requested for the merger of the Office of Cuban Broadcasting and the Latin America Division of Voice of America by establishing an independent grantee organization. The explanatory statement also provided $20 million in ESF for democracy programs in Cuba, the same as the Administration's request. Division M (Intelligence Authorization Act for FY2016), Section 512, requires that key supervisory positions at U.S. diplomatic facilities in Cuba are occupied by U.S. citizens, and also requires a report on progress on that issue and on the use of locally employed staff in U.S. diplomatic facilities in Cuba. Section 513 provides that each diplomatic facility that is constructed or undergoes a construction upgrade in Cuba shall include a sensitive compartmented information facility. P.L. 114-223 ( H.R. 5325 ). Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, and Zika Re sponse and Preparedness Act . H.R. 5325 originally was introduced as the Legislative Branch Appropriations Act, 2017, in May 2016 and passed by the House in June 2016. Subsequently, in September 2016, the bill became the vehicle for a continuing resolution funding federal agencies and programs until December 9, 2016, as well as full-year FY2017 Military Construction appropriations. Section 130 (Division A covering military construction appropriations) provides that none of the funds may be used to carry out the closure or realignment of the United States Naval Station at Guantánamo Bay, Cuba. Senate passed (72-26) with and amendment September 28, 2016. House agreed (342-85) to the Senate amendment. Signed into law September 29, 2016. P.L. 114-328 ( S. 2943 ). National Defense Aut horization Act for F iscal Year 2017 . S. 2943 introduced and reported by the Senate Armed Services Committee ( S.Rept. 114-255 ) May 18, 2016. Senate passed (85-13) June 14, 2016. House passed, amended, July 7, 2016, with the language of H.R. 4909 , which separately had been reported by the House Committee on Armed Services ( H.Rept. 114-537 ) May 4, 2016 and passed by the House (277-145) May 18, 2016. Conference report ( H.Rept. 114-840 ) on S. 2943 filed November 30, 2016; House agreed (375-34) to the conference report December 2, 2016, and the Senate agreed (92-7) December 8, 2016. Signed into law December 23, 2016. Section 1286 prohibits the Secretary of Defense from authorizing FY2017 funds for the Department of Defense to invite, assist, or otherwise assure the participation of Cuba in certain joint or multilateral exercises or related security conference between the governments of the United States and Cuba until the Secretaries of Defense and State, in consultation with the Director of National Intelligence, submits to Congress written assurances regarding Cuba's fulfillment of conditions for Cuba related to human rights, support to the security forces of Venezuela, cessation of Cuba's demand that the United States relinquish control of the U.S. Naval Station at Guantánamo Bay, and requirement that Cuban military officials indicted in the United States for the murder of U.S. citizens killed during the 1996 shoot down of two U.S. civilian planes are brought to justice. The provision provides exceptions to the funding prohibition for any payments related to the lease agreement or other financial transactions for maintenance and improvements of the military base at Guantanamo Bay, Cuba; any assistance or support of democracy-building efforts; customary and routine financial transactions necessary for the maintenance, improvements, or regular duties of the U.S. mission in Havana; or any joint or multilateral exercise or operation related to humanitarian assistance or disaster response. The conference report to the bill stated that it is the intent of the conferees that the exception related to the Guantanamo base includes periodic contact between appropriate U.S. and Cuban officials concerning the security and management of the naval station commonly referred to as "fence-line talks." (Both the White House's statement of policy on S. 2943 , issued June 7, 2016, and the Secretary of Defense's letter to Congress on the NDAA, issued July 13, 2016, had objected to the restrictions on U.S.-Cuban military-to-military interactions, noting that the restrictions would hamper pragmatic expert level coordination between the United States and Cuba, including the monthly fence talks.) Section 1035 continues provisions from the FY2016 NDAA prohibiting the use of funds in FY2017 for the realignment of forces at or closure of the U.S. Naval Station at Guantánamo, Bay, Cuba, or the implementation of a modification to a 1934 treaty that would constructively close the naval station. The House-passed version of S. 2943 also had a provision in Section 1099B that would have prohibited modification, abrogation, abandonment, or other related actions with respect to U.S. jurisdiction and control of the U.S. Naval Station at Guantánamo Bay, Cuba, without congressional action. However, the conference report to S. 2943 did not include the provision in the final version of the law. (The language in the provision was identical to H.R. 4678 , cited below, which was reported out of the Committee on Foreign Affairs in March 2016. For additional information, see CRS Legal Sidebar WSLG1586, House Approves Measure to Prevent Return of GTMO to Cuba without Congress's Say So , by [author name scrubbed].) S.Res. 418 (Collins). Introduced April 12, 2016; reported by Senate Committee on Foreign Relations without written report April 28, 2016; Senate passed by Unanimous Consent May 10, 2016. The resolution recognizes several women leaders worldwide, including Yoani Sánchez of Cuba, for their selflessness and dedication to their respective causes. Appendix B. Other Actions in 2015 and 2016 H.R. 636 (Tiberi). Federal Aviation Administration Reauthorization Act of 2016. The bill was originally introduced in the House as the Small Business Tax Relief Act of 2015 on February 2, 2015. House passed February 13, 2015. Senate floor consideration began April 7, 2016, using the vehicle to reauthorize the Federal Aviation Administration. Senate passed, amended, April 19, 2016. Several potential Senate amendments related to U.S. policy toward Cuba were filed but not considered. S.Amdt. 3557 (Flake) would have prohibited restrictions on travel to Cuba and travel transactions. S.Amdt. 3528 (Rubio) and S.Amdt. 3722 (Rubio) introduced April 13, 2016, would have provided that certain Cuban entrants would be ineligible to receive refugee/parolee assistance. S.Amdt. 3568 (Collins) would have permitted transit stops in the United States by foreign air carriers traveling to or from Cuba. S.Amdt. 3725 (Flake) would have authorized air carriers to provide service between the United States and Cuba for citizens of other countries with itineraries that begin and end outside the United States. S.Amdt. 3789 (Rubio), S.Amdt. 3790 (Rubio), and S.Amdt. 3791 (Rubio) would have added limitations to other amendments, with the limitations related to the extradition of certain criminals from Cuba and compensation for U.S. property confiscated by the Cuba government. H.R. 1735 (Thornberry) . National Defense Authorization Act for Fiscal Year 2016. Introduced April 13, 2015; reported by House Committee on Armed Services, H.Rept. 114-102 , May 5, 2015. House passed (269-151) May 15, 2015. Senate passed (71-25), with an amendment, June 18, 2015. Conference report ( H.Rept. 114-270 ) filed September 29, 2015. House agreed (270-156) to conference October 1, 2015; Senate agreed (70-27) October 7, 2015. President vetoed measure October 22, 2015. Section 1036 of the enrolled bill would prohibit any FY2016 funding for the Department of Defense to be used to (1) close or abandon the U.S. Naval Station at Guantánamo Bay, Cuba; (2) relinquish control of Guantánamo Bay to the Republic of Cuba; or (3) to implement a material modification to the Treaty Between the United States of America and Cuba signed at Washington, DC, on May 29, 1934, that constructively closes the U.S. Naval Station. Section 1036 would also require a report within 180 days from the Secretary of Defense assessing the military implications of United States Naval Station Guantánamo Bay, Cuba. For final action, see P.L. 114-92 ( S. 1356 ) above. H.R. 2577 (Diaz-Balart). Transportation, Housing and Urban Development, and Related Agencies Appropriations Act, 2016. Introduced and reported ( H.Rept. 114-129 ) by the House Committee on Appropriations May 27, 2015. House passed (216-210) June 9, 2015. Reported by the Senate Committee on Appropriations June 25, 2015 ( S.Rept. 114-75 ). As approved by the House, Section 193 would have provided that no funds in the bill could be used to facilitate scheduled flights to Cuba if they land or pass through property confiscated by the Cuban government. The amendment appeared aimed at preventing the introduction of new regular scheduled air carrier service to Cuba, but it would not have affected air charter service between the United States and Cuba. Section 414 would have prevented funds in the bill from being used by the Federal Maritime Administration or the Administrator of the Maritime Administration to issue a license or certificate for a commercial vessel that docked or anchored within the previous 180 days within 7 miles of a port or property that was confiscated by the Cuban government. The provision appeared aimed at impeding licensing for the establishment of passenger ferry/cruise service to Cuba. During June 4, 2015, House floor consideration, the House rejected H.Amdt. 404 (Lee) by a vote of 176-247, which would have prohibited the implementation or enforcement of the Cuba provisions. The Administration's statement of policy on the bill said that the Administration strongly objected to the two Cuba provisions "that would restrict flights and cruise ships from going to Cuba and would place unnecessary restrictions on options for educational, religious, or other permitted travel to Cuba." The Senate version of the bill did not have Cuba sanctions provisions. For final action, see P.L. 114-113 ( H.R. 2029 ), the FY2016 omnibus bill, above. H.R. 2578 (Culberson). Commerce, Justice, Science and Related Agencies Appropriations Act, 2016. Introduced and reported ( H.Rept. 114-130 ) by the House Committee on Appropriations May 27, 2015. House passed (242-183) June 3, 2015. Reported by the Senate Committee on Appropriations June 16, 2015 ( S.Rept. 114-66 ). As approved by the House, Section 540 would have prohibited Commerce Department funds from being used to facilitate, permit, license, or promote exports to Cuba's Ministry of the Revolutionary Armed Forces (MINFAR), the Ministry of the Interior (MININT), any subsidiaries of these two ministries, and any officers of these ministries or their immediate family members. The provision would have affected additional categories of exports to Cuba authorized as part of the Administration's policy change on Cuba. It would not have affected the export of agricultural commodities, medicines, or medical goods permitted under TSRA. During June 3, 2015, House floor consideration, the House rejected H.Amdt. 308 (Farr), by a vote of 153-273, which would have struck Section 540 from the bill. The Administration's statement of policy on the bill said that the bill included highly objectionable provisions, including nongermane foreign policy restrictions related to Cuba that prohibit funding "to facilitate, permit, license, or promote exports to the Cuban military or intelligence service." The Senate version of the bill did not contain Cuba sanctions provisions. For final action, see P.L. 114-113 ( H.R. 2029 ), the FY2016 omnibus measure, above. H.R. 2772 (Granger)/ S. 1725 (Graham) . Department of State, Foreign Operations, and Related Programs Appropriations Act, 2016. H.R. 2772 introduced and reported ( H.Rept. 114-154 ) by the House Committee on Appropriations June 15, 2015. S. 1725 introduced and reported ( S.Rept. 114-79 ) by the Senate Appropriations Committee July 9, 2015. Before consideration of the bill by the full House Appropriations Committee, the Administration wrote a letter to the chair and ranking Member of the committee on June 10, expressing serious concerns about the legislation. Among its concerns, the Administration maintained that the bill "includes provisions that would restrict Administration activities relating to Cuba, including the establishment or operation of a U.S. diplomatic presence in Cuba beyond what was in existence on December 17, 2014, interfering with the Executive Branch's ability to make the best decisions consistent with our national security." Among the Cuba provisions in the House and Senate versions: Section 7007 of both the House and Senate versions would continue to prohibit direct funding for the government of Cuba. Section 7015(f) of both the House and Senate versions would continue to require that foreign aid for Cuba not be obligated or expended except as provided through the regular notification procedures of the Committees on Appropriations. Section 7031(c) of the House bill would not have allowed for a waiver for restrictions against eligibility for entrance into the United States with respect to officials of the Cuban government and their immediate family members from Cuba (including members of the Cuban military and high-level officials of the Cuban Communist Party) whom the Secretary of State has credible information have been involved in significant corruption, including corruption related to the extraction of natural resources or a gross violation of human rights. The report to the House bill would have directed the Secretary of State, for the purposes of implementing Section 7031(c) and applying Presidential Proclamation 7750, to consider the confiscation of properties belonging to American companies by corrupt Cuban officials as having serious adverse effects on international activity of U.S. businesses and on the national interests of the United States. The Senate bill did not have a similar provision. Section 7045(c)(1) of the House bill would have provided $30 million to promote democracy and civil society in Cuba, $10 million above the Administration's request, and would have provided that no funds could be obligated for business promotion, economic reform, entrepreneurship, or any other assistance that is not democracy-building as expressly authorized in the LIBERTAD Act. The report to the House bill would have provided that not less than $8 million of the $30 million shall be for the National Endowment for Democracy; that remaining funds should be administrated by the State Department's Bureau of Democracy, Human Rights and Labor (DRL), Bureau of Western Hemisphere Affairs (WHA), and USAID; and that grants exceeding $1 million shall be awarded only to organizations with experience promoting democracy inside Cuba. Section 7045(c) of the Senate bill would have provided $15 million in ESF for Cuba democracy programs, and $5 million in ESF (notwithstanding any other provision of law) for programs to support private Cuban entrepreneurs, except that no such assistance may be provided for the Cuban government. In addition, the report to the Senate bill stated that the committee expected a portion of the $50.5 million to promote Internet freedom in Section 7078 of the bill to be used to support Internet freedom in Cuba. Section 7045(c)(2) of the House bill would prohibit funding to establish an independent grantee organization to carry out any and all broadcasting and related programs to the Latin America and Caribbean region, including Cuba, or substantively alter the structure of the Office of Cuba Broadcasting. The report to the House bill recommended not less than $28.130 million for the Office of Cuba Broadcasting, almost $2.2 million less than the Administration's $30.3 million request and $1 million more than that provided in FY2015. During House Appropriations Committee consideration, an amendment offered by Representative Serrano to shift $5 million from Cuba broadcasting to efforts to counter Russian media was rejected by a vote of 18-33. The report to the Senate bill, S. 1725 ( S.Rept. 114-79 ), recommended $27.130 million for OCB, and also did not support or include authority for the merger of OCB and VOA's Latin American Division. Section 7045(c)(3) of the House version would have prohibited funds for the establishment or operation of a U.S. diplomatic presence, including an embassy, consulate, or liaison office in Cuba beyond that which was in existence prior to December 17, 2014, until the President determined and reported to Congress that the requirements and factors specified in Section 205 of the LIBERTAD Act (related to Cuba having a transition government) have been met. The Administration requested just over $6 million for the conversion of the current U.S. Interests Section in Havana to an embassy, pending the reestablishment of diplomatic relations. The Senate version did not have such a provision. For final action, see P.L. 114-113 ( H.R. 2029 ), the FY2016 omnibus, above. H.R. 2995 (Crenshaw)/ S. 1910 (Boozman). Financial Services and General Government Appropriations, 2016. H.R. 2995 introduced and reported ( H.Rept. 114-194 ) July 9, 2015. S. 1910 introduced and reported ( S.Rept. 114-97 ) July 30, 2015. The House bill had three Cuba provisions that would have blocked part of the Administration's policy shift on Cuba related to travel and the importation of goods from Cuba, and would have introduced an additional sanction on financial transactions with Cuba. In contrast, the Senate bill had three provisions that would have lifted U.S. sanctions on Cuba related to travel, financing for U.S. agricultural exports, and shipping. As introduced, H.R. 2995 had three Cuba provisions that would have blocked some of the Administration's policy changes toward Cuba. The House Appropriations Committee approved a draft bill (30-20) on June 17, 2015. Before its approval, a Lowey amendment offered to remove various riders, including the Cuba provisions, was rejected by a vote of 19-31. Before consideration of the bill by the full House Appropriations Committee, the Administration wrote a letter to the chair and ranking Member of the committee on June 16, maintaining that the Administration "strongly opposes language in the bill affecting foreign relations with Cuba, including funding prohibitions on nonacademic educational exchanges." According to the letter, "This language would result in a reduction of people-to-people interactions and as such is counter to the Administration's policy to increase overall travel and the flow of information and resources to private Cubans. This provision is an unwarranted restriction on purposeful travel to Cuba." The three Cuba provisions in H.R. 2995 included the following: Section 130 would have prohibited funding to approve, license, facilitate, authorize, or otherwise allow people-to-people educational travel to Cuba. Section 131 would have prohibited funding to approve, license, facilitate, authorize, or otherwise allow the use, purchase, trafficking, or import of property confiscated by the Cuban government. The provision appeared aimed at prohibiting the importation of alcohol and tobacco products by authorized U.S. travelers as accompanied baggage. In January 2015, the Obama Administration amended the embargo regulations to authorize the importation of no more than $100 of tobacco and alcohol products combined as part of an overall limit of up to $400 worth of goods from Cuba as accompanied baggage for personal use. These value restrictions were lifted by Treasury Department in October 2016, so that only normal limits on duty and tax exemptions apply for merchandise imported as accompanied baggage for personal use. Section 132 would have prohibited funding to approve, license, facilitate, authorize, or otherwise allow financial transactions with Cuba's Ministry of the Revolutionary Armed Forces (MINFAR), the Ministry of the Interior (MININT), their subsidiaries, and any officers of these ministries or their immediate family members. The restrictions would not have applied to financial transactions with respect to exports permitted under TSRA. This provision would have introduced a new economic sanction that potentially could significantly have impeded U.S. financial transactions with Cuba given that the Cuban military, since the 1990s, has become increasingly involved in Cuba's economy and running numerous companies. In contrast, S. 1910 had three Cuba provisions that would have lifted several U.S. sanctions on financing for U.S. agricultural exports, travel, and shipping. The provisions were approved as amendments during the Senate Appropriations Committee's July 23, 2015, markup of the bill. Section 638 of the bill would have repealed the prohibition on financing agricultural sales to Cuba in TSRA, including the requirement that payment for such products shall be only be payment of cash in advance or financing by third country financial institutions. The provision was added by a Boozman amendment approved by the full committee by voice vote. Section 641 of the bill would have lifted restrictions on travel to Cuba. It would have prevented any funding "to implement any law, regulation, or policy that prohibits or otherwise restricts travel, or any transaction incident to travel, to or from Cuba by any citizen or legal resident of the United States." The provision further stated that any such law, regulations, or policy would cease to have any force or effect on and after the date of the enactment of the act, but would not limit the authority of the President to restrict travel or any transaction incident to such travel, if the restriction was important to U.S. national security or to protect human health or welfare. The provision was added to the bill by a Moran amendment approved by a vote of 18-12. Section 642 of the bill would have repealed a provision in the Cuban Democracy Act that prohibits a vessel that enters a Cuban port to engage in trade from loading or unloading any freight in the United States within 180 days after departing Cuba, except pursuant to a Treasury Department license. The provision was added to the bill by a Tester amendment approved by voice. For final action, see P.L. 114-113 ( H.R. 2029 ), the FY2016 omnibus measure, above. H.R. 3128 (Carter )/ S. 1619 (Hoeven) . Department of Homeland Security Appropriations Act, 2016. Introduced and reported ( H.Rept. 114-215 ) by the House Appropriations Committee July 21, 2015. The full committee had approved the bill on July 14, 2015. Senate Appropriations Committee reported S. 1619 June 18, 2015 ( S.Rept. 114-68 ). Section 559 of the House bill would have prohibited funds in the bill from being used to approve, license, facilitate, authorize, or otherwise allow the trafficking or import or property confiscated by the Cuban government. The provision appeared in part aimed at prohibiting the importation of alcohol and tobacco products by authorized U.S. travelers as accompanied baggage. Before consideration of the bill by the full House Appropriations Committee, the Administration wrote a letter to the committee expressing concern about "highly problematic ideological riders," including "a provision that prohibits funds to be used allow property confiscated by the Cuban government to enter the United States." The Senate bill did not have Cuba sanctions provisions. For final action, see H.R. 2029 , the FY2016 omnibus bill, above. H.R. 4678 (Royce). United States Naval Station Guantánamo Bay Preservation Act. The bill would have prohibited modification, abrogation, abandonment, or other related actions with respect to U.S. jurisdiction and control of the U.S. naval station. Introduced March 3, 2016; Committee on Foreign Affairs reported by unanimous consent March 15, 2016 ( H.Rept. 114-496 ). H.R. 4974 (Dent) / S. 2806 (Kirk)/ H.R. 2577 (Diaz-Balart) . Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017. H.R. 4974 introduced and reported by the House Committee on Appropriations ( H.Rept. 114-497 ) April 15, 2016; House passed (295-129) May 19, 2016. S. 2806 introduced and reported by the Senate Committee on Appropriations ( S.Rept. 114-237 ) April 18, 2016. H.R. 2577 was approved by the House in 2015 (see above) as the FY2016 transportation appropriations measure, but in 2016, the Senate used it as the vehicle for the FY2017 transportation ( S. 2844 ) and military construction ( S. 2806 ) appropriations measures as well as Zika funding. The Senate approved H.R. 2577 May 19, 2016, with an amendment substituting the language of S. 2844 and S. 2806 , amended, as well as Zika funding. The House agreed to the Senate amendment, but with its own amendment, on May 26, 2016, which included military construction appropriations and Zika funding, but not transportation appropriations. Conference report ( H.Rept. 114-640 ) filed in House June 22, 2016. House agreed (293-171) to the conference June 23. Senate failed (52-46) to invoke cloture September 6, 2016. Section 130 of the conference report to H.R. 2577 ( H.Rept. 114-640 ) would have provided that none of the funds made available by the act may be used to carry out the closure or realignment of the United States Naval Station, Guantánamo Bay, Cuba. For final action, see P.L. 114-223 ( H.R. 5325 ), above. H.R. 5054 (Aderholt)/ S. 2956 (Moran). Agricultural, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2017. H.R. 5054 introduced and reported ( H.Rept. 114-531 ) by the House Committee on Appropriations April 26, 2016. S. 2956 introduced and reported ( S.Rept. 114-259 ) May 19, 2016. The report to the Senate bill recommended $1.5 million (as requested by the Administration) for the Foreign Agricultural Service to establish an overseas post in Cuba. The House bill or report did not address the issue. H.R. 5393 (Culberson)/ S. 2837 (Shelby). Commerce, Justice, Science and Related Agencies Appropriations Act, 2017. S. 2837 introduced and reported ( S.Rept. 114-239 ) by the Senate Appropriations Committee April 21, 2016. H.R. 5393 introduced and reported ( H.Rept. 114-605 ) by the House Appropriations Committee June 7, 2016. The House bill had two Cuba provisions. Section 537 would have prohibited funds in the act from being used to facilitate, permit, license, or promote exports to the Cuban military or intelligence service or to any officer of the Cuban military or intelligence service, or an immediate family member thereof. It would not have affected the export of goods permitted under the Trade Sanctions Reform and Export Enhancement Act of 2000. Similar to a provision in the House-passed FY2016 Commerce appropriations measure, H.R. 2578 , this provision would have introduced a new sanction that would restrict additional categories of exports to Cuba authorized as part of the Administration's policy changes on Cuba. The provision could have significantly affected the expansion of U.S. exports to Cuba given that the Cuban military, since the 1990s, has become increasingly involved in Cuba's economy and running numerous companies. The Administration's statement of policy on H.R. 2578 said that the bill included highly objectionable provisions, including non-germane foreign policy restrictions to Cuba. Section 538 would have prohibited funds in the act from being used to approve the registration or renewal of, or maintenance of, a mark, trade name, or commercial name, used in commerce that is the same or substantially similar to a mark, trade name, or commercial name used in connection with a business or assets that were confiscated unless the original owner has expressly consented. The provision would have introduced a new sanction prohibiting the U.S. Patent and Trademark Office (USPTO) from approving, maintaining, or renewing such a trademark. With regard to the Havana Club case, however, the USPTO renewed the trademark registration in February 2016 until 2026. H.R. 5485 (Crenshaw) / S. 3067 (Boozman). Financial Services and General Government Appropriations, 2017. H.R. 5485 introduced and reported ( H.Rept. 114-624 ) by the House Committee on Appropriations June 15, 2016. House approved (239-185) on July 7, 2016, with four Cuba-related provisions. The Administration's statement of policy on the bill stated that the Administration "strongly objects" to the four provisions, maintaining that they "would severely undermine the President's policy on Cuba that aims to improve the lives of the Cuban people and advance U.S. interests through expanded travel, commerce, and the free flow of information." Section 132 would have prohibited funds in the bill to approve, license, facilitate, authorize, or otherwise allow, whether by general or specific license, people-to-people educational travel to Cuba described in 31 C.F.R. 565(b)(2) . In its statement of policy, the Administration said that the provision "would result in a reduction of people-to-people interactions on purposeful travel to Cuba and as such is counter to the Administration's policy to increased overall travel and the flow of information and resources to private Cubans." The Administration stated that "the provision is an unwarranted restriction on purposeful travel to Cuba by U.S. citizens." Section 133 would have prohibited funding to approve, license, facilitate, authorize, or otherwise allow the use, purchase, trafficking, or import of property confiscated by the Cuban government. In its statement of policy, the Administration maintained that the provision "could severely chill authorized U.S.-Cuba commerce designed to support the Cuban people." Section 134 would have prohibited funding to approve, license, facilitate, authorize, or otherwise allow any financial transaction with an entity owned or controlled, in whole or in part, by the Cuban military or intelligence service or with any officer of the Cuban military or intelligence service, or an immediate family member thereof, but the restrictions would not apply to financial transactions with respect to exports permitted under the Trade Sanctions Reform and Export Enhancement Act of 2000. In its statement of policy, the Administration maintained that the provision "is overly broad and, as written, could significantly undermine the ability for U.S. persons to engage in otherwise authorized business in order to more effectively support the Cuban people." Section 135 would have prohibited funds to be used to authorize a general license or approve a specific license under 31 C.F.R. 801 or 31 C.F.R.527 with respect to a mark, trade name, or commercial name that is the same as or substantially similar to a mark, trade name, or commercial name that was used in connection with a business or assets that were confiscated unless the original owner has expressly consented. The provision would have introduced a new sanction prohibiting the Treasury Department's Office of Foreign Assets Control from issuing a general or specific license to allow for the payment of trademark registration fees. An existing trademark sanction in the FY1999 omnibus appropriations measure (§211 of Division A, Title II, P.L. 105-277 ) prevents the United States from accepting payment for trademark registrations and renewals from Cuban nationals that were used in connection with a business or assets in Cuba that were confiscated, unless the original owner of the trademark has consented. U.S. officials maintain that sanction prohibits a general license for transactions or payments for such trademarks. In January 2016, however, OFAC issued a specific license for payments related to the renewal of the Havana Club trademark, and the USPTO subsequently renewed the Havana Club trademark for the 2006-2016 period and then for 10 additional years until 2026. Before House floor consideration, the House Rules Committee approved a structured rule ( H.Rept. 114-639 to H.Res. 794 ) on June 21, 2016, for the consideration of H.R. 5485 that made in order two potential Cuba amendments easing sanctions: A Crawford amendment, listed as amendment 24 in H.Rept. 114-639 , would have prohibited funds in the act from being used to implement, administer, or enforce a prohibition against private financing of U.S. agricultural sates to Cuba. The amendment ultimately was not introduced. A Sanford amendment, listed as amendment 47 in H.Rept. 114-639 , would have prohibited funds in the act from being used to administer or enforce 31 C.F.R. Part 515 (the Cuban Assets Control Regulations) or Section 910(b) of TSRA with respect to any travel or travel-related transaction. The amendment was offered on July 7, 2016, as H.Amdt. 1264 but subsequently was withdrawn. S. 3067 introduced and reported ( S.Rept. 114-280 ) by the Senate Appropriations Committee June 16, 2016, with four Cuba-related provisions. Section 634 would have amended the Trade Sanctions Reform and Export Enhancement Act of 2000 to allow for the financing of agricultural exports to Cuba. It would also eliminate a provision in the Cuban Democracy Act of 1992 prohibiting a seaborne vessel entry into the United States if it has been involved in trade with Cuba within the previous 180 days, except pursuant to a Treasury Department license. Section 635 would have prohibited funding in the act or any other act used to implement any law, regulation, or policy that prohibits or otherwise restricts travel, or any transaction incident to travel, to or from Cuba by any citizen or legal resident of the United States. Section 636 would have prohibited funds in the act from restricting the export of consumer communication devices and other telecommunications equipment to Cuba, the provision of telecommunications services to Cuba, or the establishment of facilities to provide telecommunications connecting Cuba with another country; financing any such activity; or entering into, performing, or making or receiving payments under a contract with any individual or entity in Cuba with respect to the provision of telecommunications services involving Cuba or persons in Cuba. Section 637 would have prohibited funds in the act or any act from being used to implement any law, regulation, or policy that prohibits the provision of technical services otherwise permitted under an international air transportation agreement in the United States for an aircraft of a foreign carrier that is en route to or from Cuba based on the restrictions set forth in the Cuban Assets Control Regulations. H.R. 5634 (Carter) / S. 3001 (Hoeven) . Department of Homeland Security Appropriations Act, 2017. Introduced and reported ( H.Rept. 114-668 ) by House Committee on Appropriations July 6, 2016. Section 540 of the House bill would have prohibited funds in the bill from being used to approve, license, facilitate, authorize, or otherwise allow the trafficking or import or property confiscated by the Cuban government. When a similar provision was included the FY2016 Homeland Security Appropriations bill, H.R. 3128 , the Administration wrote a letter to the committee expressing concern about "highly problematic ideological riders," including "a provision that prohibits funds to be used allow property confiscated by the Cuban government to enter the United States." The Senate version of the FY2017 bill, S. 3001 , did not include such a provision. H.R. 5728 (Katko ) / S. 3289 (Rubio). Cub an Airport Security Act of 2016 . Similar but not identical bills. Both bills would have prohibited scheduled passenger air transportation between the United States and Cuba until a study was completed regarding security measures and equipment at Cuba's airports, the Government Accountability Office conducted an audit of that report, and the Secretary of Homeland Security established agreements with Cuba allowing the Federal Air Marshal Service to conduct missions on regularly scheduled flights between the United States and Cuba and allowing Transportation Security Administration inspectors to access all areas of last point of departure airports in Cuba for the purposes of security assessments. The bills also would have amended Section 44907 of Title 49 of the U.S. Code to clarify the role of the Secretary of Homeland Security regarding security standards at foreign airports. H.R. 5728 introduced July 12, 2016; referred to the Committee on Homeland Security and in addition to the Committee on Foreign Affairs. Homeland Security Committee reported (amended) by voice vote September 13, 2016. S. 3289 introduced September 6, 2016; referred to Senate Committee on Commerce, Science, and Transportation. H.R. 5912 (Granger) / S. 3117 (Graham). Department of State, Foreign Operations, and Related Programs Appropriations Act, 2017 . H.R. 5912 was introduced and reported by the House Appropriations Committee on July 15, 2016 ( H.Rept. 114-693 ). The House Appropriations Committee had released a draft version of the bill on June 22, 2016. Among the bill's Cuba provisions are the following: Section 7007 would continue to prohibit direct funding for the government of Cuba. Section 7015(g) would continue to require that foreign aid for Cuba appropriated in the act not be obligated or expended except as provided through the regular notification procedures of the Committees on Appropriations. Section 7045(c)(1)(A)(i) would have prohibited funding for the establishment or operation of a U.S. diplomatic presence in Cuba beyond what was in place prior to December 17, 2014, including the hiring of additional staff, unless necessary for protecting the health, safety, or security of diplomatic personnel or facilities in Cuba. Section 7045(c)(1)(A)(ii) would have prohibited funding for the facilitation of the establishment of diplomatic mission of Cuba in the United States beyond that which was in existence prior to December 17, 2014. Section 7045(c)(1)(A)(iii) would have prohibited funding to support locally employed staff in contravention of Section 515 of the Intelligence Authorization Act for FY2016 (Division M of P.L. 114-113 ), which requires that key supervisory positions at U.S. diplomatic facilities in Cuba to be occupied by U.S. citizens. Section 7045(c)(1)(B) would have provided that the funding limitations in Section 1045(c)(1)(A) should not apply to democracy-building efforts for Cuba or if the President determines and reports to Congress that the Cuban government has met conditions set forth in Section 205 of the LIBERTAD Act of 1996. Section 7045(c)(2) would have prohibited funding to establish an independent grantee organization to carry out any and all broadcasting and related programs to the Latin American and Caribbean region or otherwise substantially alter the structure of the Office of Cuba Broadcasting (OCB) unless specifically authorized by a subsequent act of Congress. The funding prohibition also pertained to the merger of the OCB and the Voice of America Latin America Division. Section 7045(c)(3) would have provided $30 million for democracy promotion for Cuba to promote and strengthen civil society (double the Administration's request of $15 million) but would have prohibited funding for business promotion, economic reform, entrepreneurship, or any other assistance that was not democracy building authorized by the LIBERTAD Act. On June 29, 2016, the Senate reported its version, S. 3117 ( S.Rept. 114-290 ). Among the bill's Cuba provisions are the following: Section 7045(c)(1) would have provided not more than $15 million for democracy programs for Cuba, fully funding the Administration's request. Of that amount, as set forth in Section 7045(c)(2), not less than $3 million would have been available for USAID to support free enterprise and private business organizations and people-to-people educational and cultural activities. The report to the bill would have required a report from the Secretary of State assessing Internet access in Cuba, including a description of Internet access and use in both urban and rural areas and an assessment of the effectiveness of Cuban government efforts to block access to the Internet. Section 7045(c)(4) would have funded the operation of, and infrastructure and security improvements to, U.S. diplomatic facilities in Cuba, as well as costs associated with additional diplomatic personnel in Cuba. Section 7045(c)(5) would have provided that U.S. payments to the Inter-American Development Bank (up to $2.5 million during FY2017) not be withheld if the bank awards grants related to assistance to facilitate transparency, private sector development, and other structural reforms of the Cuban economy. S. 1705 (Burr)/ H.R. 2596 (Nunes)/ H.R. 4127 (Nunes). Intelligence Authorization Act for FY2016. S. 1705 introduced and reported ( S.Rept. 114-83 ) by the Senate Select Committee on Intelligence July 7, 2015. Section 512 would require certain efforts to replace and reduce the number of locally employed staff serving at U.S. diplomatic facilities in Cuba. Section 513 would provide that each diplomatic facility that is constructed or undergoes a construction upgrade in Cuba shall include a sensitive compartmented information facility. H.R. 2596 introduced June 1, 2015, and passed (247-178) June 16, 2015. The bill did not have similar provisions related to Cuba found in the Senate bill. H.R. 4127 was introduced November 30, 2015, and passed (364-58) December 1, 2015. As approved, H.R. 4127 had provisions in Sections 512 and 513 that were similar, although not identical to the Cuba provisions in S. 1705 described above. For final action, see P.L. 114-113 ( H.R. 2029 ), the FY2016 omnibus, above. Appendix C. Additional Bills and Resolutions in the 114 th Congress H.Res. 181 (King, NY). Among its provisions, the resolution would have called for the immediate extradition or rendering to the United States of convicted felon William Morales and all other fugitives from justice who are receiving safe harbor in Cuba in order to escape prosecution or confinement for criminal offenses committed in the United States. Introduced March 26, 2015; referred to the Committee on Foreign Affairs. H.Con.Res. 126 (Walker). The resolution would have expressed the sense of Congress that Cuba should issue a state of apology and agree to cease human rights violations in order for any embargo or economic restraints to be lifted. Introduced March 23, 2016; referred to the Committee on Foreign Affairs. H.R. 274 (Rush). United States-Cuba Normalization Act of 2015. The bill would have removed provisions of law restricting trade and other relations with Cuba; authorized common carriers to install and repair telecommunications equipment and facilities in Cuba and otherwise provide telecommunications services between the United States and Cuba; prohibit restrictions on travel to and from Cuba and on transactions incident to such travel; directed the U.S. Postal Service to take actions to provide direct mail service to and from Cuba; called on the President to conduct negotiations with the government of Cuba to settle claims of U.S. nationals for the taking of property by the Cuban government and for securing the protection of internationally recognized human rights; extended nondiscriminatory trade treatment to the products of Cuba; prohibited limits on remittances to Cuba; and rescinded the designation of the Cuban government as a state sponsor of international terrorism. Introduced January 12, 2015; referred to the Committee on Foreign Affairs, in addition to the Committees on Ways and Means, Energy and Commerce, Judiciary, Financial Services, Oversight and Government Reform, and Agriculture. H.R. 403 (Rangel). Free Trade with Cuba Act. The bill would have removed provisions of law restricting trade and other relations with Cuba; authorized common carriers to install and repair telecommunications equipment and facilities in Cuba and otherwise provide telecommunications services between the United States and Cuba; prohibited restrictions on travel to and from Cuba and on transactions incident to such travel; directed the U.S. Postal Service to take actions to provide direct mail service to and from Cuba; and called on the President to conduct negotiations with the government of Cuba to settle claims of U.S. nationals for the taking of property by the Cuban government and for securing the protection of internationally recognized human rights. Introduced January 16, 2015; referred to the Committee on Foreign Affairs, in addition to the Committees on Ways and Means, Energy and Commerce, the Judiciary, Financial Services, Oversight and Government Reform, and Agriculture. H.R. 570 (McCollum). Stop Wasting Taxpayer Money on Cuba Broadcasting Act. The bill would have repealed the Radio Broadcasting to Cuba Act (22 U.S.C. 1465 et seq.) and the Television Broadcasting to Cuba Act (22 U.S.C. 1464aa et seq.). Introduced January 27, 2015; referred to the Committee on Foreign Affairs. H.R. 634 (Rangel). Export Freedom to Cuba Act of 2015. The bill would have provided that travel to and from Cuba by U.S. citizens and residents, and any transactions incident to such travel, shall not be regulated or prohibited. Introduced February 2, 2015; referred to the House Committee on Foreign Affairs. H.R. 635 (Rangel). Promoting American Agricultural and Medical Exports to Cuba Act of 2015. Among its provisions, the bill would have permanently redefined the term "payment of cash in advance" to mean that payment is received before the transfer of title and release and control of the commodity to the purchaser; authorized direct transfers between Cuban and U.S. financial institutions for products exported under the terms of TSRA; established an export promotion program for U.S. agricultural exports to Cuba; permitted nonimmigrant visas for Cuban nationals for activities related to purchasing U.S. agricultural goods; repealed a trademark sanction related to Cuba in a FY1999 omnibus appropriations measure (§211 of Division A, Title II, P.L. 105-277 ); prohibited restrictions on travel to Cuba; and repealed the on-site verification requirement for medical exports to Cuba under the CDA. Introduced February 2, 2015; referred to the Committee on Foreign Affairs, in addition to the Committees on Ways and Means, the Judiciary, Agriculture, and Financial Services. H.R. 654 (Jolly) / S. 2559 (Burr). Naval Station Guantánamo Bay Protection Act. Identical bills would have prohibited the modification, termination, abandonment, or transfer of the lease by which the United States acquired the land and waters containing Naval Station, Guantánamo Bay, Cuba, unless the President notifies Congress before, and after such notification, Congress enacts a law authorizing that modification, termination, abandonment, or transfer. H.R. 654 introduced February 2, 2015; referred to the Committee on Foreign Affairs. S. 2559 introduced February 22, 2016; referred to the Committee on Armed Services. H.R. 664 (Sanford). Freedom to Travel to Cuba Act of 2015. The bill would have prohibited the President from prohibiting or regulating travel to or from Cuba by U.S. citizens or legal residents, or any of the transactions incident to such travel, including banking transactions. Introduced February 2, 2015; referred to the Committee on Foreign Affairs. H.R. 735 (Serrano). Cuba Reconciliation Act. The bill, among its provisions, would have lifted the trade embargo on Cuba. It would have removed provisions of law restricting trade and other relations with Cuba; authorized common carriers to install and repair telecommunications equipment and facilities in Cuba and otherwise provide telecommunications services between the United States and Cuba; prohibited restrictions on travel to and from Cuba and on transactions incident to such travel; and directed the U.S. Postal Service to take actions to provide direct mail service to and from Cuba. Introduced February 4, 2015; referred to the Committee on Foreign Affairs, in addition to the Committees on Ways and Means, Energy and Commerce, Financial Services, the Judiciary, Oversight and Government Reform, and Agriculture. H.R. 738 (Serrano). Baseball Diplomacy Act. The bill would have waived certain prohibitions with respect to nationals of Cuba coming to the United States to play organized professional baseball. Introduced February 4, 2015; referred to the Committee on Foreign Affairs, in addition to the Committee on the Judiciary. H.R. 1782 (Smith, NJ). Cuba Human Rights Act of 2015. Among its provisions, the bill would have expressed the sense of Congress that the U.S.-Cuba relationship should not be changed, nor should any federal law or regulation be amended, until the Cuban government ceases violating the human rights of the Cuban people. Introduced April 14, 2015; referred to the Committee on Foreign Affairs. H.R. 3306 (Rush). Promote Opportunities With Energy Resources for Cuba Act (or POWER Cuba Act). Would have authorized the export of energy resources, energy technologies, and related services to Cuba. Introduced July 29, 2015; referred to the Committee on Energy and Commerce, and in addition to the Committee on Foreign Affairs. H.R. 3687 (Crawford). Cuba Agricultural Exports Act. Introduced August 6, 2015; referred to the Committee on Foreign Affairs, and in addition, to the Committees on Financial Services and Agriculture. The bill would have amended TSRA to permit U.S. government assistance for agricultural exports under TSRA, but not if the recipient assistance would be an entity controlled by the Cuban government; authorized the financing of sales of agricultural commodities; and authorized investment for the development of an agricultural business in Cuba as long as it is not controlled by the Cuban government or does not traffic in property of U.S. nationals confiscated by the Cuban government. H.R. 3818 (Gosnar). Ending Special National Origin-Based Immigration Programs for Cubans Act of 2015. Introduced October 23, 2015; referred to the House Committee on the Judiciary. The bill would have repealed the Cuban Adjustment Act (P.L. 89-732) and would have prohibited any funding to implement, administer, enforce, or carry out the Cuban Family Reunification Parole Program established in 2007. H.R. 4247 (Curbelo)/ S. 2441 (Rubio). Cuban Immigrant Work Opportunity Act of 2015. Identical bills would have amended the Refugee Education Assistance Act of 1980, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, and the Immigration and Nationality Act to make Cuban nationals who enter the United States on or after the enactment of this act ineligible for refugee/parolee assistance. H.R. 4247 introduced December 15, 2015; referred to the Committee on Education and the Workforce and to the Committee on Ways and Means. S. 2441 introduced January 12, 2016; referred to the Senate Committee on Finance. H.R. 4772 (Pearce). Justice Before Commerce Act of 2016. The bill would have prohibited the use of federal funds to accept commercial flight plans between the United States and Cuba until Cuba extradites fugitives from justice from the United States located in Cuba. Introduced March 17, 2016; referred to the Committee on Transportation, and in addition to the Committee on Foreign Affairs. H.R. 4847 (Farenthold). Correcting Unfair Benefits for Aliens Act of 2016 or CUBA Act of 2016. The bill would have repealed the Cuban Adjustment Act and amended the Refugee Education Assistance Act of 1980, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, and the Immigration and Nationality Act to make Cuban nationals who enter the United States on or after the enactment of this act ineligible for refugee/parolee assistance. Introduced March 23, 2016; referred to the Committee on the Judiciary, and in addition to the Committees on Education and the Workforce and Ways and Means. S.Res. 26 (Durbin). The resolution would have commended Pope Francis for his leadership in helping to secure the release of Alan Gross and for working with the Governments of the United States and Cuba to achieve a more positive relationship. Introduced January 13, 2015; referred to the Committee on Foreign Relations. S.Res. 226 (Cruz). The resolution would have e xpressed the sense of the Senate that the street in front of the Cuban Embassy in Washington, DC, should be designated as "Oswaldo Payá Way" in honor of the Cuban political and human rights activist. Introduced July 21, 2015; referred to the Committee on Homeland Security and Governmental Affairs. S.Res. 584 (Cruz). The resolution would have acknowledged the peaceful hunger strike of Cuban political dissident Guillermo Fariñas, applauded his bravery and commitment to human rights, and expressed solidarity with him and his cause. Introduced September 28, 2016; referred to the Committee on Foreign Relations. S. 299 (Flake). Freedom to Travel to Cuba Act of 2015. The bill would have prohibited the President from regulating travel to or from Cuba by U.S. citizens or legal residents, or any of the transactions incident to such travel, including banking transactions. Introduced January 29, 2015; referred to the Committee on Foreign Relations. S. 491 (Klobuchar). Freedom to Export to Cuba Act of 2015. The bill would have repealed or amended many provisions of law restricting trade and other relations with Cuba, including certain restrictions in the CDA, the LIBERTAD Act, and TSRA. Introduced February 12, 2015; referred to the Committee on Banking, Housing, and Urban Affairs. S. 757 (Nelson)/ H.R. 1627 (Issa) . No Stolen Trademarks Honored in America Act. Identical bills would have modified a 1998 prohibition (Section 211 of Division A, Tile II, P.L. 105-277 ) on recognition by U.S. courts of certain rights to certain marks, trade names, or commercial names. The 1998 prohibition or sanction prevents trademark registrations and renewals from Cuban or foreign nations that were used in connection with a business or assets in Cuba that were confiscated, without the consent of the original owner. The bill would have applied a fix so that the sanction would have applied to all nationals and would have brought the sanction into compliance with a 2002 World Trade Organization dispute settlement ruling. S. 757 introduced March 17, 2015; referred to Committee on the Judiciary. H.R. 1627 introduced March 25, 2015; referred to the Committee on the Judiciary. S. 1049 (Heitkamp). Agricultural Export Expansion Act of 2015. The bill would have amended TSRA to allow financing by U.S. persons of sales of agricultural commodities to Cuba. Introduced April 22, 2015; referred to the Committee on Banking, Housing, and Urban Affairs. S. 1388 (Vitter)/ H.R. 2466 (Rooney). Cuba Normalization Accountability Act of 2015. The bill, among its provisions, would have required the President to submit a plan for resolving all outstanding claims relating to property confiscated by the government of Cuba before taking action to ease restrictions on travel to or trade with Cuba. S. 1388 introduced May 19, 2015; referred to the Committee on Banking, House, and Urban Affairs. H.R. 2466 introduced May 20, 2015; referred to the House Committee on Foreign Affairs. S. 1389 (Udall) / H.R. 3055 (Cramer). Cuba Digital and Telecommunications Advancement Act of 2015 (Cuba DATA Act). Among its provisions, the bill would have authorized exportation of consumer communications devices to Cuba and the provision of telecommunications services to Cuba and repealed certain provisions of the Cuban Democracy Act of 1992 and the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996. S. 1389 introduced May 19, 2015; referred to the Senate Committee on Foreign Relations. H.R. 3055 introduced July 14, 2015; referred to the House Committee on Foreign Affairs and to the House Committee on Energy and Commerce. S. 1489 (Rubio)/ H.R. 2937 (Nunes). Cuban Military Transparency Act. Section 4 would have prohibited financial transactions with MINFAR or MININT, any agency or entity controlled by those two entities or which those entities own more than a 25% share, or senior members of those two ministries. Section 5 would have included, in the State Department rewards program under the State Department Basic Authorities Act of 1956, rewards for information leading to the arrest or conviction in any country of any individual responsible for or aiding in the February 1996 attack on the aircraft of U.S. persons in international waters by the Cuban military. Section 6 would have provided that the Attorney General shall seek to coordinate with the International Criminal Police Organization (INTERPOL) to pursue the location and arrest of U.S. fugitives in Cuba, including current and former members of the Cuban military. Sections 7 and 8 would have required reports to Congress on the role of MINFAR and MININT in the economy and foreign relationships of Cuba and on the use of confiscated property by these two entities. S. 1489 introduced June 3, 2015; referred to the Senate Committee on Foreign Relations. H.R. 2937 introduced June 25; referred to the House Committee on Foreign Affairs, and in addition to the Committee on Financial Services. S. 1543 (Moran ) / H.R. 3238 (Emmer). Cuba Trade Act of 2015. Among its provisions, the bill would have repealed or amended many provisions of law restricting trade and other relations with Cuba, including in the CDA, the LIBERTAD Act, and TSRA. It would have repealed restrictions on private financing for Cuba in TSRA, but continued to prohibit U.S. government foreign assistance or financial assistance, loans, loan guarantee, extension of credit, or other financing for export to Cuba, albeit with presidential waiver authority for national security or humanitarian reasons. The federal government would have been prohibited from expending any funds to promote trade with or develop markets in Cuba, although certain federal commodity promotion programs would have been allowed. S. 1543 introduced June 10, 2015; referred to the Committee on Banking, Housing, and Urban Affairs. H.R. 3238 introduced July 28, 2015; referred to the Committee on Foreign Affairs and in addition to the Committees on Ways and Means, Financial Services, and Agriculture. S. 1999 (Nelson). Caribbean Oil Spill Intervention, Prevention, and Preparedness Act. Introduced August 5, 2015; referred to the Committee on Commerce, Science, and Transportation. Among the bill's provisions, Section 201 would have required the Administrator of the National Oceanic and Atmospheric Administration to develop and apply hydrodynamic modeling of the ocean currents and meteorological modeling of the Straits of Florida; and would have amended the National Marine Sanctuaries Act (16 U.S.C. 1935(b)) to require the Secretary of State to take appropriate action to negotiate oil pollution prevention and response and protection of the marine resources of the Gulf of Mexico and Straits of Florida. Section 202 would have amended the Outer Continental Shelf Lands Act (43 U.S.C. 1337(a)) to require that a bidder for an oil or gas lease that is conducting oil or gas operations in the territorial sea, on the continental shelf, or within the exclusive economic zone of Cuba be denied an oil or gas leases unless the bidder submits an oil spill response plan for its Cuban operations that includes one or more worst-case scenario oil discharge plans, and evidence that the bidder has sufficient financial and other resources necessary for removal, response costs, and damages to respond to a worst-case-scenario oil discharge in its Cuba operations or that poses a substantial threat to enter the marine environment of the United States. Section 204 would have required, not later than 180 days, the Secretary of the department in which the Coast Guard is operating to carry out an oil spill risk analysis and planning process for the development and implementation of oil spill response plans in the Straits of Florida and the Gulf of Mexico originating in waters beyond the territorial jurisdiction of the United States. S. 2990 (Collins). Introduced May 25, 2016; referred to Senate Committee on Banking, Housing, and Urban Affairs. The bill would have prohibited the President from preventing foreign air carriers traveling to or from Cuba from making transit stops in the United States for refueling and other technical services based on restrictions set forth in the Cuban Assets Control Regulations (31 C.F.R. Part 515).
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Cuba remains a one-party communist state with a poor record on human rights. The country's political succession in 2006 from the long-ruling Fidel Castro to his brother Raúl was characterized by a remarkable degree of stability. In 2013, Raúl began his second and final five-year term, which is scheduled to end in February 2018, when he would be 86 years of age. Castro has implemented a number of market-oriented economic policy changes over the past several years. An April 2016 Cuban Communist Party congress endorsed the current gradual pace of Cuban economic reform. Few observers expect the government to ease its tight control over the political system. While the government has released most long-term political prisoners, short-term detentions and harassment have increased significantly over the past several years. U.S. Policy Congress has played an active role in shaping policy toward Cuba, including the enactment of legislation strengthening and at times easing various U.S. economic sanctions. U.S. policy over the years has consisted largely of isolating Cuba through economic sanctions, while a second policy component has consisted of support measures for the Cuban people, including U.S. government-sponsored broadcasting and support for human rights and democracy projects. In December 2014, President Obama announced a major shift in U.S. policy toward Cuba, moving away from a sanctions-based policy toward one of engagement and a normalization of relations. The President maintained that the United States would continue to raise concerns about democracy and human rights in Cuba, but he emphasized that the United States could do more through engagement than isolation. The policy change included the restoration of diplomatic relations (July 2015); the rescission of Cuba's designation as a state sponsor of international terrorism (May 2015); and an increase in travel, commerce, and the flow of information to Cuba. In order to implement this third step, the Treasury and Commerce Departments eased the embargo regulations five times (most recently in October 2016) in such areas as travel, remittances, trade, telecommunications, and financial services. The overall embargo, however, remains in place, and can only be lifted with congressional action or if certain conditions in Cuba are met, including that a democratically elected government is in place. With the goal of advancing the normalization process, President Obama visited Cuba in March 2016, the first visit of a U.S. President to Cuba in almost 90 years. On January 12, 2017, President Obama announced a change in U.S. immigration policy by ending the special treatment for undocumented Cuban migrants entering the United States. Legislative Activity The Obama Administration's shift in Cuba policy has spurred strong interest in Congress. Some Members lauded the initiative as in the best interest of the United States and a better way to support change in Cuba, while others criticized the President for not obtaining more concessions from Cuba to advance human rights and protect U.S. interests. In the 114th Congress, numerous legislative initiatives were introduced on both sides of the policy debate. In 2015, five FY2016 House appropriations bills had Cuba provisions that would have blocked some of the Administration's policy changes and introduced new economic sanctions, and one Senate appropriations bill had provisions that would have eased certain economic sanctions. Ultimately, none of these provisions were included in the FY2016 omnibus appropriations measure, P.L. 114-113. In 2016, three FY2017 House appropriations measures (Commerce, H.R. 5393; Financial Services, H.R. 5485; and Homeland Security, H.R. 5634) had provisions that would have blocked some of the Cuba policy changes, and one FY2017 Senate appropriations measure (Financial Services, S. 3067) had provisions lifting restrictions on travel and financing for agricultural exports. In addition, the Senate version of the FY2017 State Department and Foreign Operations appropriations bill, S. 3117, would have funded U.S. diplomatic facilities in Cuba and additional personnel costs and would have fully funded the $15 million request for democracy programs. In contrast, the House version of the bill, H.R. 5912, would have prohibited assistance for expanding the U.S. diplomatic presence in Cuba and provided $30 million for democracy programs. The 114th Congress did not complete action on FY2017 appropriations, but it did approve a continuing resolution (P.L. 114-254) in December 2016 funding most programs at the FY2016 level, minus an across-the-board reduction of almost 0.2% through April 28, 2017. The 115th Congress will face completing action on FY2017 appropriations. With regard to the U.S. Naval Station at Guantánamo Bay, both the FY2016 and the FY2017 military construction appropriations measures, P.L. 114-113 and P.L. 114-223, have provisions prohibiting funding for the station's closure. Both the FY2016 National Defense Authorization Act (NDAA), P.L. 114-92, and the FY2017 NDAA, P.L. 114-328, also have prohibitions on funding for the closure of the U.S. Naval Station at Guantanamo Bay, Cuba. P.L. 114-328 also restricts FY2017 funding for Cuba's participation in certain joint or multilateral exercises or related security conferences. (See Appendix A.) Several other bills introduced in the 114th Congress would have lifted or eased sanctions: H.R. 274, H.R. 403, and H.R. 735 (overall embargo); H.R. 634, H.R. 664, and S. 299 (travel); H.R. 635 (agricultural and medical exports and travel); S. 491 and S. 1543/H.R. 3238 (some embargo restrictions); S. 1049 (financing of agricultural sales); S. 1389/H.R. 3055 (telecommunications); H.R. 3306 (energy resources and technologies); H.R. 3687 (agricultural exports and investment); and S. 2990 (foreign carriers traveling to or from Cuba). Other bills would have increased restrictions on engagement with Cuba: S. 1388/H.R. 2466 (travel and trade); S. 1489/ H.R. 2937 (Cuban military and intelligence); and H.R. 4772 and H.R. 5728/S. 3289 (U.S. flights). For more on these on other bills and resolutions, see Appendix C.
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The Environmental Protection Agency (EPA) was established in 1970 to consolidate federal pollution control responsibilities that had been divided among several federal agencies. EPA's responsibilities grew significantly as Congress enacted an increasing number of environmental laws as well as major amendments to these statutes. Among the agency's primary responsibilities are the regulation of air quality, water quality, pesticides, and toxic substances; the management and disposal of solid and hazardous wastes; and the cleanup of environmental contamination. EPA also awards grants to assist states and local governments in complying with federal requirements to control pollution, and to assist those states with the delegated authority to administer certain federal pollution control programs. Since FY2006, Congress has funded EPA programs and activities within the Interior, Environment, and Related Agencies appropriations bill. On July 19, 2011, the House Appropriations Committee reported H.R. 2584 ( H.Rept. 112-151 ) which included $27.52 billion in appropriations for FY2012 for Interior, Environment, and Related Agencies. Title II of H.R. 2584 as reported would provide a total of $7.15 billion for the EPA, $1.82 billion (20%) less than the President's FY2012 request of $8.97 billion submitted to Congress on February 14, 2011, and $1.53 billion (18%) less than the FY2011 enacted appropriation of $8.68 billion. H.R. 2584 as reported reflected a decrease for each of the EPA's eight regular appropriations accounts compared to the President's FY2012 request, and all except the Building and Facilities and the Inland Oil Spill Program accounts (the House committee-reported bill included the same level as FY2011 enacted) when compared to FY2011 enacted appropriations. Many of the federal departments and agencies included in H.R. 2584 , as reported by the House committee, generally would be funded at levels below the FY2010 and FY2011 enacted appropriations, as well as those included in the President's FY2012 request. The House-reported bill also included numerous funding modifications and restrictions for many accounts across the various departments and agencies, including several EPA accounts and program activities. Several recent and pending EPA regulatory actions have been the focus of considerable attention in Congress during hearings and markup of EPA's FY2012 appropriations, and authorizing committees have been addressing EPA regulatory actions through hearings and legislation. As reported, H.R. 2584 contained more than 30 provisions that would restrict or preclude the use of FY2012 funds by EPA for implementing or proceeding with a number of regulatory actions. Theses provisions include more than 20 provisions proposed by the subcommittee (primarily in Title IV Administrative Provisions), and eight amendments added during full committee markup. From July 25, 2011, to July 28, 2011, the House considered H.R. 2584 but did not complete debate on the bill. Concerns regarding these EPA actions continued to be raised during House floor debate and were among roughly 250 amendments considered and pending prior to suspension of floor debate on July 28, 2011. No bill to fund Interior, Environment, and Related Agencies for FY2012 has been formally introduced in the Senate. However, on October 14, 2011, the bipartisan leadership of the Senate Appropriations Subcommittee on Interior, Environment, and Related Agencies released a draft bill for FY2012 to serve as a starting point of discussions for markup. The Senate subcommittee draft recommended a total appropriation of $29.55 billion for FY2012 for Interior, Environment, and Related Agencies, including $8.62 billion for EPA under Title II of the draft. The Senate subcommittee draft did not include provisions similar to the House committee-reported bill that would restrict or preclude EPA from using FY2012 funds for implementing or proceeding with a number of regulatory actions. At the time this report was updated, EPA and other departments and agencies funded within the Interior, Environment, and Related Agencies Appropriations bill were operating under a third continuing resolution, the Consolidated and Further Continuing Appropriations Act, 2012 ( P.L. 112-55 ), which provides funding through December 16, 2011. No regular appropriations bill was enacted before October 1, 2011, the start of FY2012. As with other federal agencies funded under the 12 appropriations bills, since the beginning of FY2012 EPA had operated under continuing resolutions ( P.L. 112-33 and P.L. 112-36 ) sequentially extending funding from October 1, 2011, through November 18, 2011. If the House committee bill were enacted as reported, the provisions and amendments in Title IV would impact ongoing and anticipated EPA activities including those addressing greenhouse gas emissions, hazardous air pollutants, particulate matter emissions, permitting of new source air emissions, water quality impacts of mountaintop mining operations, management of coal ash, lead-based paint removal, environmental impacts associated with livestock operations, financial responsibility with respect to Superfund cleanup, and stormwater discharge. Further, Title V of the committee-reported bill, the Reducing Regulatory Burdens Act of 2011, included amendments to the Clean Water Act and the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) in response to EPA's consideration of requiring permits under the Clean Water Act for point source discharges of pesticides in or near U.S. waters. In response to congressional interest in the level of appropriations and several of the provisions affecting EPA program activities in H.R. 2584 as reported by the House Appropriations Committee, this report highlights a number of these provisions. The information presented throughout this report is primarily an extraction of the bill language for purposes of reference and is not intended to provide a comprehensive analysis of all provisions in H.R. 2584 as reported that may directly or indirectly affect EPA programs if enacted. Only those provisions affecting EPA programs that are clearly identifiable by specific language or references in the House committee-reported bill are included in this report. The report also provides a brief summary of funding levels for EPA accounts and program activities specified in the House committee-reported bill and as recommended in the Senate subcommittee draft. The following section of this report provides an overview of funding levels for FY2012 as specified in H.R. 2584 as reported and as recommended in the Senate subcommittee draft, compared to the amounts proposed in the President's FY2012 request, and the enacted amounts for FY2010 in P.L. 111-88 and FY2011 in P.L. 112-10 . For purposes of historical comparison, Table A-1 in the Appendix of this report shows EPA enacted appropriations by account for FY2008 through FY2011. The overview of funding levels is followed by a series of tables that present a compilation of excerpts of provisions in H.R. 2584 as reported for selected EPA programs and activities that have received prominent attention during deliberations on the FY2012 appropriations. Amendments that were agreed to or failed during floor debate, as well as proposed amendments pending actions, are not included in the tables, as House floor debate was not completed. Concerns regarding EPA's FY2012 funding have generally focused on federal financial assistance for environmental cleanup of Superfund sites, wastewater and drinking water infrastructure projects, grants to assist states in implementing air pollution control requirements, and climate change research and related activities. There also has been interest in funding for geographic-specific water quality initiatives (e.g., the Great Lakes Restoration Initiative, and efforts to restore the Chesapeake Bay and Puget Sound). Since FY1996, EPA's funding has been requested by the Administration and appropriated by Congress under eight statutory accounts. Table 1 presents the FY2012 amounts as approved for EPA by the House Appropriations Committee in H.R. 2584 and those recommended in the Senate subcommittee draft, compared to the President's FY2012 budget request, and the appropriations enacted in FY2011 and FY2010 for the eight accounts that fund the agency. The table includes a brief description of the programs and activities funded within each of the EPA accounts. Note that the former name of the "Oil Spill Response" account was changed in the President's FY2012 request to "Inland Oil Spill Program" to more clearly reflect the agency's jurisdiction for oil spill response only in the inland zone. As indicated in the table, the House Appropriations Committee approved a decrease from the President's FY2012 request and the FY2011 and FY2010 enacted levels for each of the eight accounts (except the Building and Facilities account which is the same as FY2011), with most of the decrease in two accounts: Environmental Programs and Management, and State and Tribal Assistance Grants (STAG). The more than 30% reduction below the FY2011 enacted amount for the STAG account is reflected primarily in the roughly 55% reduction below FY2011 enacted appropriations (to the FY2008 level) for grants to aid states to capitalize their Clean Water State Revolving Funds (SRFs). The Drinking Water SRF also was reduced to the FY2008 level, although the magnitude of the decreases below the FY2011 enacted and FY2012 requested levels was smaller than the decreases for the Clean Water SRF. Although the House committee proposed mostly decreases for individual programs and activities funded within each of the eight appropriations accounts, there are a few examples where funding levels were maintained or increased compared to FY2011 levels. The Senate subcommittee draft proposed overall funding for EPA would also be below FY2012 requested, and the FY2011 and FY2010 enacted levels, but the decrease would not be as large as that proposed in the House committee-reported bill. The higher funding level for EPA in the Senate subcommittee draft as compared to H.R. 2584 as reported is primarily attributed to maintaining funding for the Clean Water and Drinking Water SRFs at the same level as enacted for FY2011. As indicated in the table, proposed funding for each of the EPA accounts under Title II in the Senate subcommittee draft is above the levels recommended in Title II of H.R. 2584 , with the exception of the base appropriations prior to transfers for the Hazardous Substance Superfund, the Leaking Underground Storage Tanks Trust Fund, and the Buildings and Facilities accounts. With the exception of these two accounts, funding recommended for each of the other EPA accounts would be similar to, albeit generally slightly below, FY2011 levels under the Senate subcommittee draft. House committee-reported H.R. 2584 and the Senate subcommittee draft include both increases and decreases for programs and activities below the account level for EPA, as reflected in the funding tables accompanying each proposal. In addition to the funding amounts presented by account in the table below, the "Administrative Provisions" for EPA in Title II of H.R. 2584 included a rescission of $140.0 million from unobligated balances funded through the STAG and the Hazardous Substance Superfund account. The Senate subcommittee draft included a comparable rescission of $34.0 million. Similar rescissions of unobligated balances have been included in EPA appropriations since FY2006. For FY2011, Section 1740 in Title VII of Division B in P.L. 112-10 included a rescission of $140.0 million from unobligated balances available within the STAG account only; for FY2010, P.L. 111-88 included a $40.0 million rescission of unobligated balances available from the STAG and the Hazardous Substance Superfund accounts. During the past two years, EPA has proposed and promulgated numerous regulations implementing provisions of the 12 primary federal pollution control statutes enacted by Congress. Many stakeholders and some Members of Congress have expressed concerns that the agency has been reaching beyond the authority given it by Congress and ignoring or underestimating the costs and economic impacts of proposed and promulgated rules. EPA and others counter that these actions are consistent with statutory mandates and in some cases compelled by court ruling, the pace in many ways is slower than a decade ago, and that cost and benefits are appropriately evaluated. Recently promulgated and pending actions under the Clean Air Act, in particular EPA controls on emissions of greenhouse gases and efforts to address conventional pollutants from a number of industries, have received much of the attention. Several actions under the Clean Water Act, Safe Drinking Water Act, Resource Conservation and Recovery Act (RCRA), Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), and the Toxics Substance Control Act (TSCA), have also received some attention. A number of these issues were the focus of considerable debate which resulted in nearly 30 provisions included in H.R. 2584 as reported by the House Appropriations Committee. The House-reported provisions, if enacted, generally would restrict or prohibit use of funds as appropriated in the bill for certain EPA regulatory actions. As not all the terms and activities contained within the provisions are explicitly defined in H.R. 2584 , the scope of the effects of many of the provisions are subject to interpretation and therefore neither definitions or potential impacts are inferred in this report. Both House committee-reported H.R. 2584 and the Senate subcommittee draft contain five similar administrative provisions setting terms and conditions for certain EPA activities under the "Environmental Protection Agency Administrative Provisions" following the proposed funding for each of the appropriations accounts in Title II of each of the proposals. The Senate subcommittee draft included one additional administrative provision that would authorize EPA to transfer funding from any of its eight accounts to fund emergency response actions for oil spills, if the Inland Oil Spill Response account is insufficient to finance these costs. The funds transferred from other accounts would be reimbursed by payments administered by the U.S. Coast Guard from the Oil Spill Liability Trust Fund. The more controversial provisions regarding several EPA programs and regulations were contained in the "General Provisions" in Title IV of H.R. 2584 . Additionally, Title V of the House committee-reported bill, the Reducing Regulatory Burdens Act of 2011, included amendments to the Clean Water Act and the Federal Insecticide, Fungicide, and Rodenticide Act in response to EPA's consideration of requiring permits under the Clean Water Act for point source discharges of pesticides in or near U.S. waters. Title V of H.R. 2584 is identical to provisions contained in H.R. 872 as passed by the House March 31, 2011. The Senate subcommittee draft did not include those provisions that would restrict or preclude the use of FY2012 funds for certain EPA actions, as were contained in Title IV and Title V of House committee-reported H.R. 2584 . Tables 2 through 8, which follow, identify those provisions in the House committee-reported bill that the Senate subcommittee did not include in its draft. The provisions included in H.R. 2584 presented in the following tables are categorized in this report by general program areas, that is, air quality and climate change, water quality, and waste management. Related provisions that are under the jurisdiction of agencies other than EPA are listed separately in Table 8 . The tables contain information about the provisions including the associated sections of the bill, and those that were amendments adopted during full-committee markup if applicable. H.R. 1 , the FY2011 Full-Year Continuing resolution passed by the House February 19, 2011, included more than 20 provisions that would have similarly restricted and prohibited the use of FY2011 funds to implement EPA regulatory activities. These provisions were not included in the final FY2011 appropriations law ( P.L. 112-10 ) enacted April 15, 2011. Those provisions contained in H.R. 2584 as reported that are similar or the same as provisions included in H.R. 1 as passed by the House February 19, 2011, are denoted in the first column of each of the following tables. Since FY1996, EPA's appropriations have been requested by the Administration and appropriated by Congress within eight statutory appropriations accounts. Table A-1 identifies the amounts for the appropriations enacted by Congress for FY2008 through FY2011 for these accounts. The table identifies transfers of funds between these accounts, and funding levels for several grant program areas within the State and Tribal Assistance Grants (STAG) account that have received more prominent attention during these fiscal years. The enacted amounts presented in Table A-1 are based on most recent information available from House, Senate, or conference committee reports accompanying the annual appropriations bills that fund EPA.
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The Environmental Protection Agency (EPA) and other federal departments and agencies funded within the Interior, Environment, and Related Agencies Appropriations bill are currently operating under a continuing resolution (P.L. 112-55), which runs through December 16, 2011, while the debate over FY2012 appropriations continues. In July 2011, the House Appropriations Committee reported H.R. 2584 (H.Rept. 112-151) with $27.52 billion in appropriations for FY2012 for Interior, Environment, and Related Agencies. Title II of H.R. 2584, as reported, would provide a total of $7.15 billion for EPA, $1.82 billion (20%) less than the President's FY2012 request of $8.97 billion, and $1.53 billion (18%) less than the FY2011 enacted appropriation of $8.68 billion. In addition to funding levels for the various EPA programs and activities, H.R. 2584 as reported included more than 25 provisions that would restrict or preclude the use of FY2012 funds by EPA for implementing or proceeding with a number of recent and pending EPA regulatory actions. Nearly 250 amendments, including several regarding EPA, were under consideration during floor debate which was suspended on July 28, 2011. No companion bill for FY2012 appropriations has been formally introduced in the Senate. However, on October 14, 2011, the bipartisan leadership of the Senate Appropriations Subcommittee on Interior, Environment, and Related Agencies released a draft bill for FY2012 to serve as a starting point of discussions for markup. The Senate subcommittee draft, which recommended $8.62 billion for EPA, did not include those provisions that would restrict or preclude the use of FY2012 funds for certain EPA actions, as were contained in the House committee-reported H.R. 2584. Several EPA regulatory actions have received considerable attention during House and Senate oversight committee hearings, appropriations committee hearings, and House floor debate on the FY2012 appropriations. The provisions included in H.R. 2584 as reported, and many of the House floor amendments (considered and pending), cut across the various environmental pollution control statutes' programs and initiatives, such as those that address greenhouse gas emissions, hazardous air pollutants, particulate matter emissions, permitting of new source air emissions, water quality impacts of mountaintop mining operations, management of coal ash, lead-based paint removal, environmental impacts associated with livestock operations, financial responsibility with respect to Superfund cleanup, and stormwater discharge. Further, Title V of the House committee-reported bill, the Reducing Regulatory Burdens Act of 2011, included significant amendments to the Clean Water Act and the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) in response to EPA's consideration of requiring permits under the Clean Water Act for point source discharges of pesticides in or near U.S. waters. To date, House floor debate on H.R. 2584 has not been completed. This report summarizes funding levels for EPA accounts and certain program activities as proposed in H.R. 2584 as reported by the House Appropriations Committee, and in the Senate subcommittee draft. Selected provisions regarding EPA program activities extracted from the House committee-reported bill are also presented. Only those provisions that are clearly identifiable by specific language or references contained in the bill are included. No comparable provisions were identified for the Senate subcommittee draft. Amendments that were voted on and pending during initial House floor debate at the end of July 2011 are not included.
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This report provides a side-by-side comparison of three bills and two proposals— H.R. 6566 , H.R. 6670 , H.R. 6709 , H.R. 6899 (the House Leadership Proposal), and the Senate Draft Proposal—which address oil and gas development in the outer continental shelf (OCS). None of the bills has passed its respective chamber. The text below provides background on the issues. The side-by-side table gives a description of selected sections of the bills. President Bush announced on June 18, 2008, that he would like to open areas of the Outer Continental Shelf (OCS) for oil and gas development currently under presidential and congressional moratoria (discussed in more detail below). The President stated that he would lift the executive branch moratoria only after Congress did so legislatively. But, on July 14, 2008, President Bush reversed his position and lifted the executive ban on the OCS imposed in 1990 by President George H.W. Bush. Senator John McCain, among others, has called on Congress to lift the offshore drilling moratoria as well. Further, the Administration proposes to begin planning its next five-year leasing program that would, if approved, be implemented as early as 2010—two years ahead of schedule. The proposed new five-year program would supersede the current five-year leasing program from 2007-2012. The Administration argues that a new five-year lease program beginning in 2010 would allow any newly opened OCS areas (if the congressional moratoria is lifted this year) to be offered in a lease sale sooner than if they remained on their current schedule. Since the President lifted the executive ban, members of Congress have introduced legislation that would lift the congressional prohibition (in part or completely) against leasing and development of oil and natural gas in the OCS. The legislation section of this report summarizes several of those bills, including the House Leadership proposal ( H.R. 6899 ). Many in Congress, however, oppose lifting the offshore ban. They argue that there are still several million acres leased onshore and offshore but not yet producing and that production from these lands could increase U.S. oil supply. On September 16, 2008, the House passed H.R. 6899 by a vote of 236-189 and defeated an alternative bill, H.R. 6709 , by a vote of 191-226. How much oil could be brought into production in the short-term (from non-producing leased lands or those under the moratoria) and its impact on price is uncertain. An attempt to lift the offshore moratoria with an amendment to the FY2009 Interior, Environment, and Related Agencies Appropriations bill during the House subcommittee markup was defeated by a vote of 6-9. Meanwhile, on June 26, 2008, under suspension of the rules (which requires a two-thirds majority for passage), the House defeated a measure ( H.R. 6251 ) that would have increased rental fees on non-producing oil and gas leases, and denied new federal leases to those not diligently developing the leases they have. Oil and gas leasing has been prohibited on much of the outer continental shelf (OCS) since the 1980s. Congress has enacted OCS leasing moratoria for each of fiscal years 1982-2006 in the annual Interior and Related Agencies Appropriations bill (now the Interior and Environment and Related Agencies Appropriations bill), allowing leasing only in the Gulf of Mexico (except near Florida) and parts of Alaska. President George H.W. Bush in 1990 issued a presidential directive ordering the Department of the Interior (DOI) not to conduct offshore leasing or preleasing activity in areas covered by the annual legislative moratoria until 2000. In 1998, President Clinton extended the offshore leasing prohibition until 2012. Proponents of the moratoria contend that offshore drilling would pose unacceptable environmental risks and threaten coastal tourism industries, whereas supporters of expanded offshore leasing counter that more domestic oil and gas production is vital for the nation's energy security. The Outer Continental Shelf Lands Act of 1953 (OCSLA), as amended, provides for the leasing of OCS lands in a manner that protects the environment and returns revenues to the federal government in the form of bonus bids, rents, and royalties. OCSLA requires the Secretary of the Interior to submit five-year leasing programs that specify the time, location, and size of the areas to be offered. Each five-year leasing program entails a lengthy multistep process that includes environmental impact statements. After a public comment period, a final proposed plan is submitted to the President and Congress. The latest plan went into effect July 1, 2002. Public hearings for the 2007-2012 leasing program are underway. States and interest groups are filing comments on future lease sale areas for the 2007-2012 leasing program. States with energy development off their shores in federal waters have been seeking a larger portion of the federal revenues generated in those areas. They particularly want more assistance for coastal areas that may be most affected by onshore and near-shore activities that support offshore energy development. Proponents of these proposals look to the rates at which funds are given to jurisdictions where onshore energy development occurs on federal lands within those jurisdictions. Coastal destruction has received more attention in Louisiana—especially hard-hit by hurricanes in 2005—where many square miles of wetlands have been lost to the ocean each year. Widespread energy-related development is thought to contribute to coastal losses. Currently, the affected states receive some revenue directly from offshore oil and gas leases in federal waters under section 8(g) of OCSLA and under the Gulf of Mexico Energy Security Act of 2006. P.L. 109-432 . This is in contrast to the 50% share of direct revenues to states that have onshore federal leases within their boundaries. Opponents point out the budget implications that would result from such a loss of federal revenues.
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This report provides a side-by-side comparison of three bills and two proposals, each of which addresses oil and gas development in the outer continental shelf (OCS). None of the bills has passed its respective chamber. One of the proposals, H.R. 6899, the "Comprehensive American Energy Security and Taxpayer Protection Act," is expected to come to the House floor the week of September 15, 2008. The moratoria on oil and gas leasing in much of the OCS has become a major issue in Congress and also in the Presidential campaign. This report describes the background of OCS leasing and the various positions taken by proponents and opponents of leasing. It then compares the provisions of three bills that have been introduced with reported summaries of the House proposal and the Senate proposal, the "New Energy Reform Act of 2008." On September 16, 2008, the House passed H.R. 6899 by a vote of 236-189 and defeated an alternative bill, H.R. 6709, by a vote of 191-226.
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There are dozens of temporary tax provisions in the Internal Revenue Code (IRC), many of which had expired at the end of 2014. Recent legislation has extended certain expiring provisions, and, in some cases, made temporary provisions permanent. The American Taxpayer Relief Act (ATRA; P.L. 112-240 ), signed into law on January 2, 2013, reduced tax policy uncertainty by permanently extending most of the tax cuts first enacted in 2001 and 2003 and permanently indexing the alternative minimum tax (AMT) for inflation. ATRA, however, did not eliminate uncertainty in the tax code. Under ATRA, a number of provisions that had been allowed to expire at the end of 2011 or 2012 were temporarily extended through 2013. Most of the provisions that expired at the end of 2013 were retroactively extended for one year, through 2014, in the Tax Increase Prevention Act of 2014 ( P.L. 113-295 ). The Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), signed into law on December 18, 2015, either made permanent or temporarily extended all tax provisions that had expired at the end of 2014. Collectively, temporary tax provisions that are regularly extended by Congress rather than being allowed to expire as scheduled are often referred to as "tax extenders." Many of these "tax extender" provisions have been temporarily extended multiple times. The research tax credit, for example, was extended 16 times since being enacted in 1981, before being modified and made permanent in P.L. 114-113 . Most of the temporary tax provisions that had expired at the end of 2014 were previously extended more than once. In the 114 th Congress, much of the debate on tax extenders focused on whether expired tax provisions should be made permanent, or temporarily extended. In P.L. 114-113 , all expired tax provisions were extended, either temporarily or by being made permanent. Making a number of expired provisions permanent reduced uncertainty in the tax code, by reducing the number of temporary provisions scheduled to expire. However, as not all expired provisions were made permanent, there are still a number of tax extenders set to expire at the end of 2016. Debate in the second half of the 114 th Congress may address whether the provisions set to expire at the end of 2016 should be extended. This report provides a broad overview of the tax extenders. Additional information on specific extender provisions may be found in other CRS reports, including the following: CRS Report R43510, Selected Recently Expired Business Tax Provisions ("Tax Extenders") , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]; CRS Report R43688, Selected Recently Expired Individual Tax Provisions ("Tax Extenders"): In Brief , by [author name scrubbed] and [author name scrubbed]; CRS Report R43517, Recently Expired Charitable Tax Provisions ("Tax Extenders"): In Brief , by [author name scrubbed] and [author name scrubbed]; CRS Report R43541, Recently Expired Community Assistance-Related Tax Provisions ("Tax Extenders"): In Brief , by [author name scrubbed]; and CRS Report R43449, Recently Expired Housing Related Tax Provisions ("Tax Extenders"): In Brief , by [author name scrubbed]. The Consolidated Omnibus Appropriations Act, 2016 ( P.L. 114-113 ) contained, as Division Q, the Protecting Americans from Tax Hikes Act of 2015 (PATH Act). The PATH Act either temporarily extended or made permanent all tax provisions that had expired at the end of 2014. Further, the PATH Act also made permanent the enhanced child tax credit, the enhanced American Opportunity Tax Credit, and the enhanced earned income tax credit, which were scheduled to expire in 2017. The PATH Act also included a two-year moratorium on the medical device excise tax. Division P of P.L. 114-113 also contained tax-related provisions, including changes to and a two-year moratorium on the high-cost employer-sponsored health coverage excise tax, a one-year moratorium on the annual fee on health insurance providers, extensions of tax credits for wind renewable power facilities and solar energy, and changes to the Section 199 deduction for independent oil refineries. The Tax Increase Prevention Act of 2014, passed late in the 113 th Congress, extended expiring tax provisions for one year, retroactively through 2014. Other legislation considered in the 113 th Congress proposed a two-year extension—the Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act ( S. 2260 ). Legislation was also considered that would have made certain expiring provisions permanent—see, for example, the Jobs for America Act ( H.R. 4 ) and the America Gives More Act of 2014 ( H.R. 4719 ). Tax reform legislation introduced in the 113 th Congress, the Tax Reform Act of 2014 ( H.R. 1 ), proposed to make permanent certain provisions that are currently part of the tax extenders, including the research and experimentation (R&D) tax credit and increased expensing allowances for certain businesses allowed under Internal Revenue Code (IRC) Section 179. In the 114 th Congress, the House had passed legislation that would permanently extend certain expired provisions (America's Small Business Tax Relief Act of 2015 [ H.R. 636 ], State and Local Sales Tax Deduction Fairness Act of 2015 [ H.R. 622 ], America Gives More Act of 2015 [ H.R. 644 ], and American Research and Competitiveness Act of 2015 [ H.R. 880 ]). The Tax Relief Extension Act of 2015 ( S. 1946 ), as reported by the Senate Committee on Finance, would have extended the temporary provisions that expired at the end of 2014 for two years, making the provisions available for the 2015 and 2016 tax year. S. 1946 would have extended all temporary tax provisions that expired at the end of 2014, as well as one provision that expired at the end of 2013. The tax code presently contains dozens of temporary tax provisions. In the past, legislation to extend some set of these expiring provisions has been referred to by some as the "tax extender" package. While there is no formal definition of a "tax extender," the term has regularly been used to refer to the package of expiring tax provisions temporarily extended by Congress. Oftentimes, these expiring provisions are temporarily extended for a short period of time (e.g., one or two years). Over time, as new temporary provisions have been routinely extended and hence added to this package, the number of provisions that might be considered "tax extenders" has grown. There are various reasons Congress may choose to enact temporary (as opposed to permanent) tax provisions. Enacting provisions on a temporary basis, in theory, would provide Congress with an opportunity to evaluate the effectiveness of specific provisions before providing further extension. Temporary tax provisions may also be used to provide relief during times of economic weakness or following a natural disaster. Congress may also choose to enact temporary provisions for budgetary reasons. Examining the reason why a certain provision is temporary rather than permanent may be part of evaluating whether a provision should be extended. There are several reasons why Congress may choose to enact tax provisions on a temporary basis. Enacting provisions on a temporary basis may provide an opportunity to evaluate effectiveness before expiration or extension. However, this rationale for enacting temporary tax provisions is undermined if expiring provisions are regularly extended without systematic review, as is the case in practice. In 2012 testimony before the Senate Committee on Finance, Dr. Rosanne Altshuler noted that an expiration date can be seen as a mechanism to force policymakers to consider the costs and benefits of the special tax treatment and possible changes to increase the effectiveness of the policy. This reasoning is compelling in theory, but has been an absolute failure in practice as no real systematic review ever occurs. Instead of subjecting each provision to careful analysis of whether its benefits outweigh its costs, the extenders are traditionally considered and passed in their entirety as a package of unrelated temporary tax benefits. While most expiring tax provisions have been extended in recent years, there have been some exceptions. For example, tax incentives for alcohol fuels (e.g., ethanol), which can be traced back to policies first enacted in 1978, were not extended beyond 2011. The Government Accountability Office (GAO) had previously found that with the renewable fuel standard (RFS) mandate, tax credits for ethanol were duplicative and did not increase consumption. Congress may choose not to extend certain provisions if an evaluation determines that the benefits provided by the provision do not exceed the cost (in terms of foregone tax revenue). Tax policy may also be used to address temporary circumstances in the form of economic stimulus or disaster relief. Economic stimulus measures might include bonus depreciation or generous expensing allowances. Disaster relief policies might include enhanced casualty loss deductions or additional net operating loss carrybacks. Other recent examples of temporary provisions that have been enacted to address special economic circumstances include the exclusion of mortgage forgiveness from taxable income during the recent housing crisis, the payroll tax cut, and the grants in lieu of tax credits to compensate for weak tax-equity markets during the economic downturn (the Section 1603 grants). It has been argued that provisions that were enacted to address a temporary situation should be allowed to expire once the situation is resolved. Congress may also choose to enact tax policies on a temporary basis for budgetary reasons. If policymakers decide that legislation that reduces revenues must be paid for, it is easier to find resources to offset short-term extensions rather than long-term or permanent extensions. Additionally, by definition the Congressional Budget Office (CBO) assumes under the current law baseline that temporary tax cuts expire as scheduled. Thus, the current law baseline does not assume that temporary tax provisions are regularly extended. Hence, if temporary expiring tax provisions are routinely extended in practice, the CBO current law baseline would tend to overstate projected revenues, making the long-term revenue outlook stronger. In other words, by making tax provisions temporary rather than permanent, these provisions have a smaller effect on the long-term fiscal outlook. Temporary tax benefits are a form of federal subsidy that treats eligible activities favorably compared to others, and channels economic resources into qualified uses. Extenders influence how economic actors behave and how the economy's resources are employed. Like all tax benefits, extenders can be evaluated by looking at the impact on economic efficiency, equity, and simplicity. Temporary tax provisions may be efficient and effective in accomplishing their intended purpose, though not equitable. Alternatively, an extender may be equitable but not efficient. Policymakers may have to choose the economic objectives that matter most. Extenders often provide subsidies to encourage more of an activity than would otherwise be undertaken. According to economic theory, in most cases an economy best satisfies the wants and needs of its participants if markets allocate resources free of distortions from taxes and other factors. Market failures, however, may occur in some instances, and economic efficiency may actually be improved by tax distortions. Thus, the ability of extenders to improve economic welfare depends in part on whether or not the extender is remedying a market failure. According to theory, a tax extender reduces economic efficiency if it is not addressing a specific market failure. An extender is also considered relatively effective if it stimulates the desired activity better than a direct subsidy. Direct spending programs, however, can often be more successful at targeting resources than indirect subsidies made through the tax system such as tax extenders. A tax is considered to be fair when it contributes to a socially desirable distribution of the tax burden. Tax benefits such as the extenders can result in individuals with similar incomes and expenses paying differing amounts of tax, depending on whether they engage in tax-subsidized activities. This differential treatment is a deviation from the standard of horizontal equity, which requires that people in equal positions should be treated equally. Another component of fairness in taxation is vertical equity, which requires that tax burdens be distributed fairly among people with different abilities to pay. Most extenders are considered inequitable because they benefit those who have a greater ability to pay taxes. Those individuals with relatively less income and thus a reduced ability to pay taxes may not have the same opportunity to benefit from extenders as those with higher income. The disproportionate benefit of tax expenditures to individuals with higher incomes reduces the progressivity of the tax system, which is often viewed as a reduction in equity. An example of the effect a tax benefit can have on vertical equity is illustrated by two teachers who have both incurred $250 in classroom-related expenses and are eligible to claim the above-the-line deduction for expenses. Yet the tax benefit to the two differs if they are in different tax brackets. A teacher with lower income, who may be in the 15% income tax bracket, receives a deduction with a value of $37.50, while another teacher, in the 33% bracket, receives a deduction value of $82.50. Thus, the higher-income taxpayer, with presumably greater ability to pay taxes, receives a greater benefit than the lower-income taxpayer. Extenders contribute to the complexity of the tax code and raise the cost of administering the tax system. Those costs, which can be difficult to isolate and measure, are rarely included in the cost-benefit analysis of temporary tax provisions. In addition to making the tax code more difficult for the government to administer, complexity also increases costs imposed on individual taxpayers. With complex incentives, individuals devote more time to tax preparation and are more likely to hire paid preparers. Dozens of temporary tax provisions had expired at the end of 2014, all of which were extended in P.L. 114-113 (see Table 1 ). Most of these provisions have been extended as part of previous "tax extender" legislation. For the purposes of this report, provisions that expired in 2014 have been classified as belonging to one of four categories: individual, business, charitable, or energy. The following sections provide additional details. Table 1 also includes information on the cost of the extension in P.L. 114-113 , as enacted. All six of the individual tax extender provisions that expired at the end of 2014 had previously been extended as part of tax extenders legislation. The longest-standing individual extender provision is the above-the-line deduction for classroom expenses incurred by school teachers. This provision was first enacted on a temporary basis in 2002 and has regularly been included in tax extender packages. The above-the-line deduction for classroom expenses was made permanent in P.L. 114-113 . Other individual provisions that have been extended more than once include the deduction for state and local sales taxes, the above-the-line deduction for tuition and related expenses, the deduction for mortgage insurance premiums, and the parity for the exclusion of employer-provided mass transit and parking benefits. The deduction for state and local sales taxes and the provision providing parity for the exclusion of employer-provided mass transit and parking benefits were also made permanent in P.L. 114-113 . All of the business provisions that expired at the end of 2014 had previously been extended at least once, most more than once. Long-standing provisions that expired at the end of 2014 include the research tax credit, the rum excise tax cover-over, the Work Opportunity Tax Credit, the Qualified Zone Academy Bond (QZAB) allocation limitation, and the active financing exception under Subpart F. The New Markets Tax Credit, first enacted in 2000 to promote investment in low-income communities, also expired at the end of 2014. Bonus depreciation and enhanced expensing allowances, which are often viewed as economic stimulus measures, also expired at the end of 2014. A number of business-related extender provisions were made permanent in P.L. 114-113 , including the research tax credit, enhanced expensing under Section 179, and the active financing exception under Subpart F. Other provisions, including the New Markets Tax Credit and bonus depreciation, were given longer-term extensions, through 2019. Table 1 provides additional information on which business tax extenders were made permanent, extended through 2019, or extended through 2016. The four charitable provisions that expired at the end of 2014 have previously been extended multiple times. All four provisions were also made permanent in P.L. 114-113 . The provision providing an enhanced deduction for noncorporate businesses donating food inventory was first enacted in response to Hurricane Katrina in 2005. The remaining charitable provisions were first enacted as part of the Pension Protection Act of 2006 ( P.L. 109-280 ). The longest-standing energy-related provision that expired at the end of 2014 is the renewable energy production tax credit (PTC). The PTC was extended for two years, through 2016, as part of P.L. 114-113 . P.L. 114-113 extended the PTC for wind through 2019, with a phase-down starting in 2017. Several of the temporary energy-related tax provisions that expired at the end of 2014 were first enacted as part of the Energy Policy Act of 2005 (EPACT05; P.L. 109-58 ). These include the credit for construction of energy efficient new homes, the deduction for energy efficient commercial buildings, and the credit for nonbusiness energy property (also known as the tax credit for energy efficiency improvements for existing homes). Certain tax incentives for alternative technology vehicles and alternative fuel vehicle refueling property were also first included in EPACT05. These provisions were all extended through 2016 in P.L. 114-113 . The alternative motor vehicle credit for qualified fuel cell vehicles also expired at the end of 2014. This provision was introduced as part of EPACT05, and was originally set to expire December 31, 2014, when first introduced. EPACT05 incentives for other alternative motor vehicles—including hybrids, alternative fuel, and advanced lean-burn technology vehicles—expired at earlier dates. The credit for two-wheeled plug-in electric vehicles expired at the end of 2013, and was not extended as part of P.L. 113-295 , but would be extended in the Tax Relief Extension Act of 2015 (S. 1946). The credit was first enacted as part of the American Recovery and Reinvestment Act (ARRA; P.L. 111-5 ) and was extended once previously by the American Taxpayer Relief Act (ATRA; P.L. 112-240 ). Both the alternative motor vehicle credit for qualified fuel cell vehicles and the credit for two-wheeled plug-in electric vehicles were extended through 2016 in P.L. 114-113 . As discussed above, Congress has regularly acted to temporarily extend expired or expiring tax provisions. In addition to temporarily extending expired provisions, P.L. 114-113 also made certain provisions permanent. As a result, the cost of the tax extenders in P.L. 114-113 was higher than the cost of other tax extenders proposals considered in the 114 th Congress that would not have included permanent extensions. In total, the extensions of tax extenders in P.L. 114-113 , is estimated to reduce federal revenues by $628.8 billion between 2016 and 2025. Of that cost, nearly one-third ($202.1 billion) is attributable to extensions of provisions that were scheduled to expire in 2017 (the reduced earnings threshold for the refundable portion of the child tax credit; the American Opportunity Tax Credit; and modifications to the earned income tax credit) and the two-year moratorium on the medical device excise tax. Thus, the cost of extending the "tax extender" provisions listed in Table 1 is an estimated $426.8 billion between 2016 and 2025. Of the total cost of the tax extenders in P.L. 114-113 , $559.5 billion, or 89% of the total cost, is associated with permanent extensions. The estimated cost of permanent extension of provisions listed in Table 1 (provisions that had expired in 2014 and were made permanent in P.L. 114-113 ) is $361.4 billion. Of the total cost of tax extenders in P.L. 114-113 , a small portion, $17.7 billion (or less than 3%) was for the two-year extension of provisions that had expired in 2014 through 2016. Before P.L. 114-113 was passed, legislation was considered in the House in the 114 th Congress that would have made permanent certain temporary tax provisions. Cost of temporary as opposed to permanent extension has, in the past, been one consideration in the debate surrounding the extension of temporary tax provisions. The Senate Finance Committee reported legislation in 2015, the Tax Relief Extension Act of 2015 ( S. 1946 ), that would retroactively extend expired tax provisions, for two years, through 2016. The JCT estimated that extending tax extenders, as proposed in S. 1946 , would have reduced revenue by $97.1 billion between 2016 and 2025. S. 1946 also included several revenue raising provisions, which brought the cost of the proposal to $96.9 billion. Neither of these figures include macroeconomic effects. With macroeconomic effects included, the cost of extending expired provisions, as proposed in S. 1946 , was $86.6 billion over the 10-year budget window. According to the JCT, extending certain expired provisions affecting businesses, particularly the provision allowing businesses to expense 50% of investments, is expected to increase economic growth in the near term. Thus, the cost estimate when macroeconomic effects are included is less than the cost estimate that does not incorporate macroeconomic effects. Since S. 1946 is projected to increase the federal debt, part of the gain in economic growth from extending expired business-related provisions would be expected to be offset by higher interest rates, which tend to slow economic growth. The net effect of JCT's macroeconomic analysis, however, was increased economic growth within the budget window, leading to a lower cost estimate for S. 1946 . The Congressional Budget Office (CBO) provides estimated costs of extending all tax provisions scheduled to expire before 2025 (see Table 2 ). The estimates below reflect information provided before the recent extensions enacted in P.L. 114-113 . CBO's estimates can be viewed as the cost of a long-term extension. According to CBO's estimates, over the 2016 to 2025 budget window, extending all expiring tax provisions would reduce revenues by $897.9 billion; extending bonus depreciation would cost $223.6 billion and extending Section 179 expensing would cost $60.8 billion; and extending expansions to the child tax credit, the earned income tax credit, and the American Opportunity Tax Credit currently scheduled to expire at the end of 2017 would cost $202.8 billion. Of the 70 tax provisions set to expire before the end of 2025 in CBO's estimates, 52 had expired at the end of 2014. Thus, most of the revenue cost associated with extending expiring provisions is for provisions that were either extended or made permanent in P.L. 114-113 . Since tax extender provisions are assumed to expire as scheduled by CBO, their extension—even if expected by policymakers—is not included in CBO's current law revenue baseline. As a result, CBO's revenue projections are higher than actual revenue levels that are likely to occur. Consequently, projected budget deficits under the current law baseline are smaller than actual deficits that are likely to occur. The cost of providing a short-term extension, as is typical in "tax extenders" legislation, is less than the cost of extending expiring provisions through the budget window, as is done by CBO for the purposes of constructing the alternative fiscal scenario baseline. The CBO scores presented here, some might argue, provide a more accurate measure of the overall or long-term budget impact of temporary tax provisions. The Joint Committee on Taxation (JCT) scores accompanying extenders legislation reflect the budget impact of the temporary extension relative to current law. If expiring provisions are temporarily extended, the 10-year revenue cost may be less than the cost in year 2015, as many of the expired provisions are tax deferrals, or timing provisions. Bonus depreciation is one example of a timing provision, where the short-term cost of extension is greater than the long-term or budget window cost. The one-year extension of bonus depreciation enacted as part of the Taxpayer Relief Act of 2014 ( P.L. 113-295 ) cost an estimated $1.2 billion over the 10-year budget window; however, the one-year revenue loss of the same provision in 2015 was $45.3 billion, with much of the cost recovered in the later years in the budget window. Bonus depreciation was extended through 2019 in P.L. 114-113 , at a cost of $11.3 billion over the 10-year budget window. The cost in 2016 is estimated to be $90.6 billion, with much of the estimated revenue cost in 2016, 2017, and 2018, recovered later in the budget window. As a timing provision, bonus depreciation shifts cost recovery forward, resulting in revenue losses in earlier years, with part of that revenue loss recovered in later years. In contrast to a temporary extension, making bonus depreciation permanent would cost $223.6 billion over the 10-year budget window (see Table 2 ). As discussed above, the tax extenders legislation that was passed in December 2015, as part of P.L. 114-113 , made permanent a number of temporary tax provisions, while temporarily extending other expired tax provisions. Earlier in the 114 th Congress, the House had considered proposals to make permanent certain expired tax provisions. Legislation was also reported out of the Senate Committee on Finance that would temporarily extend expired tax provisions. During the 113 th Congress, the House had also considered legislation to make permanent certain expired tax provisions. Before P.L. 114-113 was signed into law, there was other action on extenders in the 114 th Congress. The Senate Finance Committee reported the Tax Relief Extension Act of 2015 ( S. 1946 ), which would retroactively extend expired tax provisions for two years, through 2016. The House had passed legislation to make permanent eight of the temporary tax provisions that expired at the end of 2014 (see Table 3 ). America's Small Business Tax Relief Act of 2015 ( H.R. 636 ) would have made permanent the enhanced expensing allowances under Section 179 and also included the text from bills that would extend expired S corporation provisions (the Permanent S Corporation Built-in Gains Recognition Period Act of 2015 [H.R. 629] and the Permanent S Corporation Charitable Contribution Act of 2015 [H.R. 630]). Three expired charitable provisions were part of the America Gives More Act of 2015 ( H.R. 644 ): (1) the enhanced deduction for contributions of food inventory; (2) the provision allowing for tax-free distributions from Individual Retirement Accounts (IRAs) for charitable purposes; and (3) the special rules for contributions of capital gain real property for conservation purposes. The American Research and Competitiveness Act of 2015 ( H.R. 880 ) would have modified and made permanent the research tax credit. Legislation had also passed the House that would have made permanent the option to deduct state and local sales taxes in lieu of state and local income taxes ( H.R. 622 ). Taken together, these eight measures would have cost $317.5 billion over the 10-year budget window, excluding potential macroeconomic effects. In addition to the proposals to make permanent expired tax provisions that were passed in the House, the Committee on Ways and Means had reported other legislation during the 114 th Congress that would have made permanent other expired provisions (see Table 3 ). During the 113 th Congress, various bills were considered to either extend or make permanent certain tax extender provisions. Ultimately, a one-year "tax extenders" bill was passed and enacted late in the year (the Tax Increase Prevention Act of 2014 [P.L. 113-295] was signed into law on December 19, 2014). Earlier in the year, the Senate Finance Committee had reported a two-year extenders package, the Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act ( S. 2260 ). The EXPIRE Act proposed extending most expiring provisions for two years, through 2015. The House also considered legislation to make certain expiring tax provisions permanent during the 113 th Congress. As noted in Table 3 , the House passed legislation that would have made permanent nine provisions that are currently part of the tax extenders. Taken together, permanently extending these nine provisions would have reduced revenues by an estimated $511.4 billion over the 10-year budget window. Six of these nine provisions were included in the Jobs for America Act ( H.R. 4 ), which also passed the House in the 113 th Congress. Three other charitable-related provisions were passed as part of the America Gives More Act of 2014 ( H.R. 4719 ). The Committee on Ways and Means reported legislation during the 113 th Congress that would have made two additional international-related extender provisions permanent, although this legislation was not considered in the full House. Several provisions that had expired at the end of 2013 were not extended as part of the Tax Increase Prevention Act of 2014 ( P.L. 113-295 ). Two of these provisions would have been extended in the EXPIRE Act, but were not included in P.L. 113-295 : the health coverage tax credit and the credit for electric-drive motorcycles and three-wheeled vehicles. Both of these provisions have been extended in subsequent legislation. The health coverage tax credit had not been extended as part of past "tax extenders" legislation. The health coverage tax credit was first enacted, without an expiration date, as part of the Trade Act of 2002 ( P.L. 107-240 ). A January 1, 2014, termination date was enacted as part of an act to extend the Generalized System of Preferences in 2011 ( P.L. 112-40 ). The health coverage tax credit was modified and retroactively extended through December 31, 2019, as part of the Trade Preferences Extension Act of 2015 ( P.L. 114-27 ), signed into law on June 29, 2015. The other provision that was not extended in P.L. 113-295 , but would have been extended by the EXPIRE Act, was the credit for electric-drive motorcycles and three-wheeled vehicles. In recent years, a number of incentives have been available for various alternative technology vehicles. There are currently incentives available for plug-in electric vehicles. Incentives for most other alternative technology vehicles have expired. The credit for two-wheeled electric plug-in vehicles was extended through 2016 in P.L. 114-113 . Two other energy-related provisions were not extended past their January 1, 2014, termination date: the placed-in-service date for partial expensing of certain refinery property and the credit for energy efficient appliances. The EXPIRE Act did not propose extending either of these provisions. Two disaster-related provisions that expired at the end of 2013—one that provided tax-exempt bond financing authority for facilities in the New York Liberty Zone and another related to the replacement period for nonrecognition of gain for areas damaged by the 2008 Midwestern storms—were not extended in P.L. 113-295 . The EXPIRE Act also did not include an extension for these disaster-related provisions.
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In the past, Congress has regularly acted to extend expired or expiring temporary tax provisions. Collectively, these temporary tax provisions are often referred to as "tax extenders." Fifty-two temporary tax provisions expired at the end of 2014. All of these provisions were either temporarily or permanently extended as part of the Consolidated Appropriations Act, 2016 (P.L. 114-113), signed into law on December 18, 2015. Unlike previous tax extenders legislation, P.L. 114-113 made a number of provisions permanent, and provided longer-term extensions for other provisions. This report provides a broad overview of the tax extenders. Congress had previously addressed tax extenders toward the end of the 113th Congress. The Tax Increase Prevention Act of 2014 (P.L. 113-295), signed into law on December 19, 2014, made tax provisions that had expired at the end of 2013 available to taxpayers for the 2014 tax year. The law extended most (but not all) provisions that had expired at the end of 2013. Most of the provisions in P.L. 113-295 had been included in previous "tax extender" packages. There are several reasons why Congress may choose to enact tax provisions on a temporary basis. Enacting provisions on a temporary basis provides legislators with an opportunity to evaluate the effectiveness of tax policies prior to expiration or extension. Temporary tax provisions may also be used to provide temporary economic stimulus or disaster relief. Congress may also choose to enact tax provisions on a temporary rather than permanent basis due to budgetary considerations, as the foregone revenue from a temporary provision will generally be less than if it were permanent. The provisions that expired at the end of 2014 are diverse in purpose, including provisions for individuals, businesses, the charitable sector, and energy-related activities. Among the individual provisions that expired are deductions for teachers' out-of-pocket expenses, state and local sales taxes, qualified tuition and related expenses, and mortgage insurance premiums. On the business side, under current law, the research and development (R&D) tax credit, the work opportunity tax credit (WOTC), the active financing exceptions under Subpart F, the new markets tax credit, and increased expensing and bonus depreciation allowances will not be available for taxpayers after 2014. Expired charitable provisions include the enhanced deduction for contributions of food inventory and provisions allowing for tax-free distributions from retirement accounts for charitable purposes. The renewable energy production tax credit (PTC) expired at the end of 2014, along with a number of other incentives for energy efficiency and renewable and alternative fuels. As discussed in this report, many of these provisions were made permanent in P.L. 114-113. Additional information on specific extender provisions may be found in other CRS reports, including the following: CRS Report R43510, Selected Recently Expired Business Tax Provisions ("Tax Extenders"), by [author name scrubbed], [author name scrubbed], and [author name scrubbed]; CRS Report R43688, Selected Recently Expired Individual Tax Provisions ("Tax Extenders"): In Brief, by [author name scrubbed] and [author name scrubbed]; CRS Report R43517, Recently Expired Charitable Tax Provisions ("Tax Extenders"): In Brief, by [author name scrubbed] and [author name scrubbed]; CRS Report R43541, Recently Expired Community Assistance-Related Tax Provisions ("Tax Extenders"): In Brief, by [author name scrubbed]; and CRS Report R43449, Recently Expired Housing Related Tax Provisions ("Tax Extenders"): In Brief, by [author name scrubbed].
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T here are approximately 766 million acres of forestlands in the United States, most of which are privately owned (445 million acres, or 58%) by individuals, families, Native American tribes, corporations, nongovernmental organizations, and other groups (see Figure 1 ). The federal government has numerous programs to support forest management on those private forests and also public—state and local—forests. These programs support a variety of forest management and protection goals, including activities related to planning for and responding to wildfires, as well as supporting the development of new uses and markets for wood products. These programs are primarily administered by the Forest Service (FS) in the U.S. Department of Agriculture (USDA), and often with the assistance of state partner agencies. This report describes current forestry assistance programs mostly funded and administered through the State and Private Forestry (SPF) branch of the FS. Following a brief background and overview, this report presents information on the purposes of the programs, types of activities funded, eligibility requirements, authorized program duration and funding level, and requested and enacted program appropriations. Figure 1. Forest Landownership in the Conterminous United StatesSource: CRS. Data from Jaketon H. Hewes, Brett J. Butler, and Greg C. Liknes, Forest Ownership in the Conterminous United States circa 2014 - geospatial data set, Forest Service Research Data Archive, 2017, https://doi.og/10.2737/RDS-2017-0007. Providing federal assistance for nonfederal forest landowners has been a component of USDA's programs for more than a century. Initial forestry assistance efforts began with the creation of the USDA Division of Forestry in 1881 (to complement forestry research, which began in 1876). Forestry assistance and research programs grew slowly, and in 1901 the division was upgraded to the USDA Bureau of Forestry. In 1905, the bureau merged with the Interior Department's Division of Forestry (which administered the forest reserves, later renamed national forests) and became the USDA Forest Service (FS). The FS has three primary mission areas: managing the National Forest System, conducting forestry research, and providing forestry assistance. The Senate and House Agriculture Committees have jurisdiction over forestry in general, forestry assistance, and forestry research programs. Congress authorized specific forestry assistance programs in the Clarke-McNary Act of 1924. This law guided those programs for more than half a century, until it was revised in the Cooperative Forestry Assistance Act of 1978 (CFAA). The House and Senate Agriculture Committees often examine these programs in the periodic omnibus legislation to reauthorize agriculture and food policy programs, commonly known as farm bills. The 2008 farm bill established national funding priorities (conserve working forests, protect and restore forests, and enhance public benefits from private forests); enacted a standardized process for states to assess forest resource conditions and strategize about funding needs; and established, modified, and repealed specific assistance programs, among other provisions. The 2014 farm bill repealed several programs, mostly programs whose authorizations had expired or programs that had never received appropriations. The 2014 farm bill also reauthorized and modified the requirement for statewide assessments and the Office of International Forestry. Many of the agricultural programs—including two forestry programs—authorized by the 2014 farm bill are scheduled to expire at the end of FY2018 unless Congress provides for an extension or reauthorizes them. Most forestry assistance programs are administered by the FS, but the programs are typically implemented by state partners (e.g., state forestry or natural resource agencies). In these cases, the FS provides technical and financial aid to the states, which then provides information and assistance to private landowners or specified eligible entities. However, the 2008 farm bill expanded the definition of authorized conservation practices for agricultural conservation programs generally to include forestry practices, and thus direct federal financial assistance to private forest landowners may be feasible through the conservation programs. See Table 1 for a brief summary of the FS programs addressed in this report; more information on each program is available in the " Forest Service Assistance Programs " section of this report. To be eligible to receive funds for most of the programs, each state must prepare a State Forest Action Plan, consisting of a statewide assessment of forest resource conditions, including the conditions and trends of forest resources in the state; threats to forest lands and resources, consistent with national priorities; any areas or regions of the state that are a priority; and any multistate areas that are a regional priority; and a long-term statewide forest resource strategy , including strategies for addressing the threats to forest resources identified in the assessment; and a description of the resources necessary for the state forester to address the statewide strategy. The State Forest Action Plans are to be reviewed every 5 years and revised every 10 years. All 50 states, the District of Columbia, and 8 territories are covered by a State Forest Action Plan. Each state must also publish an annual funding report and have a State Forest Stewardship Coordination (FSC) Committee. Chaired by the state forester and composed of federal, state, and local representatives (including representatives from conservation, industry, recreation, and other organizations), the FSC Committee makes recommendations on statewide priorities on specific programs as well as on the development and maintenance of the State Forest Action Plan. The forestry programs may provide technical assistance, financial assistance, or both. Technical assistance includes providing guidance documents, skills training, data, or otherwise sharing information, expertise, and advice broadly or on specific projects. Technical assistance may also include the development and transfer of technological innovations. Financial assistance is typically delivered through formula or competitive grants (with or without contributions from recipients) or cost-sharing (with varying levels of matching contributions from recipients). As an example, the Forest Health Protection program provides both types of assistance: financial assistance in the form of funding for FS to perform surveys and to control insects or diseases on state or private lands (with the consent and cooperation of the landowner) and technical assistance in the form of data, expertise, and guidance for addressing specific insect and disease infestations. Most—but not all—FS assistance programs are available nationally and have permanently authorized funding and without specified funding levels. No forestry assistance programs have mandatory spending; all require funding through the annual discretionary appropriations process, and are typically funded in the annual Interior, Environment, and Related Agencies appropriations acts. Most of the assistance programs are funded through the FS's State and Private Forestry (SPF) account, although some programs are funded or allocated from other accounts or programs. Some programs have been combined for funding purposes or for administrative reasons. Funding for forestry assistance programs has declined over the past 15 years, in both real and constant dollars (see Figure 2 ). The average annual appropriation over that time, from FY2004 through FY2018, was $362.7 million, with a peak of $420.5 million in FY2010 and a low of $328.9 million in FY2017. Funding increased in FY2018 to $355.1 million, but remains below the 15-year average. When adjusting for inflation, however, overall funding in FY2018 was 32% below FY2004 levels and 25% below FY2010 levels. In total, these forestry assistance programs made up 7% of the FS's total annual discretionary appropriation on average across those 15 years. The Administration requested $197.4 million in FY2019 and proposed to eliminate funding for seven of the programs and decreased funding for the others (see Table 2 for FY2014-FY2018 appropriations and the FY2019 budget request; more information on each program is available in the " Forest Service Assistance Programs " section of this report). Some FS programs have been repealed by previous farm bills, or have gone unfunded by Congress for several years. Table 3 lists these programs and the most recent congressional action. Some activities authorized by these unfunded or repealed programs may continue to be performed or provided by FS through other authorizations or funding sources. This report focuses on forestry assistance programs administered by FS. Other agencies, inside and outside of USDA, also administer programs that may have forest conservation or protection benefits. For example, the USDA Farm Services Agency (FSA) administers several programs, including the Emergency Forest Restoration program, which provides assistance to nonindustrial forest landowners to recover or restore forests following catastrophic events. The USDA Natural Resources Conservation Service (NRCS) administers the Healthy Forest Reserve program, which funds agreements, contracts, or easements to assist landowners with forest restoration or enhancement projects. The Department of the Interior administers a community assistance program to support collaborative community planning and projects to mitigate wildfire risk. The tabular presentation that follows provides basic information covering each of the FS forestry and fire assistance programs, including brief program description; program activities; eligibility requirements; the FS appropriations account budget line item that provides funding for the program; authorized funding levels and any funding restrictions; FY2018 funding level in the Consolidated Appropriations Act of 2018 ( P.L. 115-141 ); FY2019 funding level requested by the Administration; statutory authority, recent amendments, and U.S. Code reference; expiration date of program authority unless permanently authorized; and program's website link. Information for the following tables is drawn largely from agency budget documents and presentations, explanatory notes, and websites. Further information about these programs may be found on the FS SPF website at http://www.fs.fed.us/spf and on the "cooperative forestry" page.
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The U.S. Department of Agriculture (USDA) has numerous programs to support the management of state and private forests. These programs are under the jurisdiction of the House and Senate Agriculture Committees and are often examined in the periodic legislation to reauthorize agricultural programs, commonly known as farm bills. For example, the 2014 farm bill repealed, reauthorized, or modified many of these programs. The House version of the 2018 farm bill, the Agriculture and Nutrition Act of 2018 (H.R. 2), contains a forestry title (Title VIII) that would reauthorize, modify, and establish new forestry assistance programs. Forestry-specific assistance programs (in contrast to agriculture conservation programs that include forestry activities) are primarily administered by the USDA Forest Service (FS), with permanent authorization of funding as needed. Some programs have been combined through the appropriations process or for administration purposes. These programs generally provide technical and educational assistance such as information, advice, and aid on specific projects. Other programs provide financial assistance, usually through grants (with or without matching contributions from recipients) or cost-sharing (typically through state agencies, with varying levels of contributions from recipients). Many programs provide both technical and financial assistance. Some of the assistance programs provide support for planning and implementing forestry and related land management practices (e.g., Forest Stewardship, Urban and Community Forestry). Other programs provide assistance for forest restoration projects that involve more than one jurisdiction and address regional or national priorities (e.g., Landscape Scale Restoration). Other programs provide support for protecting forestlands from wildfires, insects and diseases, and from converting forestland to nonforest uses (e.g., Community Forest and Open Space Conservation, Forest Legacy). The Forest Health program provides support for protecting both federal and nonfederal forests from continuing threats, although most of the funding goes to federal forests. Programs also exist to enhance state and rural wildfire management capabilities (e.g., State Fire Assistance and Volunteer Fire Assistance) and to promote the use of forest products (e.g., Wood Innovation). International Forestry is often included as a forestry assistance program, because it provides technical forestry help and because it is funded through the FS appropriations account for forestry assistance programs (State and Private Forestry). Most of the programs provide assistance to state partner agencies. The state agencies can use the aid on state forestlands or to assist local governments or private landowners. How the states use the resources is largely at the discretion of the states, within the authorization of each program and consistent with the national priorities for state assistance established by Congress in the 2008 farm bill. Overall funding for the Forest Service's forestry assistance programs in FY2018 was $355.1 million, an 8% increase over FY2017 funding of $328.9 million. The Trump Administration requested $197.4 million in funding for FY2019. Overall funding has declined over the past 15 years, however, in both real and constant dollars. Over that time, funding for forestry assistance programs has ranged between 5% and 9% of the total annual Forest Service discretionary appropriation.
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In his State of the Union Address on January 28, 2003, President George W. Bush announced a new $720 million research and development (R&D) initiative to promote hydrogen as a transportation fuel. The Hydrogen Fuel Initiative is intended to complement the FreedomCAR initiative, which focuses on cooperative vehicle research between the federal government, universities, and private industry. The FreedomCAR initiative replaced a related Clinton Administration initiative, the Partnership for a New Generation of Vehicles (PNGV), announced in 1993. While both initiatives aimed to increase fuel efficiency of the automotive fleet, FreedomCAR extended the time frame by another 10 to 15 years and focused research on hydrogen fuel cell vehicles; PNGV focused mainly on diesel-fueled hybrid vehicles. Through FY2003, the overall level of funding for PNGV- and FreedomCAR-related research at the Department of Energy (DOE) remained relatively constant, with some of the funds for hybrid vehicles transferred to fuel cell research. For FY2004, however, overall funding for research (within the Office of Energy Efficiency and Renewable Energy) into hydrogen fuel, fuel cells, and vehicle technologies increased by about 30%. Some of this increase was offset by funding reductions in other programs, but the major portion of the increase was new funding. For FY2005 through FY2008, funding for hydrogen and fuel cell R&D steadily increased. However, for FY2009, the Bush Administration has requested 30% below the FY2008 appropriation for hydrogen, fuel cell, and vehicle technologies programs. Much of that decrease would be offset by an almost doubling of related basic science research. Overall, the request is roughly 4% below FY2008 levels for all related research. Most federal research on hydrogen fuel and fuel cell vehicles is overseen by two offices within the DOE Office of Energy Efficiency and Renewable Energy (EERE). The Office of FreedomCAR and Vehicle Technologies (FCVT) coordinates research on automotive fuel cells and other advanced vehicle technologies, including electric propulsion systems, vehicle systems, materials technology, and other areas. The Office of Hydrogen, Fuel Cells and Infrastructure Technologies (HFCIT) coordinates research on fuel cell technologies (for all applications, not solely transportation), as well as research on hydrogen fuel production, delivery and storage systems. As part of its FY2006 budget request for the Hydrogen Fuel Initiative, DOE added ongoing research funded through three additional DOE offices, as well as a small amount of research funding at the Department of Transportation. The three DOE offices are the Office of Fossil Energy (FE), the Office of Nuclear Energy (NE), and the Office of Science (SC). Members of the partnerships include the federal government and the national laboratories, as well as universities, state governments, vehicle manufacturers, energy companies, equipment manufacturers, and industry groups. Funding for FreedomCAR and Hydrogen Fuel Initiative research (including hydrogen-related research fossil energy research, nuclear hydrogen research and basic scientific research) is included in the Energy and Water Development appropriations bill. Funding for these areas is shown in Table 1 . The mission of the Hydrogen Fuel Initiative is to "research, develop, and validate fuel cells and hydrogen production, delivery, and storage technologies for transportation and stationary applications." Fuel cell R&D areas include transportation systems, stationary systems, fuel processing, fuel cell components, and technology validation. The focus of hydrogen fuel R&D includes hydrogen production and delivery, fuel storage, hydrogen infrastructure, safety, codes and standards, and training and education. The FreedomCAR and the Hydrogen Fuel Initiatives have each set four goals for 2015, and share one additional goal between them. The shared goal is to produce hydrogen-fueled engine systems that achieve double to triple the efficiency of today's conventional engines at a cost competitive with conventional engines. FreedomCAR's individual goals mainly focus on reducing system costs for various technologies. The FreedomCAR goals are to develop electric drive systems with a 15-year life and significantly reduced hardware costs; advanced internal combustion engine systems with double to triple the efficiency of current systems at no greater cost and no higher emissions than conventional engine systems; electrical energy storage with improved life and lower cost than current systems; and materials and manufacturing technologies that achieve a 50% weight reduction in vehicle structure, while maintaining affordability and increasing the use of recyclable/recycled materials. The four goals for the Hydrogen Fuel Initiative focus on improvements in fuel cell technology and improvements in the storage and delivery of hydrogen fuel. The Initiative's goals are to develop hydrogen fuel cell power systems that are durable, and deliver higher efficiency at lower cost than today's systems; transportation fuel cell systems that deliver greater efficiency and lower cost, and meet or exceed emissions standards; hydrogen refueling systems that are highly efficient and deliver fuel at the market price of gasoline; and on-board hydrogen storage systems with improved energy density and cost over existing systems. The creation of FreedomCAR and the President's Hydrogen Fuel Initiatives have raised debate over several issues. These issues include the proper role of the government in R&D, as well as the proper level of funding, and concerns over energy efficiency and fuel consumption. Some environmental groups, including the Sierra Club, have criticized the initiatives. They argue that while funding has increased for efficient technologies, the initiatives do not require auto manufacturers to make fuel cell vehicles available to customers by any specific time. Also, groups such as the Natural Resources Defense Council argued that the initiatives were put in place to forestall significant increases in national fuel economy standards. However, in 2007 Congress enacted more stringent fuel economy standards for passenger cars and light trucks as part of the Energy Independence and Security Act of 2007 ( P.L. 110-140 ). The Administration argues that the higher R&D funding will provide significant impetus for advancements in hydrogen and fuel cell technologies, and that without those advancements, the technology would be unaffordable for consumers. Further, some engineers argue that FreedomCAR's efficiency and cost goals may be difficult to attain in the time frame of the program, and that any sort of sales goal would be unrealistic. Moreover, industry groups argue that an explicit sales goal could force manufacturers to abandon R&D on other promising technologies like gasoline-electric hybrids. Even among supporters of the program, there is criticism that FreedomCAR and the President's Hydrogen Fuel Initiative are under-funded and that additional government commitments to hydrogen and fuel cells must be made. According to some proponents, these commitments could take the form of increased R&D funding, expanded demonstration programs, vehicle and fuel sales or production incentives, and other incentives to make these vehicles attractive to customers. Finally, some critics argue there are too many technical and economic hurdles to the development of affordable, practical hydrogen and fuel cell technology, especially for automobiles, and that federal research should focus on more realistic goals. In addition to DOE, other government agencies are also involved in fuel cell vehicle R&D, although this funding is considerably lower. For example, the National Automotive Center (NAC), part of the Army's Tank-Automotive Research, Development, and Engineering Center (TARDEC), coordinates fuel cell vehicle research between the Department of Defense (DOD) and private contractors, and partners with DOE, the Department of Transportation (DOT), the Environmental Protection Agency (EPA), academia, and industry. The appropriations processes over the next few years will directly affect the future of FreedomCAR and the President's Hydrogen Fuel Initiative. Between FY2004 and FY2008, the Administration's stated goal was a funding increase for both initiatives of $720 million above FY2003 levels for FY2004 through FY2008. In total, Congress appropriated an additional $450 million in total between FY2004 and FY2008 for hydrogen, fuel cell, and advanced vehicle programs. Congress appropriated an additional $145 million for other programs, mainly basic sciences, for a total increase of roughly $600 million over that five-year period. In addition to appropriations legislation, hydrogen and fuel cell vehicles are addressed by other recent legislation. On August 8, 2005, President Bush signed the Energy Policy Act of 2005 ( P.L. 109-58 ). Among other provisions, P.L. 109-58 authorizes appropriations for hydrogen and fuel cell research at higher levels than requested by the President—$3.3 billion over five years. In addition to R&D funding, the bill provides tax incentives for the purchase of new fuel cell vehicles. FreedomCAR and the President's Hydrogen Fuel Initiative raise several key issues for Congressional consideration. Some of these issues are: Given rising federal deficits and the potential for increased defense costs, can the federal government afford the recent increase for hydrogen and fuel cell R&D? Should the federal government be picking hydrogen and fuel cell vehicle technologies over other technologies, such as hybrid vehicles and lean-burn engines? Would the designation of a target deadline for commercialization of fuel cell vehicles help focus the program and make better use of funding resources? Alternately, would such a deadline force manufacturers to abandon other promising technologies or create an unfair burden on the industry? Should the government focus on long-term research or should it focus on technologies closer to commercialization, or both? Is the widespread use of hydrogen and fuel cells technically and economically feasible, or is the government taking too large a risk on unproven technology?
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FreedomCAR and the Hydrogen Fuel Initiative are two complementary government-industry research and development (R&D) policy initiatives that promote the development of hydrogen fuel and fuel cell vehicles. Coordinated by the Department of Energy (DOE), these initiatives aim to make mass-market fuel cell and hydrogen combustion vehicles available at an affordable cost within 10 to 15 years from the launch of the initiatives. However, questions have been raised about the design and goals of the initiatives. This report discusses the organization, funding, and goals of the FreedomCAR and Fuel partnerships, and issues for Congress.
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Daniel Ortega was a leader of the Sandinista National Liberation Front (FSLN) when it overthrew the corrupt and repressive Somoza family dictatorship in 1979. When the pro-Soviet Sandinistas gained control of the government and pursued increasingly radical social policies, including redistribution of land and wealth, the United States backed opposition "contras" who launched an eight-year war (1982-1990) against the government. About 30,000 Nicaraguans died in the war. As President from 1985-1990, Ortega's administration was marked by improved education and healthcare on the one hand, and charges of corruption and authoritarian tendencies on the other. As part of the Central American Peace Plan, Ortega's Sandinista government agreed to internationally monitored democratic elections in February 1990, which he lost and peacefully ceded to Violeta Chamorro. Ortega also ran for President and lost in 1996 and 2001. Because he came in second place, however, Nicaraguan law gave him a seat in the National Assembly, where he has served as an opposition leader. He ran for President again in 2006 and won. Since 1990 Nicaragua has developed democratic institutions and a framework for economic development. Progress has been made in social and economic reforms. Nonetheless, significant challenges remain: Nicaragua is still very poor, the second poorest nation in the western hemisphere. Its institutions are weak and often corrupt. In 2003, former President Arnoldo Alemán (1997-2002) was prosecuted by the Administration of President Enrique Bolaños (2002-2007) for embezzling about $100 million in public funds while in office. The effort was particularly notable because Bolaños and Alemán not only belonged to the same political party, the conservative Liberal Constitutional party (PLC), but Bolaños also served as Alemán's Vice-President until he stepped down to run for President. Alemán was sentenced to 20 years in prison for fraud and money-laundering. In December 2006 U.S. federal officials seized $700,000 in certificates of deposit they said were bought for Alemán with Nicaraguan government funds. Nonetheless, Alemán continues to control the Liberal party. His supporters have tried continually to secure his release and an amnesty. He has served his term under increasingly lax terms, and was released under very broad terms in March 2007 after Ortega took office. The 2006 elections followed more than a year of political tensions among then-President Bolaños, the leftist Sandinista party, and allies of rightist former President Alemán. Alemán and Ortega, once longtime political foes, negotiated a power-sharing pact ("El Pacto") in 1998 that has since defined national politics. Their parties passed laws making it difficult for other parties to participate in elections, and otherwise facilitated an alternating of terms between their two parties. Their ongoing influence made governing increasingly difficult for President Bolaños, who had limited legislative support. In 2004, renegotiation of the pact included a demand for Alemán's release. In October 2004 the Organization of American States (OAS) sent a special mission to Nicaragua to encourage all parties to preserve and follow democratic order there. In January 2005, the two parties adopted a series of constitutional amendments that transferred presidential powers to the legislature, and further divided up government institutions as political patronage, moves the Central American Court of Justice ruled illegal. During the height of tensions, President Bolaños invoked the OAS Inter-American Democratic Charter, and the OAS sent several high-level delegations to help negotiate a solution. Negotiations in October 2005 considerably reduced tensions and provided for President Bolaños, who had been isolated by his anti-corruption efforts against Alemán, to serve the remainder of his term, which expired in January 2007. Ortega announced he was breaking the power-sharing pact between his party and the PLC that had hampered Bolaños' ability to govern. After Ortega's announcement, the legislature passed reforms such as the passage of the 2006 budget, the first-ever tax code, local government transfers, and financial administration reforms. Ortega and Bolaños then agreed to postpone the implementation of the constitutional amendments at the root of the tensions. Politics remained volatile in 2006, but for a different reason, as attention shifted to national elections held on November 5, 2006. The FSLN and PLC still control many state institutions, however, including the electoral authority, and opposition parties and others expressed concern that the two parties would use those posts to manipulate the electoral outcome. Concerns remain that the two parties will use their dominance of state institutions to manipulate state power in their favor. Three elements were key to Ortega's victory: a change in Nicaraguan electoral law, an effective political machine, and a divided opposition. The Sandinistas negotiated a change in the electoral law with then-President Alemán's party eliminating the requirement that a candidate gain 45% of the vote to avoid a run-off election. The new law requires that a presidential candidate win either 40% of valid votes, or 35% of the vote plus at least 5% more votes than the second-place candidate in order to win in a first round. Failing that, a run-off vote between the top two candidates is held. Many observers saw this lowering of the threshold as part of the Pact alternating power between the PLC and FSLN. The lower percentage required to win in the first round facilitated the election of Ortega, whose support in the previous three presidential elections had hovered around 40%. Analysts believed Ortega felt it was critical he win in a first round, because the opposition would unite against him in a second round. Ortega won only 37.9% of the vote, but was able to avoid a run-off vote because he was 9.6% ahead of the next closest candidate, Eduardo Montealegre of the Nicaraguan Liberal Alliance (ALN). Ortega also had the advantage of an extremely well-disciplined party. Critics say he forced out members seeking reform, and made the party into a platform for his personal ambitions. In addition, Ortega ensured through his position as opposition leader in the legislature and through the Pact that FSLN loyalists were firmly entrenched throughout various government agencies. According to polls prior to the vote, about 60% of voters said they would not vote for Ortega. This held true in the final vote, but the opposition was divided in 2006 among four candidates. In the 2001 presidential elections, Ortega received 40% of the vote, but faced a united opposition and lost. Montealegre, who gained 28.3% of the vote, is a Harvard-educated banker and former finance minister. He says he offered to run as the vice presidential candidate for the conservative Constitutional Liberal party (PLC) party to prevent further splintering of the opposition. When Alemán refused to remove himself from the political scene, however, Montealegre split from the PLC, formed the ALN, and advocated continued political reform. He was regarded by many as the U.S.-favored candidate. Montealegre's second place position garnered him a seat in the legislature. The PLC then came in third place with 26.2% for candidate José Rizo, an ally of Alemán and critic of President Bolaños. Edmundo Jarquín registered a distant fourth place at 6.4%. Jarquín, an economist who worked at the Inter-American Development Bank, became the presidential candidate of the center-left Sandinista Renewal Movement (MRS) when nominee Herty Lewites died suddenly in July 2006. The son-in-law of former President Violeta Chamorro (1990-1997), Jarquín chose popular singer and composer Carlos Mejia Godoy as his running mate. The two candidates are prominent former Sandinistas who left the FSLN in opposition to Ortega and in favor of political reform, joining other like-minded former Sandinistas in the splinter party, the MRS. Edén Pastora, another disaffected one-time Sandinista leader, won less than half a percent of the vote as head of the Alternative for Change (AC) party. The 90-member National Assembly was also elected. No party won an outright majority. The FSLN has 38 seats, the PLC 25, the ALN 22, and the MRS 5. Pastora's AC won no seats. Voters also chose 20 members of the Central American parliament in the November 5 elections. The United States provided $15.3 million to support the 2006 elections in Nicaragua. Critics accused both U.S. officials and Venezuelan President Hugo Chávez of trying to influence the election's outcome. The U.S. embassy was criticized for making critical remarks, such as alluding to Ortega and Rizo as "two corrupt bosses." After U.S. officials voiced their opposition to Ortega, support for him increased. U.S. Ambassador Paul Trivelli, asserting a right to express his opinion, rejected calls to stop commenting on the elections. A prominent figure in the Iran-Contra scandal was also accused of interfering in the elections. Oliver North, a former Reagan Administration aide who manipulated the funding of the Nicaraguan contras by selling arms to Iran, appeared in Nicaragua to support Rizo's candidacy. Ambassador Trivelli, who has criticized Rizo's PLC as undemocratic and corrupt, publicly distanced himself from North, saying North spoke only as a private citizen, not for the U.S. government. Other analysts were baffled by North's position: while condemning Ortega as the worst thing that could happen to Nicaragua, he backed the candidate whose party was essentially governing with Ortega through a political pact. Critics say Chávez was indirectly supporting Ortega's campaign by providing fertilizer and oil to certain municipalities under favorable terms through Sandinista-dominated organizations. The Venezuelan state oil company signed the agreement to supply oil at preferential rates and with a deferred payment schedule, for example, with the Nicaraguan Association of Municipalities, a predominantly Sandinista association of mayors, rather than with the Nicaraguan government. Regional elections were held on the Atlantic Coast earlier in the year, on March 5, 2006. According to the State Department, problems there included voter identification card distribution, errors in the voter registry, lack of voter education, inadequate voting materials, and poorly trained electoral officials. Domestic and international observation groups were seen as essential to ensuring the transparency and credibility of the regional elections, and later, for the national elections as well. Most of the problems experienced at the regional level were evident at the national level. A non-governmental group providing electoral support expressed concern that more than a third of Nicaraguans could have been disenfranchised in the November elections, a number that could have affected the outcome of the elections. An audit by a Nicaraguan election observation group, Ethics and Transparency, revealed a high rate of errors on voter registry lists, and only about 28% of voters participated in a drive to verify and correct the lists. Concern over the elections was due in large part to the fact that the FSLN and PLC controlled many state institutions, including the electoral authority. As a result of the 2000 power-sharing pact, the electoral council in charge of running the elections consisted of three PLC members, three FSLN members, and a consensus president chosen by the two parties. International and domestic observation groups pressed the government to address problems during the pre-election process such as a high rate of errors on voter registry lists, and difficulty getting voter identification cards needed to vote. The OAS found that 200,000 citizens still did not have the cards less than a month before the elections, and told the government to issue them. Some 18,000 observers monitored the elections. International observer missions, such as those from the OAS and the European Union, concluded that the irregularities that occurred did not affect the outcome. The observer missions generally agreed with the conclusion reached by the OAS electoral observer mission, that the election was "peaceful and orderly, had a massive turnout and took place in accordance with the law." FSLN leader Daniel Ortega was inaugurated President on January 10, 2007 for a five-year term Over the years, Ortega has changed his image from Marxist revolutionary and protagonist in a proxy Cold War battle with the United States to a practicing Catholic preaching peace and reconciliation. The other candidates presented themselves as a vote against Ortega, and some warned of a return to forced conscription and food shortages if he were re-elected. Although the opposition together garnered over 60% of the vote, it was divided among four candidates, and Ortega was able to win with less than 40% of ballots cast. What Ortega's government positions on many issues will be is unclear, as he still has not provided coordinated policy plans for major areas such as the economy, energy, or poverty reduction. Conversations between Ortega and U.S. officials, including President Bush, indicate both sides are seeking a cooperative relationship. Nonetheless, since taking office, Ortega has continued to vacillate between populist, anti-U.S. rhetoric, and pragmatic reassurances that his second administration will respect private property and pursue free-trade policies. His cabinet appointments include both Sandinista loyalists and supporters of a free market economy. He has close ties with Venezuelan President Hugo Chávez, who advocates a leftist, populist alliance in the Americas to counter U.S. influence in the region. Venezuela is reportedly providing Nicaragua with energy assistance—including research into constructing an oil refinery in Nicaragua—and promising sizeable development assistance. But Ortega's Vice President Jaime Morales, spokesman for the anti-Sandinista contras during the 1980s, has resumed talks with the International Monetary Fund, of which Chávez is highly critical, regarding a new Poverty Reduction and Growth Facility plan. The Ortega Administration says it seeks a plan which will place greater emphasis on social priorities than previous plans. The amendments passed and then postponed by the previous legislature, in which Ortega was opposition leader of the FSLN, would have transferred significant executive powers, including controlling Cabinet appointments, to the legislature in February 2007. The new legislature voted in January 2007 to postpone them again, however, for another year, until January 2008. Montealegre, now serving as head of the opposition, said he advocated postponing them in part because implementing them as they are now would give control of new institutions and more patronage jobs to the FSLN and the PLC. The legislature established a commission for constitutional reforms that will look at the reforms currently on hold, plus others being proposed. The ALN is advocating a provision barring presidential reelection. The FSLN says it supports unlimited presidential re-election. The Ortega Administration also proposed in January a bill that would create "people's councils" and give direct control of the police to the President. The National Assembly approved the bill, but weakened Ortega's proposals. Critics feared the people's councils resembled defense committees that operated during the 1980s Sandinista government and reportedly acted as spies and enforcers of FSLN doctrine. The new councils will have less power and more of a consulting role under the new law. The bill that passed gave Ortega greater control over the police, but not as much as he had proposed. In March 2007 the Ortega government released former President Alemán from the conditions of his parole, allowing him to travel freely throughout the country. Many critics see this as evidence that he still operates under the power-sharing pact with Ortega, and believe that his release was a reward for contributing to the split in his party and facilitating Ortega's election. Alemán said he would like to be president again. Some Members of Congress have criticized the Administration's reduced levels of some funding to Latin America, including to Nicaragua. The Administration proposes to reduce aid to Nicaragua by 40%, from $47.583 million in FY2006 to $29.375 million in 2008, a decrease of $18.2 million. The Administration notes, however, that it has supported forgiveness of Nicaraguan debts, and is providing significant amounts of aid through the Millennium Challenge Account (MCA) (see " Development and Poverty Reduction ," below). The Administration's five-year MCA agreement of $175 million represents $35 million per year. Some analysts argue that the Administration had said MCA funds would be in addition to traditional aid provided mostly through the U.S. Agency for International Development (USAID), not instead of it. In its Congressional Budget Justification for FY2008, the Administration describes 2008 as a "critical year for Nicaragua," as Ortega—who the Administration says still controls the "anti-democratic 'pact'" with former President Alemán—completes his first year in office and the implementation of CAFTA-DR "hopefully hits its stride." Programs seeking to promote good governance and maximize the benefits of the U.S.-Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) would be significantly reduced under this proposal. Programs to promote "Governing Justly and Democratically" would be cut by more than 50%, from $10 million to $4 million. Programs promoting "Economic Growth" would be reduced by about a third, from $17.3 million to $11.3 million. "Investing in People" programs, focusing on education, and environmental protection and social safety nets related to CAFTA-DR, would be cut by a third, from $18.6 million to $11.7 million. Aid under two smaller groups of programs would increase. Peace and security programs would increase from $1.3 million to $2.2 million. These programs would include reducing the threat posed by excess weapons and improving civilian control over the military. Humanitarian assistance to improve disaster preparedness and mitigation would increase from $0.0 to $200,000. Between 1990 and August 2006, the United States forgave $389.7 million in Nicaraguan debt. As of December 31, 2005, Nicaragua owed the U.S. $20.5 million. In March 2007, the Inter-American Development Bank approved 100% debt relief for several countries, including $984 million in debt relief for Nicaragua. The Bush Administration supported the decision. Nicaragua is the second poorest nation in the hemisphere, rating only above Haiti. Nicaragua's poverty is widespread and acute. Some social indicators have shown little or no improvement since 1993. According to a recent World Bank report, overall poverty declined in Nicaragua between 1993 and 2001, but more than two-thirds of the rural population continue to live in poverty. The official unemployment rate is about 12%, with another 35% underemployed, though estimates vary. In 2005, the Bush Administration signed a five-year, $175 million agreement with Nicaragua under the Millennium Challenge Account to promote rural development. The programs are focusing on the regions of León and Chinandega. According to the Bush Administration, the MCA projects will reduce poverty and spur economic growth by reducing transportation costs and improving access to markets for rural communities; increasing wages and profits from farming and related enterprises in the region; and increasing investment by strengthening property rights. Ortega has not yet stated the policies his government proposes to achieve his stated goal of ending poverty. He did, however, say that the United States should pay at least $300 million to support former "contras" whom the Reagan Administration funded to fight Ortega's first government in the 1980s. The rebels seek housing, land, and credits. The top U.S. priority in Nicaragua, according to the Administration's FY2008 budget request, is "strengthening and consolidating democracy." U.S. programs in the requested "Governing Justly and Democratically" component of U.S. aid would support the structural reform of government institutions to make them more transparent, accountable and professional; combat corruption; and promote the rule of law. They also aim to increase citizen advocacy and the role of the media in order to "blunt" Nicaragua's caudillo-style political practices. In January 2007, the legislature passed a bill proposed by President Ortega concentrating political power in the executive branch and another delaying implementation of constitutional changes which would have given more power to the legislature until January 2008. A commission for constitutional reforms will reexamine the passed package and look at new reform proposals from all the parties. The FSLN has suggested it will propose a reform to allow unlimited presidential re-elections. Current law allows re-election, but only in non-consecutive terms. U.S. officials have also expressed concern regarding improving respect for human rights. According to the State Department's 2006 Human Rights report, released in March 2007, civilian authorities generally maintained effective control of security forces, but there were some reports of human rights abuses involving the police. The most significant human rights abuses included harsh prison conditions; widespread corruption in and politicization of government entities, including the Office of Human Rights Ombudsman, the judiciary, and the Supreme Electoral Council. According to Amnesty International, the inadequate response by authorities to high levels of violence against women was a major concern. Violence against children was also a concern expressed by human rights reports. Journalists were harassed and abused. Human rights problems related to labor issues include widespread child labor and violation of worker rights in free trade zones. Human rights and other groups expressed concern over the National Assembly's passage of a law in October 2006 that made abortion illegal and punishable by imprisonment even when done to save a pregnant woman's life, or the pregnancy is a result of rape or incest, conditions under which abortion had been legal since 1893. International organizations, including the UN, criticized the legislature for passing the bill during the highly politicized period just before the presidential elections. The Sandinistas, who had previously supported a woman's right to abortion, supported the penalization of abortion. Many observers saw the move as an effort by the party to garner Catholic votes for Ortega. In January human rights activists asked the Supreme Court to declare the law unconstitutional on grounds that it violates fundamental rights and principles. The National Assembly approved the U.S.-Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) in October 2005 and passed related intellectual property and other reforms in March 2006. It went into effect on April 1, 2006. CAFTA-DR supporters say the agreement will promote economic growth, create jobs, and increase exports to the United States. In 2005, Nicaraguan exports to the United States were $275 million; they increased almost 40 percent in the second quarter of 2006 following the introduction of CAFTA-DR-related tariff reductions. U.S. imports to Nicaragua totaled $522 million, and also are expected to increase under the pact. President Ortega has said he will honor the CAFTA-DR agreement. Immigration is a contentious area in U.S.-Nicaraguan relations. In December 2005, the U.S. House of Representatives passed a bill ( H.R. 4437 ) that would make unlawful presence in the United States a criminal, rather than a civil offense. In January 2006, Nicaragua joined the Mexican and other Central American governments in criticizing such efforts to toughen immigration laws and in demanding guest-worker programs and other immigration reforms. The 2000 U.S. census reported about 220,000 Nicaraguans living in the United States. Of those, 21,000 were estimated to be "unauthorized." In late February 2006, the Department of Homeland Security extended Temporary Protected Status (TPS) for about 4,000 eligible Nicaraguans living in the United States until July 5, 2007. During his March 2007 trip to Latin America, President Bush said he would support new legislation to give legal status to millions of undocumented immigrants through temporary worker programs, and said he would seek its passage through Congress by August 2007. Resolution of property claims by U.S. citizens has been a contentious area in U.S.-Nicaraguan relations for decades, since the Sandinista regime expropriated property in the 1980s. The Nicaraguan government has gradually settled many claims through compensation since 1995, including the claims of 4,400 U.S. citizens. About 760 claims registered with the U.S. embassy remain unresolved. Nicaragua passed a law creating a new Property Institute that could lead to the dismissal of property claim lawsuits arising from Sandinista-era expropriations. The law is part of the constitutional reform package now on hold until January 2008. The Bush Administration suspended military assistance to Nicaragua in March 2005. It resumed providing assistance in October 2005 after an agreement was reached to destroy an arsenal of anti-aircraft missiles the Administration says constitutes a possible terrorist threat. The National Assembly also promised to schedule debate on a law authorizing the missiles' destruction. After being held up for many months, the bill was suddenly brought up for a vote on July 13, 2006. Sandinista legislators walked out in protest. PLC and ALN legislators passed a bill lowering the threshold needed to approve the destruction of weaponry to a simple majority. They did not, according to the U.S. embassy, vote on the destruction of the missiles, which the current government will not consider unless it is linked to a reduction of military strength throughout Central America. Nicaragua and the United States are participating in regional security efforts. Nicaragua hosted a meeting of hemispheric defense chiefs in October 2006; then-U.S. Secretary of Defense Donald Rumsfeld participated. Defense officials at the Eighth Central American Security Conference held in April 2007 discussed regional initiatives regarding security issues such as organized crime and transnational trafficking in small arms, drugs, and humans. Congress has also expressed concern over improving civilian control over defense policy. USAID peace and security programs include efforts to reduce the threat posed by excess weapons and improve civilian control over the military. Nicaragua is a significant sea and land transshipment point for cocaine and heroin being shipped from South America primarily to the United States and Canada, according to the State Department's 2007 Narcotics Control Report. Trafficking has been mostly through the Atlantic coast, which is geographically and culturally isolated from the rest of the country. In response to increased law enforcement efforts there, however, traffickers shifted their operations in 2006 to the Pacific coast, where the State Department estimates that three-fourths of drug trafficking now occurs. Its report said the Nicaraguan government "is making a determined effort to fight both domestic drug abuse and the international narcotics trade, despite an ineffectual, corrupt, and politicized judicial system." The Ortega Administration has promised to participate in counternarcotics efforts, and called on the United States to do more to combat trafficking.
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Sandinista leader and former President Daniel Ortega was inaugurated to a five-year term as President on January 10, 2007. Three elements were key to Ortega's victory in the November 2006 presidential election: a change in Nicaraguan electoral law, an effective political machine, and a divided opposition. Ortega won only 37.9% of the vote, but was able to avoid a run-off vote because he was ahead of the next closest candidate, Eduardo Montealegre of the Nicaraguan Liberal Alliance (ALN), by more than the 5% required by law. Montealegre, who gained 28.3% of the vote, was regarded by many as the U.S.-favored candidate. His second place position garnered him a seat in the legislature. The Liberal Constitutional party (PLC) then came in third place with 26.2% for candidate José Rizo, an ally of the corrupt former President, Arnoldo Alemán. Critics accused both U.S. officials and Venezuelan President Hugo Chávez of trying to influence the election's outcome. Ortega was a leader of the Sandinista National Liberation Front (FSLN) when it overthrew the Somoza family dictatorship in 1979. When the pro-Soviet Sandinistas gained control of the government the United States backed opposition "contras" who launched an eight-year war (1982-1990) against the government. Ortega's government agreed to democratic elections in February 1990, which he lost. Since 1990 Nicaragua has developed democratic institutions and a framework for economic development. Nonetheless, significant challenges remain: Nicaragua is still very poor, the second poorest nation in the western hemisphere. Its institutions are weak and widely viewed as corrupt. In his first three months in office, Ortega has continued to vacillate between anti-U.S. rhetoric and pragmatic reassurances that his second administration will respect private property and pursue free-trade policies, as he did during his campaign. Ortega and U.S. officials have indicated that both sides are seeking a cooperative relationship, however. There is debate among some Members and the Administration over what the appropriate level and focus of U.S. aid to Nicaragua should be. The Administration says its top priority in Nicaragua is consolidating democratic processes, including reforming the judicial system, implementing good governance, and combating corruption. Another issue is promoting development and poverty reduction; the Millennium Challenge Account compact between the two countries focuses on reducing rural poverty through road-building, increased wages, and strengthening property rights. Supporting the U.S.-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) is the dominant trade issue; President Ortega has said he will honor the agreement. Resolution of property claims by U.S. citizens and immigration are contentious areas in U.S.-Nicaraguan relations. Other issues in U.S.-Nicaraguan relations include improving respect for human rights, improving civilian control over defense policy, the state of Nicaraguan missiles, and increasing Nicaragua's capacity to combat transnational crimes such as narcotics trafficking. This report will not be updated.
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The Corporation for Public Broadcasting (CPB) was incorporated in 1967 as a private nonprofit corporation under the authority of the Public Broadcasting Act of 1967 (P.L. 90-129). CPB funding promotes public television and radio stations and their programs. These CPB-funded stations reach virtually every household in the United States. CPB is the largest single source of funding for public television and radio programming. Most CPB-funded television programs are distributed through the Public Broadcasting Service (PBS), created in 1969 by CPB. CPB-funded radio programs are distributed primarily through National Public Radio (NPR), created in 1970 by CPB. Both PBS and NPR are private, not-for-profit corporations. The number of radio and television public broadcasting stations supported by CPB increased from 270 in 1969 to 1,495 in 2016, of which 364 are television stations. Public broadcasting stations are run by universities, nonprofit community associations, state government agencies, and local school boards, all of which are licensed by the FCC. CPB is a nonprofit private corporation and is guided by a nine-member board of directors. These directors are appointed by the President with the advice and consent of the Senate. The directors serve for staggered six-year terms. The current chairman is Lori Gilbert, reappointed by President Obama and confirmed by the Senate in August 2013. CPB's principal function is to receive and distribute the federal appropriation in accordance with the Public Broadcasting Act, supporting qualified public radio and television stations and funding national content. Seventy percent of the federal appropriation is used to provide Community Service Grants (or CSGs) to stations that meet specified eligibility criteria. CPB exercises minimum control of program content and other activities of local stations, and is prohibited from owning or operating any of the primary facilities used in broadcasting. In addition, it may not produce, disseminate, or schedule programs. The current president and CEO of CPB is Patricia de Stacy Harrison, appointed by the board of directors in June 2005. Approximately 15% of public television and 10% of radio broadcasting funding comes from the federal appropriations that CPB distributes. However, among individual public broadcasting stations, the amount of federal dollars that contributes to a station's annual budget depends on the funds it receives from nonfederal sources; the number and extent of broadcast transmitters required to service its coverage area; the extent to which a station is serving rural areas and minority audiences; and whether or not it is a television or radio station. While federal funding for CPB primarily comes from the Departments of Labor-Health and Human Services-Education appropriations bill as a separate entry under the "Related Agencies" section of that bill, it may receive other sources of funding from the federal government. For example, on September 8, 2015, CPB and PBS received a five-year Ready to Learn (RTL) grant from the Department of Education's Office of Innovation and Improvement, which supports the development of educational television and digital media targeted at preschool and early elementary school children. According to the CPB, for the last year data are available, the RTL grant was funded for FY2016 at $25.741 million. The CPB received approximately $18 million, and Twin Cities Public Television received the rest of the grant. Under RTL, CPB receives the grant money and then partners with PBS for RTL content production. PBS was created by CPB in 1969 to operate and manage a nationwide (now satellite) program distribution system interconnecting all the local public television stations, and to provide a distribution channel for national programs to those public television stations. Although PBS does not produce programs for its members, it aggregates funding for the creation and acquisition of programs by and for the stations, and distributes programs through its satellite distribution system. Paula Kerger became the sixth and current president and CEO of PBS in March 2006. For radio, a different division of responsibilities was established. CPB created National Public Radio (NPR) in 1970 as a news-gathering, production, and program-distribution company governed by its member public radio stations. Unlike its public television counterpart, NPR is authorized to produce radio programs for its members as well as to provide, acquire, and distribute radio programming through its satellite program distribution system. NPR Inc., located in Washington, DC, provides these administrative operations. On July 2014, Jarl Mohn became the current president and CEO of NPR. After the firing of Juan Williams, a news analyst for NPR, in October 2010, NPR Inc. announced that its board of directors had accepted several recommendations to provide greater clarity and transparency for its code of ethics regarding NPR employees. These include reviewing and updating of policies and training with respect to the role of NPR journalists appearing on other media outlets, reviewing and defining their roles (including those of news analysts) in a changing news environment, and encouraging a broad range of viewpoints to reflect the diversity of NPR's national audiences. At the same time these recommendations were announced, Ellen Weiss, vice president of news for NPR, resigned; it was also announced that Vivian Schiller, then president and chief executive at NPR, would not receive a bonus for 2010. On March 9, 2011, Ms. Schiller resigned, over continued scrutiny and criticism over NPR's handling of an incident regarding Ronald Schiller (no relation) in a taped interview. These incidents brought intense scrutiny to NPR from public policymakers. NPR currently employs 828 people, and has an operating budget of $193 million. There are 1,076 stations broadcasting NPR programming; of these 116 are non-NPR members. Approximately 42 million people listen to NPR stations weekly; 3.7 million users download NPR podcasts weekly. The Obama Administration requested a $445 million appropriation for CPB submitted in its FY2017 budget request. The vehicle that is used to provide appropriations to CPB is the Departments of Labor-Health and Human Services-Education bill. On June 9, 2016, the Senate Appropriations Committee approved, 29-1, S.Rept. 114-274 , the FY2017 Labor-HHS-Education Appropriations bill. Among its provisions is $445 million for CPB in 2019. On May 5, 2017, President Trump signed P.L. 115-31 , the Consolidated Appropriations Act of 2017, which maintained FY2017 funding for CPB through the rest of the fiscal year. On May 23, 2017, the Trump Administration released its FY2018 budget request. It calls for the elimination of federal funding for CPB for FY2018 and beyond; however, $30 million is requested for the orderly closeout of federal funding for CPB in FY2018. (For funding levels, see Table 1 .) From the last year of available information, the U.S. public broadcasting system—comprised of the national public radio and television stations—reported total revenue of $3.05 billion in FY2015. According to CPB, for public broadcasting revenue by source, CPB funds made up 14.6% of the total; another 1.2% came from federal grants and contracts. The remaining 84.3% was raised from nonfederal sources (including individuals, businesses, foundations, state and local governments, and educational institutions). The largest single income source (31.0% in FY2015) came from membership. Federal appropriations which go through CPB to the individual public radio and television stations generally are designated as unrestricted federal funds. CPB distributed $69.31 million in FY2014 funding to public radio stations that qualify for its Community Service Grant program. However, member stations also pay NPR fees for content and programming; some contend that federal grant money is supporting part of the revenue streams back to NPR Inc. A history of CPB appropriations is presented in Table 1 . Additional information on both NPR and PBS funding may be obtained at their respective websites ( http://www.npr.org and http://www.pbs.org , respectively). There was significant legislative interest and activity regarding federal funding for CPB from the end of the 111 th Congress through the 112 th Congress. During the 111 th Congress, Representative Lamborn (CO) introduced H.R. 5538 , a bill that would have eliminated federal funding for CPB after FY2012. This bill was referred to the House Committee on Energy and Commerce. During the "lame duck" period of the 111 th Congress in November 2010, Representative Lamborn sought to have his bill considered for floor action in the House, but this action was defeated by a vote of 239-171. In response, Representative Earl Blumenauer (OR) defended public broadcasting by stating that "National Public Radio is one of the few areas where the American public can actually get balanced information." On January 5, 2011, Representative Lamborn introduced H.R. 68 (To amend the Communications Act of 1934 to prohibit Federal funding for the Corporation of Public Broadcasting after FY2013) and H.R. 69 (To prohibit Federal funding of certain public radio programming, to provide for the transfer of certain public debt, and for other purposes). The first bill, like its predecessor H.R. 5538 , would have eliminated federal appropriations for CPB when its two-year advanced funding ends. The second bill would have prohibited federal funding to organizations incorporated for specified purposes related to (1) broadcasting, transmitting, and programming over noncommercial educational radio broadcast stations, networks, and systems; (2) cooperating with foreign broadcasting systems and networks in international radio programming and broadcasting; (3) assisting and supporting such noncommercial educational radio broadcasting pursuant to the Public Broadcasting Act of 1967; or (4) acquiring radio programs from such organizations. In effect, it would have prohibited any individual public radio station from using federal funding to engage in transactions with NPR Inc. Both bills were referred to the House Committee on Energy and Commerce. On January 11, 2011, NPR Inc. responded to the two bills by stating, in part: "The proposal to prohibit public radio stations from using CPB grants to purchase NPR programming interjects federal authority into local station program decision-making. Furthermore, restrictions on the authority of CPB—a Congressionally chartered, independent, nonprofit organization—to make competitive grants to NPR, or any other public broadcasting entity, is misguided." Other legislation was introduced addressing federal support for public broadcasting. On January 7, 2011, Representative Kevin Brady introduced H.R. 235 (Cut Unsustainable and Top-Heavy Spending Act of 2011 or the CUTS ACT), which provided that all unobligated balances held by the CPB that consist of federal funds be rescinded and no federal funds appropriated hereinafter shall be obligated or expended. On January 24, 2011, Representative Jim Jordan introduced H.R. 408 (Spending Reduction Act of 2011), which would have reduced federal spending by $2.5 trillion through FY2021 in part by eliminating the CPB. On March 15, 2011, Representative Lamborn introduced H.R. 1076 , a bill to prohibit the funding of National Public Radio and restrict the use of federal funds for member stations to acquire NPR broadcasting content. The House Rules Committee passed H.Res. 174 , which permitted H.R. 1076 to go directly to the floor and, without any points of order or amendments, be open to one hour of debate before a full vote in the House of Representatives. H.R. 1076 passed the House 228-192, and was referred to the Senate. No further action was taken on this bill. Other proposals in the 112 th Congress addressed federal funding for public broadcasting. On January 20, 2011, the Republican Study Group, a conservative caucus comprised of 100 Members of Congress, released its list of proposed budget cuts, including elimination of CPB's appropriations starting in FY2012. At the same time, Representative Ryan (WI), the chairman of the House Committee on the Budget for the 112 th Congress, proposed a new continuing resolution that would have set the rest of the FY2011 budget at FY2008 levels (excluding defense, homeland security, and veterans' programs). In the 113 th Congress, several bills were introduced addressing the Corporation for Public Broadcasting, National Public Radio, the Public Broadcasting System, and issues related to these institutions and their funding. H.R. 2597 , a bill To Prohibit Federal Funding of National Public Radio and the Use of Federal Funds to Acquire Radio Content (Lamborn), was introduced on July 5, 2013, and was referred to the House Subcommittee on Communications and Technology of the Energy and Commerce Committee. As the title indicates, this bill would have eliminated all direct federal funding for NPR as well as federal funding to sell or acquire NPR-based programming content. H.R. 2647 , the Emergency Information Improvement Act of 2013 (Higgins), was introduced on July 10, 2013, and referred to the House Subcommittee on Economic Development, Committee on Public Buildings and Emergency Management. The bill would have revised disaster relief law to include public broadcasting facilities, among other provisions. On July 11, 2013, S. 1284 , the Departments of Labor, Health and Human Services, and Education and Related Agencies Appropriations Act, 2014 (Harkin), was introduced and placed on the Senate Legislative calendar. In this bill, the congressional request for CPB in FY2016—the forward two-year appropriation—was $45 million. This bill was incorporated into H.R. 3547 , the Consolidated Appropriations Act of 2014, and signed into law on January 17, 2014 ( P.L. 113-76 ). FY2019 appropriations for CPB were addressed in both the House and Senate FY2017 Labor-HHS-Education bills ( S. 3040 , H.R. 5926 ); both the House and the Senate approved a $445 million funding level for CPB. However, there is a Continuing Resolution for FY2017, P.L. 114-254 , which was signed into law by President Obama on December 9, 2016. The Trump Administration has requested zero funding for CPB in FY2018. On January 30, 2017, Representative Lamborn introduced H.R. 726 (A Bill To Prohibit Federal Funding of National Public Radio and the Use of Federal Funds to Acquire Radio Content) and H.R. 727 (To Amend the Communications Act of 1934 to Prohibit Federal Funding for the Corporation for Public Broadcasting After Fiscal Year 2019). Both bills were referred to the House Energy and Commerce Committee's subcommittee on Communications and Technology . In an age of multiple cable channel options, digital radio, and computerized digital streaming, some ask whether there is a need for federal appropriations to support public broadcasting. The array of commercial all-news radio and radio talk shows, many of which are also streamed on the Internet, provides various sources of news and opinion. Supporters of public broadcasting argue that public radio and television broadcasters, free of commercial interruption, provide perhaps the last bastion of balanced and objective information, news, children's education, and entertainment in an era of a changing media landscape. Still others contend that public broadcasting has lost much of its early impact since the media choices have grown so much over the last several decades and that the federal role in public broadcasting should be reevaluated as well. Supporters of public broadcasting contend that public radio and public television provide education and news to many underserved parts of the American population. Public broadcasters may provide this service to an underserved and less commercially attractive population that commercial broadcasters do not address. For example, PBS broadcasting for children includes lessons in reading, counting, and spelling, subjects not normally found on commercial broadcasts. According to NPR Inc., approximately 90% of public radio stations provide local newscasts, airing both newscast and non-newscast content (primarily in weekday drive times and especially during morning drive time). About half of all public radio stations carry local news during the weekends, says NPR, and 74% of stations are producing and inserting stories into their programming. On June 20, 2012, the CPB released a report, Alternative Sources of Funding for Public Broadcasting Stations. The report was undertaken in response to language in the Military Construction and Veterans Affairs and Related Agencies Appropriations Act of 2012 directing the CPB to provide a report to congressional appropriations committees on alternative sources of federal funding for public broadcasting stations. ( H.R. 2055 , P.L. 112-74 ). The report, undertaken by the consulting firm of Booz & Company, provides several alternative or new funding options for public broadcasting stations, with possible benefits as well as liabilities for each option. Five options considered by Booz & Company are television advertising, radio advertising, retransmission consent fees, paid digital subscriptions, and digital game publishing. In addition, 14 current sources of revenue streams already employed by public broadcasting, ranging from merchandise licensing to mobile device applications, were also analyzed as options to replace federal funding for public broadcasting. Booz & Company found "there is simply no substitute for the federal investment" in public broadcasting and that "Ending federal funding for public broadcasting would severely diminish, if not destroy, public broadcasting service in the United States." The report concludes that if the existing public broadcasting structure were commercialized, the new revenue streams would not offset the loss of federal funding, and that many public broadcasters would have to deviate from their statutory service mission or compete for advertising with established commercial broadcasters in a difficult economic environment. Still, some critics contend that the report substantiates criticisms of the public broadcasting model: required to compete with commercial television and radio broadcasters that also provide news and entertainment, many public broadcasters could not adapt to a changing media world that provides multiple sources of information and entertainment. For these critics, if many public broadcasters struggle to operate with budget deficits even with federal funding available, what does that say about the need and viability of these stations in a multimedia world, or the ability of their audiences to sustain this business model going forward? Several important issues are facing congressional policymakers as they address federal appropriations for all forms of public broadcasting. On the most fundamental level, many question the 1967 law that created the national public broadcasting system and whether the federal government should be in the "business" of providing general appropriations to CPB every year since 1969. They ask: is this still a relevant and appropriate role of the federal government? On a second level, some may contend that in an era of spiraling federal deficits, in which many (if not all) federal expenditures are being reexamined, appropriations for CPB should be reduced if not eliminated. Underlying this position are concerns that the federal role, once so clear in 1967, has been eclipsed in a multimedia Internet age; concerns that the size and scope of the federal government budget deficit requires significant cutbacks in many areas; and allegations that public broadcasting is not objective, balanced, or free of an ideological slant. These questions revolve around whether federal funding for public broadcasting should be continued at its current level; whether the funding should be modified or reduced; whether the arrangement between the federal funding process and public broadcasting should be changed; or whether federal funding for public broadcasting should be eliminated. Public broadcasting retains its strong supporters. Most federal appropriations go through CPB to directly support member stations of NPR, PBS, and other independent affiliates. Since, according to NPR, federal funding to supplement administrative functions amounts to less than 2% of its annual budget, some may question whether such a small amount is worthy of congressional action to eliminate federal funding. As indicated in Table 1 , CPB has consistently received increasing federal appropriations since 1969. Some would contend that this demonstrates a general consensus among congressional policymakers that there is a federal role in public broadcasting. In addition, public support of public radio and television broadcasting generally has been consistent as well. Supporters of a public broadcasting network system contend that local programming content is not determined by NPR Inc., or PBS, and that most content is local, serving community needs. Balanced against concerns about the role of the federal government in public broadcasting, as well as strong pressure to reduce federal spending, these issues will likely continue to be of interest to federal policymakers.
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The Corporation for Public Broadcasting (CPB) receives its funding through federal appropriations; overall, about 15% of public television and 10% of radio broadcasting funding comes from the federal appropriations that CPB distributes. CPB's appropriation is allocated through a distribution formula established in its authorizing legislation and has historically received two-year advanced appropriations. Congressional policymakers are increasingly interested in the federal role in supporting CPB due to concerns over the federal debt, the role of the federal government funding for public radio and television, and whether public broadcasting provides a balanced and nuanced approach to covering news of national interest. It is also important to note that many congressional policymakers defend the federal role of funding public broadcasting. They contend that it provides news and information to large segments of the population that seek to understand complex policy issues in depth, and in particular for children's television broadcasting, has a significant and positive impact on early learning and education for children. On June 20, 2012, the Corporation for Public Broadcasting released a report, Alternative Sources of Funding for Public Broadcasting Stations. The report was undertaken in response to the conference report accompanying the Military Construction and Veterans Affairs and Related Appropriations Act of 2012 (incorporated into the Consolidated Appropriations Act, FY2012, H.R. 2055, P.L. 112-74). The CPB engaged the consulting firm of Booz & Company to explore possible alternatives to the federal appropriation to CPB. Among its findings, the report stated that ending federal funding for public broadcasting would severely diminish, if not destroy, public broadcasting service in the United States. The two-year advanced appropriations process for CPB means that in any given year congressional policymakers are considering what the CPB appropriations will be two years from that time. So as Congress continues to consider funding for the FY2017 fiscal year, that deliberation would include CPB funding for FY2019. On June 9, 2016, the Senate Appropriations Committee voted 29-1 to approve S.Rept. 114-274, the FY2017 Labor-HHS-Education Appropriations bill. Included in this report is $445 million for CPB in FY2019. On May 5, 2017, President Trump signed P.L. 115-31, the Consolidated Appropriations Act of 2017, which maintained FY2017 funding for CPB through the rest of the fiscal year. On May 23, 2017, the Trump Administration released its FY2018 budget request. It calls for the elimination of federal funding for CPB for FY2018 and beyond; however, $30 million is requested for the orderly closeout of federal funding for CPB in FY2018.
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The admission of refugees to the United States and their resettlement here are authorized by the Immigration and Nationality Act (INA), as amended by the Refugee Act of 1980. The 1980 Act had two basic purposes: (1) to provide a uniform procedure for refugee admissions; and (2) to authorize federal assistance to resettle refugees and promote their self-sufficiency. The intent of the legislation was to end an ad hoc approach to refugee admissions and resettlement that had characterized U.S. refugee policy since World War II. Under the INA, a refugee is a person who is outside his or her country and who is unable or unwilling to return because of persecution or a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion. In special circumstances, a refugee also may be a person who is within his or her country and who is persecuted or has a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion. Excluded from the INA definition of a refugee is any person who participated in the persecution of another. The Bureau of Population, Refugees, and Migration (PRM) of the Department of State (DOS) coordinates and manages the U.S. refugee program, and U.S. Citizenship and Immigration Services (USCIS) of the Department of Homeland Security (DHS) makes final determinations about eligibility for admission. Refugees are processed and admitted to the United States from abroad. Separate provision is made in the INA for the granting of asylum on a case-by-case basis to aliens who are physically present in the United States or who arrive in the United States and who meet the definition of a refugee. After one year in refugee status in the United States, refugees are required to apply to adjust to lawful permanent resident (LPR) status. By law, the annual number of refugee admissions and the allocation of these numbers by region of the world are set by the President after consultation with Congress. Each year, the President submits a report to Congress, known as the consultation document , which contains the Administration's proposed worldwide refugee ceiling and regional allocations for the upcoming fiscal year. Following congressional consultations on the Administration's proposal, the President issues a Presidential Determination setting the refugee numbers for that year. Table 1 shows refugee admissions ceilings and regional allocations for FY2008-FY2019. The U.S. refugee program was greatly impacted by the terrorist attacks of September 11, 2001. In the aftermath of those attacks, a review of refugee-related security procedures was undertaken, refugee admissions were briefly suspended, and enhanced security measures were implemented. As a result of these and other factors, refugee admissions, which had totaled about 70,000 in FY2001, plunged to historically low levels in the years following the attacks. In FY2002, for example, actual admissions totaled 27,131. Admissions subsequently rebounded, as shown in Table 1 , exceeding 70,000 in each of FY2009 and FY2010. As also shown in Table 1 , however, there were significantly fewer admissions in FY2011 (56,424) and FY2012 (58,238). The FY2013 consultation document attributed the shortfalls in refugee arrivals in FY2011 and FY2012 largely to new security requirements. Refugee admissions increased in FY2013, and the FY2014 consultation document offered the following explanation for the increase: Refugee arrivals in FY 2013 are up sharply from the previous two years thanks to the concerted efforts of the many partners involved in U.S. resettlement... This success was made possible in part by better synchronization of security and medical checks for refugee families as well as investments in [the United Nations High Commissioner for Refugees'] ability to refer refugees from the Middle East and Africa. In FY2013, FY2014, and FY2015, refugee admissions fell just under each year's 70,000 ceiling. The FY2016 refugee ceiling was 85,000, and actual admissions that year were just below that number. The refugee ceiling for FY2017 was set at 110,000 by President Barack Obama. However, President Donald Trump issued two successive executive orders in January 2017 and March 2017 that "proclaim[ed] that the entry of more than 50,000 refugees in fiscal year 2017 would be detrimental to the interests of the United States." The March 2017 executive order, which revoked its predecessor, also directed the Secretary of State and the Secretary of Homeland Security to suspend the refugee admissions program for a period of 120 days. During the 120-day period, the Secretary of State, in conjunction with Secretary of Homeland Security, was tasked with reviewing refugee admissions procedures. On June 26, 2017, the U.S. Supreme Court ruled that, pending the resolution of ongoing litigation concerning the lawfulness of the March 2017 executive order, the provisions establishing the FY2017 50,000 refugee admissions limit and the 120-day refugee program suspension could take effect for all individuals except for those "who can credibly claim a bona fide relationship with a person or entity in the United States." The 120-day suspension was in effect from June 26, 2017, until its expiration on October 24, 2017. Actual refugee admissions in FY2017 totaled 53,716. During the suspension of the refugee admissions program, President Trump set the FY2018 refugee ceiling at 45,000, lower than the ceiling for any prior year. The FY2018 consultation document explained that DHS had decided to prioritize the processing of asylum cases over refugee cases that year: Delays in the timely processing of asylum applications are detrimental to legitimate asylum seekers. Furthermore, while a series of security checks are initiated when an asylum application is filed, lingering backlogs can be exploited and used to undermine the security and integrity of the country's asylum system. As such, in considering how to allocate its available resources for humanitarian work in FY 2018, DHS/USCIS is prioritizing adjudication of asylum cases to address this growing backlog, while still providing a portion of its resources to continue refugee processing activities. On October 24, 2017, President Trump issued another executive order on refugee admissions. It provided for the resumption of the refugee admissions program subject to certain conditions. The executive order referenced "special measures" that would be applied to "certain categories of refugees whose entry continues to pose potential threats to the security and welfare of the United States." It also indicated that the Secretary of State and the Secretary of Homeland Security would continue to "assess and address any risks posed by particular refugees." To this end, the executive order directed the Secretary of Homeland Security, in consultation with the Secretary of State and the Director of National Intelligence, to determine within 90 days of the date of the order, and annually after that, whether any steps taken to address the risks posed by the admission of any category of refugees should be modified or terminated. The order further authorized the Secretary of Homeland Security to implement any such modifications or terminations. A DOS fact sheet issued the same day as the executive order explained that DOS, DHS, and the Office of the Director of National Intelligence had "concluded that additional in-depth review is needed with respect to refugees of 11 nationalities previously identified as potentially posing a higher risk to the United States." According to the fact sheet, admissions of prospective refugees from these 11 unspecified countries would occur on a case-by-case basis during the 90-day review period specified in the executive order. In January 2018, DHS announced that as a result of the 90-day review it was putting in place "additional security enhancements and recommendations to strengthen the integrity of the U.S. Refugee Admissions Program," including the following: Additional screening for certain nationals of high-risk countries. Administering the [U.S. Refugee Admissions Program] in a more risk-based manner when considering the overall refugee admissions ceiling, regional allocations, and the groups of applicants considered for resettlement. A periodic review and update of the refugee high-risk country list and selection criteria. According to the DHS announcement, these measures "are designed to keep nefarious and fraudulent actors from exploiting the refugee program to enter the United States." Refugee admissions for FY2018 totaled 22,491, about half the FY2018 ceiling of 45,000. These FY2018 admissions represented the lowest annual level of refugee arrivals in the United States since the establishment of the U.S. refugee admissions program in 1980. The refugee ceiling for FY2019 is 30,000. The FY2019 consultation document offered the following explanation for setting the refugee ceiling at that level, the lowest in the history of the refugee admissions program: This ceiling takes into account the operational realities associated with security measures to protect national security and public safety, as well as the need to conduct credible fear screenings of aliens seeking asylum at our borders and address the backlog of affirmative asylum cases. On October 4, 2018, President Trump signed the Presidential Determination setting the FY2019 worldwide refugee ceiling and regional allocations. The FY2019 refugee ceiling is 30,000, the same as proposed in the FY2019 consultation document. As shown in Table 1 , the FY2019 refugee ceiling of 30,000 is allocated among the regions of the world. The regional allocations are intended to cover previously approved refugees in the pipeline as well as new cases. Unlike in some past years, there is no unallocated reserve in FY2019. An unallocated reserve is to be used if, and where, a need develops for refugee slots in excess of the allocated numbers. Unallocated numbers have been used regularly in recent years (see Table 1 ). The FY2019 consultation document, unlike its predecessors, does not identify the nationalities of the refugees expected to be resettled in the United States. Instead, it describes uncertainty surrounding the home countries of FY2019 refugee arrivals: Given the lengthy processing required, it is likely that refugees referred to [U.S. Refugee Admissions Program] will not be admitted to the United States until a subsequent year. It is therefore impossible to determine exactly which countries will be the sources of refugees admitted to the United States in FY 2019. The FY2019 regional allocations can be compared to FY2018 and FY2017 regional admissions levels, as follows: Africa has been allocated 11,000 refugee admissions numbers for FY2019. FY2018 admissions totaled 10,459; FY2017 admissions totaled 20,232. East Asia's FY2019 allocation is 4,000. FY2018 admissions totaled 3,668; FY2017 admissions totaled 5,173. Europe and Central Asia have a combined FY2019 allocation of 3,000 refugee admissions. FY2018 admissions for this region totaled 3,612; FY2017 admissions totaled 5,205. The FY2019 allocation for Latin America and the Caribbean is 3,000. FY2018 admissions totaled 955; FY2017 admissions totaled 1,688. The Near East/South Asia allocation for FY2019 is 9,000. FY2018 admissions totaled 3,797; FY2017 admissions totaled 21,418. PRM is responsible for processing refugee cases. Generally, it arranges for a nongovernmental organization (NGO), an international organization, or U.S. embassy contractors to manage a Resettlement Support Center (RSC) that assists in refugee processing. RSC staff conduct pre-screening interviews of prospective refugees and prepare cases for submission to USCIS, which handles refugee adjudications. Refugee processing is conducted through a system of three priorities for admission. These priorities provide access to U.S. resettlement consideration, and are separate and distinct from whether such persons qualify for refugee status. Priority 1 covers refugees for whom resettlement seems to be the appropriate durable solution, who are referred to the U.S. refugee program by the United Nations High Commissioner for Refugees (UNHCR), a U.S. embassy, or a designated NGO. Such persons often have compelling protection needs, and may be in danger of attack or of being returned to the country they fled. All nationalities are eligible for this priority. Priority 2 covers groups of special humanitarian concern to the United States. It includes specific groups that may be defined by their nationalities, clans, ethnicities, or other characteristics. Unlike Priority 1 cases, individuals falling under Priority 2 are able to access the U.S. refugee program without a UNHCR, embassy, or NGO referral. Some P-2 programs, such as the program for certain former Soviet nationals (see " Lautenberg Amendment and Specter Amendment "), process applicants in their country of origin . Some Priority 2 groups are processed outside their country of origin. These include Burmese in refugee camps in Thailand. Another P-2 group, Iraqis associated with the United States, is eligible for in-country processing in Iraq as well as processing outside that country. Priority 3 covers family reunification cases. Refugee applications under Priority 3 are based upon an affidavit of relationship (AOR) filed by an eligible relative in the United States. The Priority 3 program is limited to designated nationalities. For FY2019, Priority 3 processing is available to nationals of 15 countries. Individuals falling under Priority 3, like those falling under Priority 2, are able to access the U.S. refugee program without a UNHCR, embassy, or NGO referral. The Priority 3 program has changed over the years. Since FY2004, qualifying family members have been the spouses, unmarried children under age 21, and parents of persons who were admitted to the United States as refugees or granted asylum. In October 2008, the U.S. refugee program stopped accepting applications under Priority 3. Earlier in 2008, processing of Priority 3 cases was suspended in certain locations in Africa "due to indications of extremely high rates of fraud in claimed family relationships identified through pilot DNA testing." The Priority 3 program resumed in October 2012 with a new AOR form and requirement for DNA evidence of certain claimed biological parent-child relationships. To file an AOR, the U.S.-based relative must be at least age 18 and must file within five years of being granted asylum or admitted to the United States as a refugee. The Secretary of DHS has discretionary authority to admit refugees to the United States. USCIS is responsible for adjudicating refugee cases. To be eligible for admission to the United States as a refugee, an individual must meet the INA definition of a refugee, not be firmly resettled in another country, be determined to be of special humanitarian concern to the United States, and be admissible to the United States. In the past, the majority of refugee adjudications were conducted by USCIS officers on temporary duty from domestic asylum offices. Today, these adjudications are handled by USCIS officers in the Refugee Corps. To be admitted to the United States, a prospective refugee must be admissible under immigration law. The INA sets forth various grounds of inadmissibility, which include health-related grounds, security-related grounds, public charge (i.e., indigence), and lack of proper documentation. Some inadmissibility grounds (public charge, lack of proper documentation) are not applicable to refugees. Others can be waived for humanitarian purposes, to assure family unity, or when it is otherwise in the public interest. Of particular relevance to the admission of refugees are certain health-related and security-related grounds of inadmissibility. Under the INA health-related grounds of inadmissibility, an alien who is determined, in accordance with Department of Health and Human Services (HHS) regulations, to have a communicable disease of public health significance is inadmissible. In past years, human immunodeficiency virus (HIV) infection was defined to be one of these diseases, although HIV-infected refugees could apply for a waiver. In 2008, Congress amended the INA to eliminate the reference to HIV infection as a health-related ground of inadmissibility. And effective January 4, 2010, the Centers for Disease Control and Prevention (CDC) of HHS amended its regulations on the medical examination of aliens to remove HIV infection from the definition of a "communicable disease of public health significance." The CDC further amended its regulations on the medical examination of aliens, effective March 28, 2016, to revise the definition of a "communicable disease of public health significance" and make other changes to the health screening process. Since 1990, the security-related grounds of inadmissibility in the INA have expressly included terrorism-related grounds. Over the years, the terrorism-related grounds have been amended to lower the threshold for how substantial, apparent, and immediate an alien's support for a terrorist activity or organization may be for the alien to be rendered inadmissible. Among the current terrorism-related grounds, an alien is generally inadmissible for engaging in terrorist activity if he or she gives any "material support," such as a safe house, transportation, communications, or funds, to a terrorist organization or any of its members or to a person engaged in terrorist activity. The Secretary of State or the DHS Secretary, after consultation with the other and the Attorney General, may exercise discretionary waiver authority over certain terrorism-related grounds of inadmissibility. Both the Secretary of State and the Secretary of DHS have used this authority to grant exemptions from the terrorism-related inadmissibility grounds to certain categories of individuals and for certain types of support. The Consolidated Appropriations Act, 2008, specified groups that, for purposes of the INA terrorism-related grounds of inadmissibility, are not to be considered terrorist organizations on the basis of past acts. Thus, a prospective refugee who was a member of, or provided support to, one of these groups would not be inadmissible on the basis of those actions. More broadly, the Consolidated Appropriations Act expanded the discretionary authority of the Secretary of State and the Secretary of DHS to grant waivers of the terrorism-related grounds of inadmissibility generally. Measures subsequently enacted in 2008 and 2014 limited the application of the INA's terrorism-related provisions with respect to other specific groups. To be admissible to the United States under the INA security-related grounds of inadmissibility discussed above, a prospective refugee must clear all required security checks. According to an August 2018 USCIS fact sheet on refugee security screening: USCIS has the sole discretion to approve an application for refugee status and only does so after it has obtained and cleared the results of all required security checks for the principal applicant, as well as any derivative family members included on their case. Just as DOS commonly denies visas, USCIS also routinely denies refugee cases, including for reasons of national security. The fact sheet summarizes the security screening process, as follows: [U.S. Refugee Admissions Program] screening includes both biometric and biographic checks, which occur at multiple stages throughout the process, including immediately after the preliminary RSC interview, before a refugee's departure to the United States, and on arrival in the U.S. at a port of entry. The March 2017 executive order issued by President Trump called for a review of U.S. refugee admissions processes to determine what additional procedures were needed to ensure that prospective refugees did not pose threats to the United States. The October 2017 executive order noted that the results of that review would, among other benefits, "enhance the ability of our systems to check biometric and biographic information against a broad range of threat information contained in various Federal watchlists and databases." (For further information about these executive orders, see " Refugee Admissions .") The FY2019 consultation document noted that prospective refugees "undergo more thorough screening than ever before." It further explained: The U.S. government has increased the amount of data it collects on refugee applicants, and more applicants now are subject to higher levels of security screening. The "Lautenberg Amendment" was originally enacted as part of the FY1990 Foreign Operations Appropriations Act. It required the Attorney General to designate categories of former Soviet and Indochinese nationals for whom less evidence would be needed to prove refugee status, and provided for adjustment to permanent resident status of certain Soviet and Indochinese nationals granted parole after being denied refugee status. To be eligible to apply for refugee status under the special provision, an individual had to have close family in the United States. Applicants under the Lautenberg standard were required to prove that they were members of a protected category with a credible, but not necessarily individual, fear of persecution. By contrast, the INA requires prospective refugees to establish a well-founded fear of persecution on an individual basis. The Lautenberg Amendment has been regularly extended in appropriations acts, although there have often been gaps between extensions. The Consolidated Appropriations Act, 2004, in addition to extending the amendment through FY2004, amended the Lautenberg Amendment to add a new provision known as the "Specter Amendment." The Specter Amendment required the designation of categories of Iranian nationals, specifically religious minorities, for whom less evidence would be needed to prove refugee status. The Consolidated Appropriations Act, 2018, extended the Lautenberg Amendment through September 30, 2018. As of the date of this report, the Lautenberg Amendment has not been enacted for FY2019. The HHS Office of Refugee Resettlement (ORR), within the Administration for Children and Families (ACF), administers a transitional assistance program for temporarily dependent refugees, asylees, Cuban/Haitian entrants, and other specified humanitarian groups. Since its establishment in 1980, the refugee resettlement program has been justified on the grounds that the admission of refugees is a federal decision, entailing some federal responsibility. Unlike immigrants who enter through family or employment ties, refugees are admitted on humanitarian grounds, and there is no requirement that they demonstrate economic self-sufficiency. For FY2018, the Consolidated Appropriations Act, 2018, which included appropriations for the Departments of Labor, HHS, and Education, and related agencies, provided $1.865 billion for ORR programs. This funding was supplemented by transferred funds from within HHS, for final FY2018 funding of $2.051 billion. Table 2 details refugee resettlement funding for FY2009-FY2018. ORR-funded refugee assistance activities include transitional and medical services, social services to help refugees and other specified humanitarian groups (referred to collectively as "refugees" below) become socially and economically self-sufficient, and targeted assistance for impacted areas. As indicated in Table 2 , the refugee social services, targeted assistance, and preventive health programs have been combined into the refugee support services program. Transitional/cash and medical services accounts for a greater portion of the ORR annual budget than any other activity for refugees. (Several of the ORR programs—unaccompanied alien children, victims of trafficking, and victims of torture—are not refugee programs.) In most cases, this assistance is administered by states and provided in the form of refugee cash assistance (RCA) and refugee medical assistance (RMA). RCA and RMA are intended to help needy refugees who are ineligible to receive benefits from mainstream federal assistance programs. This assistance is currently available for eight months after entry. RMA benefits are based on the state's Medicaid program, and RCA payments are based on the state's Temporary Assistance for Needy Families (TANF) payment to a family unit of the same size. The ORR program was significantly affected by the 1996 welfare reform act and subsequent amendments. Prior to this legislation, refugees who otherwise met the requirements of federal public assistance programs were immediately and indefinitely eligible to participate in them just like U.S. citizens. Now, refugees are subject to time limits. Table 3 summarizes the time limits on refugee eligibility for four major public assistance programs.
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A refugee is a person fleeing his or her country because of persecution or a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion. Typically, the annual number of refugees that can be admitted into the United States, known as the refugee ceiling, and the allocation of these numbers by region are set by the President after consultation with Congress at the start of each fiscal year. For FY2019, the worldwide refugee ceiling is 30,000. The FY2019 regional allocations are, as follows: Africa (11,000), East Asia (4,000), Europe and Central Asia (3,000), Latin America/ Caribbean (3,000), and Near East/South Asia (9,000). This 30,000 ceiling is the lowest annual ceiling since the establishment of the U.S. refugee admissions program in 1980. Refugee admissions in FY2018 totaled 22,491, the lowest annual level of refugee arrivals in the United States in the history of the refugee admissions program. The Bureau of Population, Refugees, and Migration (PRM) within the Department of State (DOS) coordinates and manages the U.S. refugee program. Generally, PRM arranges for a nongovernmental organization, an international organization, or U.S. embassy contractors to manage a Resettlement Support Center that assists in refugee processing. Overseas processing of refugees is conducted through a system of three priorities for admission. Priority 1 comprises cases involving persons facing compelling security concerns. Priority 2 comprises cases involving persons from specific groups of special humanitarian concern to the United States (e.g., Iranian religious minorities). Priority 3 comprises family reunification cases involving close relatives of persons admitted as refugees or granted asylum. The Department of Homeland Security's (DHS's) U.S. Citizenship and Immigration Services (USCIS) is responsible for adjudicating refugee cases. To be eligible for admission to the United States as a refugee, an individual must meet the definition of a refugee, not be firmly resettled in another country, be determined to be of special humanitarian concern to the United States, and be admissible to the United States. The Department of Health and Human Services' Office of Refugee Resettlement (HHS/ORR) administers a transitional assistance program for temporarily dependent refugees, Cuban/Haitian entrants, and others. For FY2018, the Refugee and Entrant Assistance account was funded at $2.051 billion.
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Muslims in a number of countries have responded in recent days with anger at the United States that many observers describe as a response to a privately produced film circulating on the Internet that denigrates Islam and the prophet Mohammed. In some cases, this outrage has taken the form of public expressions by relatively small groups of demonstrators, and in other countries the demonstrations have been larger. In the most extreme cases, such demonstrations have been accompanied by violent attacks against U.S. diplomatic personnel and diplomatic facilities. Pre-existing anti-U.S. sentiment and domestic political frustrations also appear to be contributing to the unrest. On September 11, 2012, attacks on U.S. interim diplomatic facilities in Benghazi, Libya, killed four U.S. personnel, including Ambassador Christopher Stevens. Vandalism and violence against U.S. facilities in Yemen, Egypt, Tunisia, and Sudan indicates the potency of the issue, as does the spread of clashes between protestors and local security forces elsewhere in the Middle East and North Africa and in some countries in South and Southeast Asia. The geographic scope of the protests and the reportedly broadly shared outrage of participants have overshadowed important distinctions in political context, divergences in host government responses, and the fact that the groups demonstrating, particularly those committing violent acts, are small relative to much larger and diverse populations. In general terms, the global tempest over the film is the latest in a series of transnational controversies involving material critical of Islam that some Muslims and non-Muslims consider to be hate speech. A set of cartoons depicting the prophet Mohammed in a negative light, first published in Denmark in 2005 and re-published by several international newspapers, fueled demonstrations, debate, and, in some isolated cases, violence. Reports of desecration of Islamic religious books have sparked similar trends. From a U.S. diplomatic perspective, the current unrest also echoes a series of parallel incidents targeting U.S. diplomats and embassies in the Middle East and South Asia in 1979, which ushered in reforms that helped define U.S. diplomatic security arrangements. The series of distinct incidents in 1979 was fueled by the siege of Mecca by extremists, the Iranian revolution, and Cold War rivalry, but shares several characteristics with current developments. Apparent spontaneity and raw public emotion commingled with evidence of advance planning by violent groups and manipulation of events by local leaders for political gain. The global environment remains marked by the rapid spread of information and misinformation via somewhat "ephemeral" media. The current demonstrations and recent attacks reveal the persistence of security challenges for U.S. government personnel and citizens abroad, highlight the unresolved and unrelenting nature of some Islamic groups' transnational grievances, and provide fodder for domestic political rivalries in several countries, including the United States. The key questions now before Congress and the Obama Administration concern how best to ensure the security of U.S. personnel, facilities, and citizens in the short term while pursuing policies that also preserve longer-term U.S. national security interests. One challenge lies in considering the nuances and complexities of individual countries; for example, noting that long-established governments have more mechanisms and experience to control public displays of anger than newly elected governments in transitioning countries. Additional questions to consider include: How has the Obama Administration responded to the unrest and attacks? Did particular governments temper their expressions of anger at the film with exhortations against violence? Did the publics and governments in a given country express sympathy with the attackers or outrage at their actions? How cooperative has each government been in working with U.S. officials to protect U.S. persons and facilities and to investigate incidents? Congress may wish to hold detailed oversight hearings to explore these possible questions and others, as it did in the wake of previous diplomatic security incidents in the Muslim world. Some of the largest protests and the most violent attacks have taken place in countries in the Middle East and North Africa that have experienced political unrest and change since 2011, most notably Egypt, Libya, Tunisia, and Yemen. The United States has generally embraced the emergent current of political change, but now faces choices about how to encourage host governments to meet their security responsibilities as they grapple with their own domestic political balancing acts and work to overcome the limitations of their security forces. In Egypt and Tunisia, for example, newly elected Islamist political leaders share the disgust their fellow citizens have for the film, and they have struggled to simultaneously maintain credibility vis-à-vis the public, hard-line domestic rivals, and the United States and other international observers demanding action to limit the potential for violence. In both countries, moreover, these emergent political leaders are still testing the bounds of their relationships with the state security forces, which formed the backbone of previous authoritarian regimes' efforts to repress and contain Islamist activism. Libyan authorities remain dependent on state-affiliated militia groups to help provide security, including at diplomatic facilities. In 2011, an independent and as yet not fully identified group of individuals secured financing and filmed a crude movie depicting the Islamic prophet Mohammed and his followers. Reportedly working under the guise of a historical action film tentatively titled "Desert Warriors," the group shot the movie using paid actors in California and overdubbed dialogue to include anti-Islamic messages after the fact. The film was uploaded to YouTube.com in June 2012 under a variety of names, including "Innocence of Muslims." Available video segments portray Mohammed and his followers as sadistic buffoons engaged in a range of violent and perverse behavior. Christian and Islamic religious media outlets in Egypt reported on the film in early September 2012, launching the bizarre, inflammatory, and otherwise obscure project to global prominence and sparking outcries, protests, and violence that are still ongoing. Google, the company that owns YouTube.com, has restricted access to the online videos in Egypt and Libya, and press reports suggest that authorities in Pakistan, Saudi Arabia, Afghanistan, and other countries have taken steps to block access to the online videos of the film in their countries. According to press reports, federal authorities and Los Angeles County police have identified a Cerritos, CA, resident named Nakoula Basseley Nakoula as having been involved with the film's production. Reportedly, Nakoula, a Coptic Christian Egyptian American, was questioned in connection with potential violations of supervisory release terms related to past federal fraud charges and was released from police custody on September 17. He is now reportedly in hiding along with his family after threats to his life from angry Muslim extremists. For a discussion of domestic freedom of speech issues raised by the controversy surrounding the film, see CRS Report WSLG229, Is Freedom to Incite An International Incident Permitted Under the First Amendment? , by [author name scrubbed]. The recent attacks on U.S. diplomatic facilities and the ongoing protests and international political controversy present a number of challenging policy questions for Congress. Members of Congress may consider a range of options for responding to the overlapping issues raised by these developments. In considering appropriations for foreign assistance and diplomatic security operations, Congress may choose to pursue detailed investigations into recent incidents in order to make recommendations or inform the placement of conditions on future programs. In considering intelligence matters, Congress may choose to pursue questions about threat assessments available prior to the recent attacks and discuss with intelligence, military, and diplomatic officials the potential implications of the recent unrest and of potential U.S. responses for the future of U.S. relations with countries in North Africa, the Middle East, and South and Southeast Asia. The following sections explore appropriations, authorization, and oversight issues of potential interest. Recent unrest and attacks raise both logistical and philosophical questions about U.S. foreign assistance to several countries that have been part of the wave of upheaval in the Arab world or are important U.S. partners on other regional security priorities, such as the war in Afghanistan. On a practical level, the evacuation of non-emergency personnel from Libya, Tunisia, and Sudan will prevent the continuation of some ongoing assistance programs at least temporarily. Beyond that, some Members of Congress have called for a suspension of U.S. assistance to some countries where attacks have taken place, and others have argued for assistance to be made contingent upon the provision of improved security at diplomatic facilities or full cooperation in the investigation of violent incidents. Still others, along with Obama Administration officials, are advising that violent extremists should not be permitted to damage U.S. efforts to both remain engaged with key security partners such as Pakistan and Egypt or to provide security and transition assistance to Arab countries in the process of fundamental political change. Examples of recent legislative developments include: On September 19, Senator Rand Paul introduced S. 3576 , which would prohibit the obligation or expenditure of funds for assistance to the governments of Egypt, Libya, Pakistan, and other governments of countries where U.S. diplomatic facilities have been "attacked, trespassed upon, breached, or attempted to be attacked, trespassed upon, or breached on or after September 1, 2012." The bill would allow for suspension of the prohibition following a certification and request by the executive branch. The President would have to certify that host nations were cooperating with the United States in investigating incidents, working to improve local security, and that persons involved in the organizing, planning, or executing of related incidents have been identified by U.S. law enforcement officials and are in U.S. custody. Congress would have to approve requests for the withdrawal of any prohibition through passage of a joint resolution under expedited procedures outlined in the bill. The bill would also require a report "examining the extent to which advanced weaponry remaining unsecured after the fall of Moammar Qaddafi was used by the individuals responsible for the September 11, 2012, attack on the United States consulate in Benghazi, Libya." The bill states that "nothing in this section may be construed as an authorization for the use of military force." On September 12 and 13, Senator Rand Paul offered amendments to S. 3457 ( S.Amdt. 2815 and S.Amdt. 2838 ) to prohibit the obligation or expending of funds for Pakistan, Egypt, Yemen, or Libya. The amendments contain language similar to that in S. 3576 . S.Res. 556 , introduced by Senator James Inhofe, would express "the sense of the Senate that foreign assistance funding to the Governments of Libya and Egypt should be suspended until the President certifies to Congress that both governments are providing proper security at United States embassies and consulates pursuant to the Vienna Convention on Consular Relations." H.Res. 783 , introduced by Representative Michael McCaul, would express the sense of the House of Representatives that "the President should immediately suspend all United States foreign assistance" to Libya and Egypt, "until the Governments of Libya and Egypt formally apologize to the United States and condemn in the strongest possible terms the savage attacks on United States diplomats in Benghazi, Libya, and Cairo, Egypt, and assure the safety of United States diplomats in Libya and Egypt." Administration officials and some Members of Congress have stated their view that remaining committed to supporting transitional governments in Libya, Tunisia, and Egypt is a sound investment that will contribute to marginalizing extremist voices over time. Secretary of State Clinton has suggested that U.S. engagement and partnership with countries seeking to establish security and complete transitions to democracy should not become a "casualty" of the recent violence. It remains to be seen what impact the unrest and violence will have on current Administration policy priorities before Congress. In early 2012, the Administration requested $770 million for a Middle East North Africa Incentive Fund (MENA-IF) to provide flexible, multi-year funding for responding to transition needs in the Arab world. As of September 2012, the House Appropriations Committee had declined to include funding for the MENA-IF initiative in its version of the FY2013 Foreign Operations appropriations bill ( H.R. 5857 ). The Senate Appropriations Committee included $1 billion for the MENA-IF, an increase over the Administration's request ( S. 3241 ). The enactment of a continuing resolution may link interim FY2013 spending to FY2012 levels set through consultation between the executive branch and Congress rather than specified in legislation. As such, established inter-branch consultation mechanisms would likely remain the primary venue for determining U.S. funding for several countries where protests and violent incidents have taken place. Like the cartoon and Quran desecration controversies before it, the current unrest that many observers link to the inflammatory film has implications for the image of the United States among Muslims and for U.S. efforts to undermine advocates of violent extremism as part of worldwide counterterrorism programs. Al Qaeda affiliates in Yemen and the Sahel have sought to capitalize on the film and incidents of violence against diplomatic facilities and personnel. Statements released by Al Qaeda in the Arabian Peninsula (AQAP) and Al Qaeda in the Lands of the Islamic Maghreb (AQLIM) have encouraged further demonstrations and attacks on U.S. and other diplomatic targets, characterizing them as a religious duty. The AQAP statement said, in part, various efforts should collaborate in order to aim to expel the embassies of the United States from Muslim countries, to continue the demonstrations and protests as happened in some Muslim countries, and to set fire to these embassies as our zealous people did in Egypt and Yemen. Whoever, from among our Muslim brothers, captures U.S. ambassadors or envoys, he may follow in the footsteps of the grandsons of Umar al-Mukhtar in Libya who set the best example by killing the U.S. ambassador, may God reward them for their adherence to Islam. The step of expelling the [US] embassies and consulates is a step toward liberating Muslim lands from U.S. hegemony and arrogance. The AQLIM statement said, in part, The United States has now condemned itself and exposed its claims with its deeds when it encroached on the honor of our prophet, prayers and peace be upon him, after having lied to the Muslims for longer than 10 years about its war being against terrorism and not Islam; that it was not an enemy of the Muslims and that its enmity was confined to a band of terrorist, as it likes to describe the mujahidin.… We incite Muslims to continue and escalate the protest and we urge the youth of Islam to follow the example of Benghazi by pulling down the U.S. flag in its embassies in all our capital cities and burn them after trampling on them, and to kill its ambassadors and representatives or expel them and cleanse our land from their filth in vengeance for the honor of best of cultivators, prayers and peace be upon him. Egyptian Salafist-jihadist cleric Ahmad Ashush has issued a ruling ( fatwa ) "calling for killing everyone who participated in making this movie and their blood deems permissible, including the producer, director, and actors." The statement says that, "It is the duty of each Muslim able to kill them if one can, and killing those abovementioned people is the decisive ruling of Islam that has been agreed upon regarding them and their ilk." Ashush had been imprisoned prior to the Egyptian revolution and has criticized Egyptian Salafists for participating in post-2011 elections. While in prison in 2007, he rejected ideological revisions accepted by other violent Egyptian extremists imprisoned by the Mubarak regime, saying "We support all jihad movements in the world and see in them the hope of the nation and its frontlines toward its bright future." In contrast, official clerics in conservative Muslim countries like Saudi Arabia have denounced the film but urged peaceful responses and avoidance of violence. In Tunisia, Libya, and Egypt, the crisis has widened fissures between Islamist groups calling for protests but refraining from calls for violence and others, including some Salafist movements and militia groups that have supported calls for targeting U.S. and other Westerners in response to the film. As elected Islamist authorities affiliated with the Muslim Brotherhood or other independent groups move to improve security conditions, they may find themselves in direct confrontation with Salafist groups that share their disdain for the film but may be committed to resisting state authority on the issue. According to news reports, Tunisian security forces attempted on September 17 to arrest the leader of the Salafist militant group Ansar al Sharia in Tunisia, Seif Allah ben Hassine (aka Abu Iyadh). He reportedly escaped after a stand-off at a mosque in Tunis. Ben Hassine is a former member of the Tunisian Combatant Group, an organization currently thought to be inactive but previously designated by the United States as a Foreign Terrorist Organization. As of September 18, similar confrontations appeared imminent involving Ansar al Sharia Brigade in the eastern Libyan city of Benghazi. The Brigade warned an "inferno" would await any foreigners intervening militarily in Libya. Shiite extremists also have denounced the film and have stressed their shared antipathy with Sunni Muslims of the film's depiction of the prophet Mohammed. In just his fifth public appearance since 2006, Hezbollah leader Hassan Nasrallah addressed a reported crowd of tens of thousands in southern Beirut on September 17 and called the video "the worst attack ever on Islam." He also said, "The United States must realize that broadcasting the entire film will have very dangerous repercussions in the world," and threatened "Those who insult the Prophet Mohammed will suffer a holy punishment." Hezbollah has called for a week of protests in response to the film. Hezbollah's reaction to the controversy may be an attempt to overcome setbacks the group has suffered as a result of sectarian divisions and its unpopular policy toward the conflict in Syria. Some might suggest that the inherently vulnerable nature of U.S. diplomatic facilities in a country experiencing significant political and security uncertainty should have led to the national security community being more aware and better prepared for the possibility of an attack—whether resulting from a pre-planned effort, opportunistic actors, or a combination of the two. In making the argument that the attack appears to have been pre-planned, some security observers have suggested that the United States intelligence community may have missed possible signals of a growing threat. On September 19, National Counterterrorism Center Director Matthew Olsen said in Senate testimony that, to date, the Administration did not have "specific intelligence that there was significant advanced planning or coordination for this attack," but analysts were "still developing facts and still looking for any indications of substantial advanced planning." It remains unclear whether State Department security officials requested additional assistance from the host government to assess emerging risks or how the U.S. intelligence community has prioritized collection and counterintelligence activities related to Libya. If the attack was opportunistic, as Administration officials have stated and some observers have suggested, Members of Congress may wish to explore whether a lack of appreciation of the threat environment and prospective intentions and capabilities of anti-U.S. entities in the immediate area of U.S. facilities may have led to policy or intelligence gaps. On September 18, 2012, Secretary of State Hillary Clinton noted that "the Federal Bureau of Investigation has joined the investigation on the ground in Libya and we will not rest until the people who orchestrated this attack are found and punished." Security for the more than 285 U.S. diplomatic facilities around the world is, by international treaty, primarily the responsibility of host nations, although the local capacity to provide this protection varies. The additional, U.S.-provided security posture of each facility varies based on assessments of local conditions and is not made public. U.S. facilities typically rely on a combination of an outer layer of host nation-provided and/or contract guard forces, physical perimeter security, and State Department officials or contractors, as coordinated by a Regional Security Officer. Under normal conditions, the U.S. Marine Security Guard posts detachments to many, but not all, such facilities; their primary mission is providing internal security services and preventing the compromise of classified U.S. government information and equipment. In the wake of an attack on U.S. diplomatic facilities or personnel, the Secretary of State is required by the Omnibus Diplomatic Security and Antiterrorism Act of 1986 to convene an Accountability and Review Board within 60 days. A series of violent incidents involving U.S. diplomatic personnel and/or facilities in recent decades has inspired repeated action by Congress to improve security conditions and exercise oversight over U.S. government operations. S. 3551 , introduced by Senators DeMint and Corker, would require the President within 30 days of enactment to submit to the Committee on Foreign Relations of the Senate and the Committee on Foreign Affairs of the House of Representatives a report on the September 11, 2012, attack on the United States Consulate in Benghazi, Libya, the attacks on the United States Embassy in Cairo, Egypt, that began on September 11, 2012, the September 13, 2012, attack on the United States Embassy in Sana'a, Yemen, and the state of security at United States diplomatic missions globally. The War Powers Resolution ( P.L. 93-148 ) requires the President to notify Congress of the introduction of "combat-equipped" personnel into a foreign country. Section 2(c) of the resolution recognized the constitutional powers of the President as Commander-in-Chief to introduce forces into hostilities or imminent hostilities as "exercised only pursuant to (1) a declaration of war, (2) specific statutory authorization, or (3) a national emergency created by attack upon the United States, its territories or possessions, or its armed forces." The executive branch has contended that the President has much broader authority to use forces, including for such purposes as to protect U.S. embassies, personnel, and citizens. Presidents have used U.S. military forces for diplomatic or U.S. civilian protection purposes periodically since the 19 th century, including since the start of the recent uprisings in the Arab world in 2011. Historically, such deployments generally have not been a subject of controversy between Congress and the President. Section 4(a)(2) of the War Powers Resolution requires the President to notify Congress when forces are introduced into foreign territory "while equipped for combat." On September 14, President Obama reported to Congress, "consistent with the War Powers Resolution," that he had authorized the deployment of security forces from U.S. Africa Command to Libya and "additional security forces" to Yemen "for the purpose of protecting American citizens and property." The notification states, "These security forces will remain in Libya and in Yemen until the security situation becomes such that they are no longer needed." The President might make further notifications concerning additional deployments or military operations in Libya, Yemen, or other countries if such deployments represent the beginning or an escalation of hostilities or increase the number of combat-equipped troops in such countries. A combat-equipped security force of about "40 U.S. military personnel from the U.S. Central Command" was deployed to Cairo, Egypt, on January 31, 2011, for the sole purpose of "protecting American citizens and property." That force is no longer present in Cairo. A force of 16 personnel was deployed to Tripoli, Libya, to assist in establishing the U.S. Embassy in the wake of the 2011 civil war. That force had been withdrawn and was not present at the time of the September 11, 2012, attack. Some editorial commentary in Arabic language press has warned about the potential political and security implications of the United States or other countries introducing new military forces or using force to respond to recent violent incidents in predominantly Muslim countries. One London-based author argued that "such presence would undermine the sovereignty of these countries and may be tantamount to occupation. This could provoke national and religious sentiments and justify acts of resistance by some people as is happening in Afghanistan and as had happened in Iraq prior to the withdrawal of the U.S. forces." As noted above, a member of the Benghazi-based Ansar al Sharia Brigade being linked by some to the attack on U.S. offices reportedly said, "If one U.S. soldier arrives, not for the purpose of defending the embassy, but to repeat what happened in Iraq or Afghanistan be sure that all battalions in Libya and all Libyans will put aside all their differences and rally behind one goal of hitting America and Americans.… Libyans will wage jihad." Members of Congress may wish to consider how, and to what extent, the recent protests and attacks on U.S. and other diplomatic premises are addressed in United Nations (U.N.) fora. For example, on September 14, the U.N. Security Council issued a press statement that "condemned, in the strongest terms the series of violent attacks against embassies and consular premises of Member States in multiple locations on 13 and 14 of September." Additionally, the spokesperson for U.N. Secretary-General Ban Ki-moon stated that the Secretary-General was "deeply disturbed by the recent violence in Libya and elsewhere in the Middle East," and noted that "nothing justifies such killings and attacks." The protests, and any number of related issues, may be raised by U.N. Member States during the general debate portion of the U.N. General Assembly's 67 th session at U.N. Headquarters in New York City. The 67 th session convened on September 18, with the general debate starting on September 25. During 2011, the United States and other governments reached an interim agreement on some controversial issues related to the protection of freedom of expression and what the 57 member governments of the Organization of Islamic Cooperation (OIC) had long referred to as "defamation of religion." Since 1999, the OIC and its members have been acting through various U.N. entities to raise international attention and encourage international responses to what they perceive to be a global trend of increased discrimination and hatred directed toward Islam and Muslims. From the late 1990s through 2010, members of the OIC repeatedly sponsored resolutions before the U.N. General Assembly and U.N. Human Rights Council seeking to require states to legally restrict defamation of religion. The U.S. government and other governments opposed these measures out of concern for limiting freedom of speech and other rights. During 2011, the United States and OIC member states jointly supported the adoption of two resolutions in the U.N. Human Rights Council and the U.N. General Assembly encouraging states to act domestically and internationally to create an atmosphere of religious tolerance and to combat religious profiling and discrimination by state authorities. Among what some policymakers consider the more controversial provisions of the resolutions are those noting and endorsing a prior OIC call for states to adopt "measures to criminalize the incitement to imminent violence based on religion or belief." In the adopted resolutions, "incitement to imminent violence" remains undefined. This ambiguity has been the subject of discussion among key states in subsequent months, including in consultative meetings under the OIC-sponsored "Istanbul Process for Combating Intolerance and Discrimination Based on Religion or Belief." In June 2012, OIC Secretary General Ekmeleddin Ihsanoglu said, "Whatever may be the Western perception, we strongly believe that this right [of free expression] should be exercised responsibly and not misused or abused to incite violence by contemptuous or malicious expression in written, verbal or visual depictions." The reactions of governments and religious authorities in several OIC member states to the recent video controversy suggest that they view the controversial film as inflammatory and as having directly incited recent violent and protests. OIC Secretary General Ehsanoglu condemned violent attacks against U.S. facilities and personnel while attributing the violence to "emotions aroused by a production of a film" that "hurt the religious sentiments of Muslims." He also said, "the two incidents [in Cairo and Benghazi] demonstrated serious repercussions of abuse of freedom of expression," and called for a return to "structured international engagement." It remains to be seen if or how the OIC as a group or individual governments might seek to use U.N. bodies to pursue the matter further in light of the adoption of the related resolutions in 2011. Based on some officials' recent statements on the issue, it may be reasonable to expect the OIC to renew its calls for the adoption of a binding international instrument to address its members' concerns. For a discussion of domestic freedom of speech issues raised by the controversy surrounding the film, see CRS Report WSLG229, Is Freedom to Incite An International Incident Permitted Under the First Amendment? , by [author name scrubbed]. Morocco : Hundreds of Salafist demonstrators reportedly gathered outside the U.S. consulate in Morocco's commercial capital, Casablanca, on September 12, chanting slogans against the United States and burning a U.S. flag. The protests do not appear to have involved a direct attack on the U.S. facilities or any injuries of U.S. citizens. A heavy police presence was reported. News reports indicate that protests again occurred in the city of Tangiers and other urban centers on September 17, with total turnout estimated in the thousands. King Mohammed VI of Morocco publicly offered condolences to the American people and government following the attack in Benghazi, and also condemned "unacceptable provocations undermining the sacred values of Islam" in a phone call with Secretary of State Clinton. On September 13, in a public appearance in Washington, DC, marking the opening of a new U.S.-Morocco "Bilateral Strategic Dialogue," Moroccan Foreign Minister Saad Eddine al Othmani likewise expressed condolences and condemned the violence, stating that U.S. diplomats "should be protected." Algeria : Algerian security forces broke up a protest march of hundreds in the capital, Algiers, on September 14, and reportedly deployed preemptively throughout the city to deter such movements. On September 12, the U.S. Embassy in Algiers had warned of efforts by unspecified groups to organize demonstrations against "a range of issues" and instructed Americans to avoid large gatherings and non-essential travel in and around official buildings. Among those arrested in connection with the demonstration was Ali Belhadj, the former deputy leader of the banned Islamic Salvation Front (FIS) party. On September 16, the speaker of the Libyan parliament accused Algerian nationals of being among those responsible for the killing of the U.S. Ambassador to Libya. Tunisia : Security forces dispersed protests outside the U.S. Embassy in Tunis on September 13. The following day, protesters breached the outer walls of the embassy compound, reportedly hanging a black flag associated with Islamist extremists and setting fire to cars in the compound parking lot. Unidentified assailants also sacked an American school facility located near the embassy. Tunisia's President Moncef Marzouki condemned the attacks and reportedly dispatched members of the presidential guard to protect the embassy following a phone call from Secretary of State Clinton; Marzouki also called for the international prosecution of those who made the offending video. Tunisia's Interior Minister,Ali Laraydh, a senior member of the ruling Islamist party Al Nahda, apologized to the United States on national television the same day for failing to protect the embassy; on September 15, the ruling party also released a written statement condemning both the violence and the video. Tunisia's National Assembly subsequently held a hearing on the incidents, at which members expressed a range of opinions as to who was responsible for the violence; some called for Laraydh's resignation while others contended the U.S. government was at fault. The State Department has warned U.S. citizens against all travel to Tunisia and urged Americans to leave the country via the airport, noting that it has ordered the departure of all non-emergency U.S. government personnel. Libya : U.S. Ambassador to Libya Christopher Stevens and three other U.S. personnel were killed on September 11, 2012, during an assault by armed terrorists on two U.S interim diplomatic office sites in Benghazi, Libya. U.S. officials have provided a preliminary account of the events that the ambassador and another officer died as a result of a fire started during an initial armed assault by several dozen attackers on the main office compound. A larger number of attackers subsequently assaulted a separate U.S. annex compound to which U.S. personnel had been evacuated, killing two more U.S. personnel and wounding several others. Ambassador Stevens' body was retrieved from a local hospital and remaining U.S. personnel were evacuated from the Benghazi airport. According to Secretary of State Hillary Clinton, "American and Libyan security personnel battled the attackers together." Additional U.S. personnel have been deployed to Libya to secure U.S. facilities. Joint Libyan and U.S. investigations are ongoing. Sudan : Protesters set fire to the German Embassy in Khartoum, and at least two protesters were killed by police during demonstrations on September 14 outside the U.S. Embassy. Reports suggest several thousand people were involved in the protests, which occurred after Friday prayers. On the same day, the Foreign Ministry reportedly summoned U.S. and German diplomats to convey an official protest against the video. The Foreign Ministry also denounced German Chancellor Angela Merkel for giving a press freedom award in 2010 to the Danish cartoonist whose work had prompted protests in 2006. Vice President Joseph Biden called his counterpart to reaffirm the Sudanese government's responsibility to protect diplomatic facilities and ensure the protection of diplomats. The government deployed additional police to provide security near the embassies, but rejected a U.S. plan to deploy Marines for increased security of the embassy facilities and personnel. Non-emergency U.S. diplomatic personnel and family members have been evacuated from Khartoum, given damage done to the outside of the embassy building, and the State Department is evaluating the security posture of the Sudanese security forces. Sudan blocked access to YouTube's website in the country after unsuccessfully requesting that Google remove the film. Egypt : The "Innocence of Muslims" film appears to have first gained international attention in the Egyptian media, where it was debated by Coptic Christian and Salafist Muslim outlets. On September 11 thousands of predominantly Salafist Egyptians protested at the U.S. Embassy in downtown Cairo, scaling the walls and replacing the U.S. flag with a black one inscribed with the Islamic creed, "There is no God but God and Mohammed is the prophet of God." Embassy officials reportedly directed non-essential personnel to avoid the embassy in anticipation of the protest and no U.S. injuries were reported in Cairo nor during subsequent demonstrations by several hundred protestors at the consulate in Alexandria. On September 12, President Mohammad Morsi asked the U.S. government to take legal action against the makers of the film that sparked the protests, drawing criticism from some U.S. observers. Comments by State Department officials suggest that a September 13 conversation between Presidents Obama and Morsi likely influenced a dramatic improvement in police and military efforts to secure the U.S. Embassy. President Obama's efforts and critiques by other U.S. officials also may have motivated the Muslim Brotherhood and other Islamists to alter a planned demonstration outside the embassy on September 14 and instead symbolically stage a rally of several thousand people in nearby Tahrir Square. Robust security operations cleared the area of most protestors over the weekend of September 15 and 16. On September 13, President Morsi condemned the violent attacks on U.S. diplomatic facilities and personnel during a meeting with the European Commission. In a separate series of short statements published by the Deputy Chairman of the Muslim Brotherhood Khairat al Shater, the Brotherhood stated the following: Our condolences to the American people for the tragic loss of Ambassador Stevens, and three Embassy staff in Libya. Breach of the U.S. Embassy in Cairo is illegal under international law, and police failure to protect embassy has to be investigated. We are relieved none of the U.S. Embassy Cairo staff were harmed and hope US-Egypt relations will sustain turbulence of Tuesday's events. Militants in the Sinai, who were already engaged with Egyptian military forces attempting to pacify the area, may have used the protests as an opportunity to launch new attacks against foreign peacekeepers stationed there. On September 14, press reports indicate that militants attacked a Multinational Force and Observers (MFO) facility in the Al Gura area of north Sinai, injuring four MFO staff. The MFO mission monitors the implementation of the Israel-Egypt peace treaty. Israel/West Bank- Gaza : Generally nonviolent protests have taken place since September 11 in various parts of Israel among Arabs, particularly in northern cities such as Nazareth. These protests have reached the U.S. Embassy in Tel Aviv. On September 14, hundreds of Arab Jerusalemites and Israeli Arabs marched from East Jerusalem following noontime prayers at the Al Aqsa Mosque and threw stones at Israeli riot police, in an unsuccessful probable attempt to approach the U.S. consulate. A smaller group assembled on September 15, presumably en route to the U.S. consulate, and Israeli police quickly dispersed the protest and arrested the organizer. Israeli reports indicated that most of the rallies have been called by the Israeli Arab Islamic movement. Reportedly, thousands of Palestinians protested in Gaza on September 14, and Palestinians in the West Bank have protested in Ramallah. Lebanon : Violent protests by several hundred Sunni Arab extremists in the northern city of Tripoli resulted in property damage to two U.S. chain restaurants on Friday, September 14. Lebanese leaders have condemned the film and the resulting violence and have committed to protecting U.S. diplomatic facilities and personnel. Hezbollah leader Hassan Nasrallah appeared in public to address thousands of supporters and denounce the film. Hezbollah has called for a week of protests. The group's reaction to the controversy may be an attempt to overcome setbacks the group has suffered as a result of sectarian divisions and its unpopular policy toward the conflict in Syria. Turkey : Turkish Prime Minister Recep Tayyip Erdogan, seen by U.S. leaders as a potentially important influence on regional opinion, responded to the violence against U.S. installations on September 14 by saying, "Insulting the Prophet cannot be justified as freedom of expression. It cannot be a reason for innocent people to be attacked or harmed…. No one can, in the name of Islam, carry out actions of the kind that happened in Libya with the attack on the U.S. mission [in Benghazi]." Small protests involving an Islamist organization and workers' party outside the U.S. Embassy in Ankara led to the burning of an American flag on September 16. Yemen : On September 13 hundreds of mostly young men stormed the compound of the U.S. Embassy in Sana'a, one of the most secure buildings in Yemen, causing destruction, looting, and setting fires. Up to 4 protestors were killed and 15 wounded in clashes with Yemeni security forces, 24 of whom were injured. President Abed Rabbo Mansour al Hadi apologized the same day and called for a swift investigation; on September 16 the Ministry of Interior announced it had made 13 arrests. Some videos of the incidents allegedly show security forces embracing fleeing protestors, possibly indicating collusion stemming from their allegiance to former President Ali Abdullah Saleh. Hadi had dismissed several pro-Saleh officials the night before the attack, and the government had announced the killing of a senior al Qaeda figure on September 11. Negotiations between U.S. and Yemeni officials resulted in the deployment of a platoon (50) of U.S. Marines to Yemen on September 14. On September 15, Yemen-based Al Qaeda in the Arabian Peninsula (AQAP) called for more attacks, describing the video and related confrontations as "a new chapter in the crusades against Islam." Qatar : An estimated 2,000 Qatari citizens and residents demonstrated in a peaceful gathering at the U.S. Embassy in Doha. In his September 14 sermon, Qatar-based cleric Yusuf al Qaradawi condemned the film and said, "It's unfair to accuse all the U.S. community of wrongdoing." He added, "Expressing loyalty to the prophet does not mean that we should head out to foreign embassies to pelt them with stones or burn them, kill the ambassador and people accompanying him. We should not react this way." Bahrain : After Friday prayers on September 14, about 2,000 protesters in a Shiite district outside the capital of Manama burned American and Israeli flags to protest the video. The government, which has been attempting to suppress a Shiite uprising since February 2011, did not deploy security forces against the protest. However, the Interior Ministry reportedly ordered media regulators to attempt to block access to the video in Bahrain. Kuwait : On September 13, hundreds of Kuwaitis, including several Islamist members of its elected National Assembly, demonstrated opposite the U.S. Embassy in Kuwait City. The Islamist lawmakers had earlier called for the peaceful protest, but they reportedly left the demonstration when some protesters called for the storming of the embassy. Forewarned by the lawmakers' call for the protest, Kuwaiti security forces were deployed to push protesters away from the embassy security perimeter, and they successfully prevented any breaching of the facility. Iraq : Hundreds of Iraqis protested against the United States and the video on September 13, 2012, calling the video inflammatory and anti-Islamic. In Baghdad, the protests took place mainly in the Shiite Muslim district called "Sadr City," home to many followers of hardline Shiite cleric Moqtada al Sadr. Similar protests took place in pro-Sadr neighborhoods of the predominantly Shiite cities of Najaf and Karbala. Iraqi Prime Minister Nuri al Maliki strongly condemned the video but also called on demonstrators not to commit violence in expressing their anger at the video. Iran : On September 13, 2012, about 500 people conducted a peaceful protest near the Embassy of Switzerland, which is the protecting power for U.S. interests in Iran. The Iranian government deployed hundreds of security people to prevent the crowd from approaching the compound. Subsequently, several leading Iranian political figures, officials, parliamentarians, and security organizations (Islamic Revolutionary Guard Corps) issued statements denouncing the video as an example of what they asserted is U.S. anti-Islam bias and U.S. efforts to sow discord among major religions, operating in the guise of protecting free speech. Afghanistan : Following several days in which the Afghan government attempted to block distribution of the "Innocence of Muslims" video, on September 17, 2012, several hundred to several thousand Afghans demonstrated outside a U.S. training facility for the Afghan security forces (Camp Phoenix), just east of central Kabul. Afghan police were deployed to prevent the demonstrators from entering that and nearby facilities, leaving 40 Afghan police injured. A few days before the demonstration, the office of President Hamid Karzai released a statement denouncing the video as a "desecrating act," but also saying that video's producer represents a "small radical minority," whose work should not be distributed in Afghanistan. Afghan clerics reportedly denounced the video but called for nonviolent responses in sermons on Friday, September 14. On September 18, a young female suicide bomber targeted a vehicle in Kabul, killing 10 foreign workers in an attack claimed by Hezb-i-Islami "in response to the film insulting the Prophet Mohammed and Islam." Pakistan: In the Islamic Republic of Pakistan—home to about 170 million Muslims—early public demonstrations were unexpectedly muted, given large-scale rioting that had occurred in response to previous perceived offenses against Islam. Police there have taken robust action to block violent protesters and to protect American diplomatic facilities. The country's legislative and executive branches both issued formal condemnations of the video clip. Yet many analysts see Islamabad's acute interest in preventing the further deterioration of ties with Washington keeping it from stirring the pot or acceding to demands from Islamist leaders that the top U.S. diplomat be ejected from the country. However, beginning on September 16, some protests in major Pakistani cities involved arson and rock-throwing. One person was killed in protests outside the U.S. consulate in Karachi, and police in Lahore pushed back rioters near the U.S. consulate in that city. The next day, as the turbulence continued, the prime minister ordered a suspension of access to YouTube to prevent further dissemination of "blasphemous material." Evidence of public anger in Pakistan grew steadily in the week following the first protests. On September 19, a group of lawyers broke through the gate outside Islamabad's diplomatic enclave, where they burned American flags and held a brief sit-in. On the same day, personnel at the U.S. consulate in Lahore were moved to a secure location as a precautionary measure. In a reflection of widespread and possibly growing anger, the government took the unusual step of declaring Friday, September 21 as an official "day of peaceful protest." India : A very small percentage of India's roughly 180 million Muslims displayed public opposition and anger to the video; notable protests were found in only three cities and have involved only minor violence. Police there have effectively protected American diplomatic facilities. An Indian External Affairs Ministry spokesman called the clip "offensive material." In Jammu and Kashmir—the country's only Muslim-majority state—Islamist leaders called for a general strike and organized street protests comprised of thousands of angry Muslims chanting anti-American slogans. A smaller-scale protest in the city of Chennai included rocks being thrown at the U.S. consulate there. Peaceful protests were also seen in Hyderabad. Bangladesh : Approximately 10,000 demonstrated on Friday, September 14 in Dhaka after prayers but were blocked from approaching the U.S. Embassy by elements of the Rapid Reaction Battalion with armored personnel carriers and water cannons. The demonstrators chanted anti-U.S. slogans, threatened to besiege the embassy, burned the U.S. flag, and demanded an apology from the United States. Bangladesh police and security forces had reportedly tightened security around the embassy in anticipation of the protests. The Bangladesh government condemned the film and reportedly blocked YouTube after the film was not taken off the website. Bangladesh, with a population of 153 million, is approximately 90% Muslim. Sri Lanka : About 300 demonstrators gathered in Colombo to denounce the film near the U.S. Embassy. Some of the protestors called for those who created the film to be hanged. Sri Lanka, with a population of 21 million, is largely Buddhist (69%) with Muslim (8%), Hindu (7%), and Christian (6%) minorities. Indonesia : Police reportedly fired tear gas and used water cannons after hundreds of protesters marched to the U.S. Embassy in Jakarta on September 16, burning American flags, hurling rocks and Molotov cocktails, and setting tires alight. Protests against the film began on September 13, and have been led by a number of groups, including Hizbat Tharir Indonesia, the Islamic Defenders Front (FPI), and the Islamic People's Forum (FUI). The situation could serve as a test of influence for both hardline and moderate Islamic groups in Indonesia. Moderate religious leaders, including the head of the country's largest Muslim organization, Nahdlatul Ulama, have urged members not to react violently to the film. On September 16, President Susilo Bambang Yudhoyono, who has condemned both the film and the Benghazi attack, urged the United Nations and the Organization of Islamic Cooperation to issue edicts against religious defamation. Imprisoned extremist cleric Abu Bakar al Ba'asyir reportedly said in an interview from his cell that "What happened in Libya can be imitated. If it is defaming God and the Prophet [Muhammad], the punishment should be death. [There are] no other considerations." Malaysia : Around 30 protesters gathered at the U.S. Embassy on September 13, and local groups have promised further protests this week. The events could affect the outcome of nationwide parliamentary elections that must be held by March 2013. Officials from both the United Malays National Organization (UNMO), the largest party in the ruling coalition, and the Parti Islam se-Malaysia (PAS), Malaysia's largest opposition party, have condemned the video. Australia : Australia, with a population of approximately 23 million, has a Muslim population of about half a million that represents 2.2% of the population. On September 15, about 400 demonstrators carrying placards reading "Behead all those who insult the Prophet" gathered outside the U.S. consulate in Sydney before clashing with police. The police used dogs and chemical sprays to disperse the protestors. Six police officers were injured and eight protestors were arrested in the incident. Australian Prime Minister Julia Gillard, a self-described atheist, called on immigrants to leave old hatreds behind, learn English, and respect women while condemning the protests as extremism. A demonstration against the film had been called for September 23 in Melbourne, and some observers expressed concerned that such a gathering could become violent. Organizers subsequently cancelled the protest, and the Islamic Council of Victoria welcomed the move. Despite this, police remain concerned that a protest may occur and become violent.
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Muslims in a number of countries have responded in recent days with anger at the United States that many observers describe as a response to a privately produced film circulating on the Internet that denigrates Islam and the prophet Mohammed. In some cases, this outrage has taken the form of public expressions by relatively small groups of demonstrators, and in other countries the demonstrations have been larger. In the most extreme cases, such demonstrations have been accompanied by violent attacks against U.S. diplomatic personnel and diplomatic facilities. Pre-existing anti-U.S. sentiment and domestic political frustrations also appear to be contributing to the unrest. On September 11, 2012, attacks on U.S. interim diplomatic facilities in Benghazi, Libya, killed four U.S. personnel, including Ambassador Christopher Stevens. Vandalism and violence against U.S. facilities in Yemen, Egypt, Tunisia, and Sudan indicates the potency of the issue, as does the spread of clashes between protestors and local security forces elsewhere in the Middle East and North Africa and in some countries in South and Southeast Asia. The geographic scope of the protests and the reportedly broadly shared outrage of participants have overshadowed important distinctions in political context, divergences in host government responses, and the fact that the groups demonstrating, particularly those committing violent acts, are small relative to much larger and diverse populations. This report provides background information and analysis about the recent wave of protests and includes a summary appendix of select incidents and international responses organized geographically by country. The report discusses several issues of potential interest to Congress, including emerging debates on foreign assistance funding for countries affected by unrest, intelligence and diplomatic security policies, war powers considerations, and the potential effects of the current controversy on long-running international debates on religion and freedom of expression.
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On July 22, 2009, in Phuket, Thailand, Secretary of State Hillary Rodham Clinton and representatives from the 10-member Association of Southeast Asian Nations' (ASEAN) signed the Instrument of Extension and the Instrument of Accession to ASEAN's Treaty of Amity and Cooperation (TAC). Secretary Clinton was in Thailand to attend the annual ASEAN Regional Forum Foreign Ministerial. The move came less than six months after she had announced, during a visit to Jakarta, that the Obama Administration would launch its formal interagency process to pursue accession. One of ASEAN's pillars, the TAC was first negotiated in 1976 and subsequently amended to allow non-regional countries to accede. The Administration's move is designed to symbolically boost the United States' standing in Southeast Asia by expanding the multilateral component of U.S. policy in the region. Following consultations with selective offices in the Senate, the Administration decided that accession would take the form of an executive agreement, which does not require Senate approval. The debate over whether the United States should accede to the TAC raised at least three issues for the Obama Administration and the Congress: 1. how would accession to the TAC advance U.S. interests in Southeast Asia? 2. would accession to the TAC constrain U.S. policy in Southeast Asia, particularly with respect to Burma? 3. should the Administration send the TAC to the Senate for ratification? Periodically, Congressional measures have called attention to ASEAN and/or called for upgrading U.S. engagement with ASEAN. In the 109 th Congress, the Senate passed by unanimous consent S. 2697 (Lugar), the United States Ambassador for ASEAN Affairs Act, which mandated the naming of an Ambassador to the organization. None of the congressional measures dealing with U.S. engagement with ASEAN mentioned U.S. accession to the TAC. The Obama Administration's primary motivation for acceding to the TAC appears to have been to send a signal that the United States seeks to upgrade its presence in Southeast Asia. Many leaders in the region have felt neglected by the United States in recent years. ASEAN leaders have long viewed the TAC not only as a constitutional document for the organization, but also as establishing guiding principles that have built confidence among members, thereby contributing to maintaining regional peace and stability. Accession to the TAC by non-members often is seen as a symbol of their commitment to engagement in Southeast Asia and the organization's emphasis on multilateral processes. As shown in Table 1 , prior to July 2009, the United States was the only major Pacific power that had not joined the TAC; traditionally, the U.S. presence in Southeast Asia has been organized primarily along bilateral lines. Additionally, acceding to the TAC is also one of the three requirements for joining the East Asia Summit (EAS), a four-year old forum that features an annual meeting among the heads-of-state of the ASEAN members, China, Japan, South Korea, India, Australia, and New Zealand. The other two requirements are dialogue partnership and significant economic relations with ASEAN, both of which the United States already meets. It is unclear whether the Obama Administration plans to join the EAS, or to what extent U.S. participation would be resisted by EAS members, particularly China and Malaysia, which in the past have voiced reservations with U.S. participation. Australia's accession to the TAC in 2005, which reversed years of official policy, was primarily motivated by Canberra's desire to be a founding member of the EAS. Joining the TAC had been proposed by many in the Asia policy community for several years, and the idea was debated in the George W. Bush Administration. Objections to joining the TAC included arguments that the TAC's emphasis on non-interference in domestic affairs (particularly in Articles 2, 10, and 13) would constrain U.S. freedom of action, particularly its ability to penalize Burma; a concern that the treaty would undermine U.S. security agreements with Asian allies, notably Japan, South Korea, and Australia; a belief that acceding would accord greater legitimacy to the ruling Burmese junta; a view that ASEAN is insufficiently "action-oriented"; and a belief that the TAC is an ineffectual, largely symbolic agreement. Proponents of accession countered that the decisions by U.S. allies Australia, South Korea, and Japan to accede to the TAC should negate concerns that the TAC would constrain U.S. policy and/or undermine U.S. alliances. As discussed in detail below, as part of their accession negotiations, Australia and South Korea both signed side letters with ASEAN that were designed to alleviate similar concerns. (See Appendix B .) Along the same lines, Japan reached an understanding with ASEAN prior to its accession to the TAC. Following the Australian and South Korean model, the Obama Administration negotiated and exchanged side letters with the Chairman of ASEAN (who in July 2009 was the Thai Foreign Minister) designed to prevent the TAC from constraining U.S. foreign policy actions. During the debate over accession, Australia's October 2007 promulgation of targeted financial and travel restrictions on over 400 members of the Burmese regime in the aftermath of the regime's September 2007 crackdown against peaceful protesters was cited as evidence that the TAC would not necessarily constrain U.S. policy. Australia, like Japan, has generally followed a policy of quiet engagement of Burma, seasoned with occasional public criticisms and targeted penalties. Canberra's restrictions against the Burmese regime are not nearly as expansive as U.S. sanctions. During its first weeks in office, the Obama Administration announced it would initiate a review of U.S. policy toward Burma. During her February 2009 visit to Asia, Secretary Clinton said that neither sanctions nor the engagement strategies pursued by ASEAN members were working. One of the world's largest regional groupings, ASEAN is Southeast Asia's primary multilateral organization. Its 10 member-nations include over 500 million people. Geographically, Southeast Asia includes some of the world's most critical sea lanes, including the Straits of Malacca, through which pass a large percentage of the world's trade. The straits also are important routes for U.S. naval deployments around the globe, including the Middle East and South Asia. Southeast Asia has served as a center and a base for terrorist operations by radical Islamist groups, including Al Qaeda, though the threat posed by such indigenous groups appears to have been significantly reduced since the middle of the decade. The region is a key source and transmission point for many of the world's "human security" problems, including smuggling, narcotics trafficking, piracy, human trafficking, and the spread of contagious diseases such as avian influenza. Southeast Asia is home to Indonesia, the world's most populous Muslim nation, which is important to the United States for its size, its democratic example for other majority-Muslim countries, and its status as one of the world's largest carbon emitters, largely by virtue of the rapid pace of deforestation. U.S. relations with Malaysia, another core majority-Muslim ASEAN member, also have global and regional importance because of Malaysia's democratic and economic example (it is a middle income country) and because of its attempts to mediate long-running conflicts between Christian and Muslim factions in the southern Philippines. The region also includes two formal U.S. treaty allies with functioning, although sometimes troubled, democracies—Thailand and the Philippines—as well as another close U.S. security partner, Singapore. Furthermore, diplomatically and strategically, Southeast Asia is the site of a contest for influence among China, the United States, and to a lesser extent Japan. China in particular has expanded its presence and influence in Southeast Asia since the early 2000s. Some commentators have argued that Beijing's increased presence has jeopardized U.S. influence. Others contest this assertion, arguing that the U.S. and China are not locked in a "zero sum" situation in Southeast Asia, that some of China's actions since 2007 have made some Southeast Asians wary of Beijing's actions, and/or that Chinese diplomacy in Southeast Asia is perceived as successful because China has tended to prioritize areas of mutual agreement while putting off issues that are more difficult to resolve. Regardless of whether U.S. interests are materially threatened, China's increased presence in Southeast Asia has made many Southeast Asian leaders eager for a strong U.S. presence in the region. Indeed, one factor motivating the United States' increased engagement with ASEAN in the 2000s has been the desire to support Southeast Asia's political stature as China expands its influence in the region. Collectively, ASEAN is a major U.S. trading partner. Total trade between the United States and the 10 ASEAN countries in 2008 totaled $178 billion. If ASEAN were treated as a single trading partner, it would rank as the fourth largest U.S. export market (at $68.2 billion) and the fifth largest source of U.S. imports (at $110.2 billion) in 2008. Since 2005, between 5%-6% of total U.S. exports by value have been shipped to the ASEAN market, slightly more than exports to Japan. Over the same period, ASEAN has been the source for about 5%-6% of total U.S. imports. ASEAN's share of U.S. trade has fallen since 1995, when it was the destination for nearly 7% of U.S. exports and the source of 8.5% of U.S. imports, by value. Many analysts who see China as a growing power in East Asia point to the surge in its trade with ASEAN countries vis-a-vis that with the United States. Table 2 compares Chinese and U.S. trade with ASEAN for 1995, 2005, and 2008. Over this period, China's trade with ASEAN has expanded sharply in terms of trade volume, percentage increase, and size relative to U.S. trade levels. Table 3 provides trade data on the importance of the United States, as well as of China, from ASEAN's perspective (i.e., using ASEAN trade data). These data indicate that: From 1995 to 2007, the share of ASEAN's imports that came from China increased from 2.2% to 12.7%, while the share that came from the United States dropped from 14.6% to 9.6%. From 1995 to 2008, the share of ASEAN exports that went to China rose from 2.1% to 9.7%, while the share of ASEAN's exports that went to the United States fell from 18.5% to 11.5%. According to ASEAN official data, in 2008 (the latest year in which comprehensive ASEAN trade data are available), its top trading partners (excluding intra-ASEAN trade) were Japan (11.4% of total), the European Union (11.8%), China (11.3%), and the United States (10.6%). The United States was ASEAN's third largest export market and its fourth largest source of imports, while China was ASEAN's fourth largest export market and its largest source of imports. The United States is a bigger source of ASEAN's foreign direct investment (FDI) than China (although the European Union and Japan are the two largest investors). During 2006-2008, cumulative U.S. FDI flows to ASEAN were $12.8 billion (or 8.2% of the total), making the United States ASEAN's third largest source of FDI (excluding FDI flows from other ASEAN countries). Over this period, China's FDI flows to ASEAN totaled $3.5 billion or 1.9% of the total, making China the ninth largest source of ASEAN's FDI. In 2008, U.S. FDI flows to ASEAN totaled $3.0 billion versus $619 million from China. (See Table 4 .) Established in 1967 with five original members, ASEAN has evolved from its original Cold War-era goal of containing Chinese and Vietnamese communism. Increasingly, ASEAN is a vehicle for Southeast Asian nations to resolve problems through the "ASEAN way" of informal, consensus-based, and confidence-building efforts rather than through binding commitments or agreements. Since the early 1990s, ASEAN also has been playing a leading role in moving the countries of East Asia toward organizing into cooperative multilateral arrangements. ASEAN often takes the lead in building multilateral institutions because it is viewed as less threatening than China or Japan. Some analysts speculate that this role of neutral convener may be losing some of its utility, as evidenced by the first-ever standalone China-Japan-South Korea tripartite summit in December 2008. Follow-on summits are expected. Previously, the leaders of the three countries had met only on the sidelines of the annual ASEAN "Plus Three" gathering. ASEAN's consensus-based decision-making and policy of non-interference in members' affairs have led some commentators, particularly from outside the region, to dismiss the organization as a mere "talk shop." They cite ASEAN's ineffectiveness in dealing with transnational issues like drug trafficking, human trafficking, wildlife trafficking, and illegal logging. ASEAN also has not appeared to play a role in some conflicts among members, such as the 2008 and 2009 border skirmishes between Thailand and Cambodia. Indeed, frustrations with ASEAN's internal procedures, continued difficulties with Burma, and the expansion of non-ASEAN regional groupings in Asia have led some prominent Southeast Asians to publicly call attention to ASEAN's limitations. However, many Southeast Asians contend that ASEAN has been critical to fostering stability, reducing conflict, and promoting trade and economic growth. In the 2000s, some ASEAN members—particularly Indonesia and the Philippines—have pushed to expand the organization's powers. These moves often have been resisted by other members, particularly Vietnam, Cambodia, and Burma. For instance, in 2008, ASEAN adopted a new charter, early drafts of which included provisions for sanctions and a system of compliance monitoring for ASEAN agreements. However, these items eventually were stripped from the charter. In July 2009, ASEAN's Foreign Ministers approved the creation of the organization's first-ever human rights body. The ASEAN Intergovernmental Commission on Human Rights is designed to focus on promoting human rights. The body, launched in October 2009, will not have the power to penalize human rights violations and/or violators. The TAC establishes general principles governing the relations between State parties, with the intention of promoting "perpetual peace, everlasting amity and cooperation" within Southeast Asia. Towards this end, it provides a mechanism for the pacific settlement of regional disputes between TAC parties. As drafted in 1976, the TAC was open to ratification by the five original members of ASEAN, and was only open to accession by other Southeast Asian States. The TAC was subsequently amended in 1987 to permit the accession of States outside Southeast Asia with the consent of the five ASEAN members, and to establish rules concerning when States outside Southeast Asia could participate in the agreement's dispute-settling mechanism. The TAC was further amended in 1998 to reflect the expansion of ASEAN to 10 members, and to make accession to the TAC by any additional States outside Southeast Asia contingent upon the approval of all 10 ASEAN members. Article 1 of the TAC announces that the purpose of the agreement is to promote peace and cooperation among the parties. Article 2 provides that in their relations with one another, parties shall be guided by six principles: Mutual respect for the independence, sovereignty, equality, territorial integrity, and national identity of all nations; The right of every State to lead its national existence free from external interference, subversion, or coercion; Non-interference in the internal affairs of one another; Settlement of differences or disputes by peaceful means; Renunciation of the threat or use of force; and Effective cooperation among themselves. While TAC Article 2 describes these principles as "fundamental," it does not specify that they are the sole principles that may inform relations between parties. TAC Article 3 obliges parties to endeavor to develop and strengthen their mutual relations and fulfill their obligations under the agreement in good faith. TAC Articles 4-9 outline party obligations concerning mutual cooperation. Articles 4 and 5 provide that parties shall promote and strengthen active cooperation in the economic, social, technical, scientific and administrative fields on the basis of equality, non-discrimination and mutual benefit. Articles 6 and 7 provide that parties shall collaborate (including through the use of international and regional organizations outside Southeast Asia) to accelerate the region's economic growth, including through promotion of greater use of parties' agriculture and industries, the expansion of trade, and the improvement of economic infrastructure. Article 8 states that parties shall strive to achieve cooperation in the form of training and research facilities in the social, cultural, technical, scientific and administrative fields. Article 9 provides that parties shall retain regular contacts with one another on international and regional matters with a view towards coordinating their policies. TAC Article 10 provides that no party shall "in any manner or form participate in any activity which shall constitute a threat to the political and economic stability, sovereignty, or territorial integrity of another High Contracting Party." The agreement does not elaborate on the types of activity constituting a "threat" to the political or economic stability, sovereignty, or territorial integrity of another party, or what type of conduct is intended to be barred by the agreement's prohibition on "participat[ion] in any activity" constituting a threat to another party. Presumably, prohibited activity would have to be of a particularly severe nature to constitute a threat to the stability, sovereignty, or integrity of another TAC party. TAC Articles 11 and 12 provide that parties shall endeavor to promote national and regional resilience. TAC Articles 13-17 concern the pacific settlement of disputes between parties. Article 13 states that parties shall act in good faith to prevent disputes from arising between them. Parties are obliged to "refrain from the threat or use of force," and are instead called upon to settle disputes "through friendly negotiations." Towards that end, Article 14 establishes a High Council, composed of a ministerial level representative of each State party, to resolve disputes. As amended by the 1987 Protocol, the dispute settlement system established by Article 14 is only applicable to State parties outside Southeast Asia when those States are "directly involved in the dispute to be settled." TAC Article 15 states that in cases where disputes cannot be settled via direct negotiation between TAC parties, the High Council shall take cognizance of the matter and recommend an appropriate means of settlement, such as good offices, mediation, inquiry, or conciliation. The High Council may also, with the consent of the parties to the dispute, act as a committee for mediation, inquiry, or conciliation. When necessary, the Council shall also recommend appropriate measures to prevent further deterioration of the situation. TAC parties are not legally compelled to abide by the High Council's recommendations. TAC Article 16 limits application of Article 15 to instances where all parties to the dispute agree to its application. Perhaps for this reason, the High Council has never been convened to resolve a dispute arising under TAC. TAC Article 17 states that nothing in the agreement precludes parties from seeking recourse pursuant to the modes of peaceful settlement contained in Article 33(1) of the U.N. Charter. Article 33(1) of the Charter provides that U.N. Member States that are parties to a dispute threatening international peace and security shall "seek a solution by negotiation, enquiry, mediation, conciliation, arbitration, judicial settlement, [and may] resort to regional agencies or arrangements, or other peaceful means of their own choice." TAC Article 17 also states that parties are encouraged to resolve disputes through friendly negotiations "before resorting to the other procedures provided for in the Charter of the United Nations." This language appears intended to ensure that TAC's dispute-resolution requirements are not interpreted as violating Article 103 of the U.N. Charter, which provides that Member States' obligations under the U.N. Charter override any conflicting obligations under other international agreements. TAC Articles 18-20 relate to treaty ratification and accession, entry into force, and the authoritative text of the agreement. As amended by the 1987 and 1998 Protocols, Article 18 provides that accession of any State outside Southeast Asia is subject to the consent of all the States in Southeast Asia, which the agreement expressly lists as the 10 current members of ASEAN. Article 19 describes the procedure by which TAC entered into force. Article 20 notes that the treaty is drawn in the equally authoritative language of all contracting parties. A common English text has also been agreed upon, with any divergent interpretation of the common text to be settled by negotiation. The TAC does not contain provisions concerning withdrawal from the agreement by a State party, the agreement's relationship to other multilateral or bilateral agreements to which TAC parties may belong, or the remedies available to a party in the event that its rights under the agreement are violated by another party and neither direct negotiation by the parties nor the assistance from the High Council resolves the violation. These matters would presumably be handled in accordance with customary practice, absent evidence of a contrary understanding by TAC parties. TAC Article 18, as amended, requires the consent of all ASEAN members before candidate States may accede to the agreement. Formal exchanges of correspondence and consultation between ASEAN members and candidates for accession to the TAC are generally made between the candidate and the ASEAN Chairman. In some instances, a candidate will sign a declaration signifying its intent to accede to the TAC contingent upon completion of any necessary domestic procedures. If all ASEAN Members consent to a candidate's proposed accession to the TAC, the Chairman is authorized to sign a preliminary declaration of consent to accession on behalf of ASEAN Members. The accession process is completed once all ASEAN foreign ministers sign an instrument formally consenting to the candidate party's accession to the TAC, and the candidate party signs and submits the instrument of accession. The instrument of accession is typically signed and deposited by the acceding State's foreign minister. Negotiations regarding accession to the TAC may raise issues related to the interpretation and application of the agreement's provisions. In many cases, a party will attach a reservation, declaration, or understanding to an agreement at the time of accession or ratification when questions or concerns arise regarding an agreement's potential application. The TAC does not contain a provision barring this practice. However, ASEAN members have historically been unwilling to permit an acceding State to make a reservation or declaration upon accession. Some States seeking to accede to the TAC have instead sought to reach common understandings with ASEAN members regarding the interpretation of certain TAC provisions, and have recorded these shared understandings in an exchange of notes ("side letters") with the ASEAN Chairman prior to acceding to the TAC. Although these side letters are not understood to amend or modify the TAC, they may serve as important interpretative guidance as to the meaning of its provisions. The Vienna Convention on the Law of Treaties, which is recognized as an authoritative guide to treaty law and practice, states that "any instrument which was made by one or more parties in connection with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty" may be relied upon to assist in interpreting the underlying treaty. The United States memorialized its understanding of certain TAC requirements during communications with the ASEAN Chairman regarding its proposed accession. This side letter is attached as Appendix A . Similar communications appear to have been made by Australia, South Korea, Japan, and New Zealand when they acceded to the TAC. Most of these communications have not been made publicly available. However, the side letters memorializing understandings reached by Australia with ASEAN members during the TAC accession process are attached as Appendix B . One of the most notable issues that U.S. policymakers were required to consider when contemplating whether to join the TAC was the form that U.S. accession should take. Legally binding international agreements entered into by the United States take the form of either a treaty or an executive agreement. If an agreement is entered into as a treaty, the Senate must provide its advice and consent by a two-thirds majority for the agreement to become "the Law of the Land." The great majority of international agreements that the United States enters into are not treaties but executive agreements—agreements made by the executive branch that are not submitted to the Senate for its advice and consent. Depending upon the circumstances, authority to enter an executive agreement may derive from different sources, including from a statute enacted by Congress which authorizes the Executive to enter the agreement (a congressional-executive agreement), or pursuant to the Executive's constitutional authority in a given area (sole executive agreement). There are a number of provisions in the Constitution that may confer limited authority upon the President to promulgate sole executive agreements, including his Commander-in-Chief authority and power in the area of foreign affairs. Ultimately, the executive branch opted to accede to the TAC as a sole executive agreement, presumably because the agreement is deemed to focus solely upon relations between TAC parties and impose no requirements upon parties' domestic activities. Arguably, U.S. accession to the TAC could have taken the form of a treaty, with accession being subject to the advice and consent of the Senate, or an executive agreement. Agreements concerning friendly relations, consultation, and cooperation between countries have taken both forms. The United States has concluded numerous agreements which concern amity or friendly relations between parties as treaties. However, these agreements have traditionally focused on different matters than the TAC. Agreements concerning amity and cooperation that have taken the form of treaties generally focus on the rights afforded to each party's nationals in the territory of the other State party. In contrast, the ASEAN TAC appears to focus exclusively on State-to-State relations. It does not appear that the TAC is intended to afford parties' nationals with individually enforceable rights in the territory of other TAC parties, or otherwise modify a State's internal practices. The United States has concluded several international agreements as executive agreements that address one or more issues covered by the ASEAN TAC—e.g., cooperation on matters involving security, economics, and science and technology. In a few instances, the United States has entered international agreements of similar breadth to the TAC (and in some cases greater breadth) by way of executive agreement. For example, in 1982, the United States concluded an executive agreement with Spain in order to "promote their cooperation in the common defense, as well as … economic, scientific, and cultural cooperation." Beyond establishing a general framework for relations in these areas, the agreement also contained specific provisions related to basing rights, defense procurement, the status of U.S. forces in Spain, and the establishment of joint committees to promote cooperation on economic, scientific, and cultural matters. The form that U.S. accession to the TAC would take was the subject of discussion between the executive and legislative branches. One issue that was discussed was the significance of the agreement being titled the Treaty of Amity and Cooperation. Although agreements similar to the TAC have often been entered via executive agreements, none of these agreements referred to themselves as "treaties." An examination of official compendiums of international agreements and other sources by CRS found only a single agreement currently in force at the time of U.S. accession to the TAC which, although referring to itself as a "treaty," was concluded by the United States via executive agreement —the Budapest Treaty on the International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure. Although the TAC refers to itself as a "treaty," it is important to distinguish the meaning of this term in the context of international law, in which "treaty" and "international agreement" are synonymous terms for all binding agreements, and "treaty" in the context of domestic American law, in which the term more narrowly refers to a particular subcategory of binding international agreements. In other words, the fact that the TAC uses the word "treaty" in its title does not necessarily mean that it must take the form of a "treaty" for purposes of U.S. law. Perhaps to prevent confusion, U.S. negotiators have generally avoided using the term "treaty" whenever drafting language of an international agreement which is unlikely to be presented to the Senate for its advice and consent. Because the United States did not participate in the drafting of the TAC, it was not involved in the decision to entitle it a "treaty." Shortly after the United States acceded to the TAC by way of executive agreement, Senator Mitch McConnell submitted into the Congressional Record a July 10, 2009, letter to Secretary of State Hillary Clinton that had been signed by Senator McConnell as well as Senators John Kerry and Richard Lugar, the Chairman and Ranking Member of the Senate Foreign Relations Committee, respectively. In the letter, written prior to U.S. accession to the TAC, the Senators expressed their view that "it is consistent with U.S. practice for the United States to accede to the TAC as an executive agreement." However, the Senators also expressed their belief that, while the TAC could properly be entered as a sole executive agreement, other agreements labeled "treaties" should generally be submitted to the Senate for its advice and consent. Specifically, the letter stated: We note that the title of the agreement refers to the agreement as a "treaty," and we are unaware of any precedent for the United States acceding to an agreement styled as a "treaty" without the advice and consent of the Senate as provided for in Article II, Section 2 of the Constitution. At the same time, we are mindful that other factors apart from the formal name of the agreement could suggest that it is consistent with U.S. practice for the United States to accede to the TAC as an executive agreement. Of particular importance, the agreement is largely limited to general pledges of diplomatic cooperation and would [generally] not appear to obligate the United States to take (or refrain from taking) any specific action … We also note that the United States did not take part in the negotiations among ASEAN countries leading up to the conclusion of the TAC in 1976, or in the decision to characterize it as a treaty. In light of these unique considerations, we will not object to the Department's plan to accede to the TAC as an executive agreement. We continue to believe, however, that the use of the term "treaty" in the title of an agreement will generally dictate that Senate advice and consent will be required before the United States may accede to the agreement. In this regard, treatment of the TAC as an executive agreement should not be considered a precedent for treating future agreements entitled "treaties" as sole executive agreements. To ensure our understanding that the process surrounding this agreement is not misinterpreted in the future as a precedent, we will submit this letter into the Congressional Record. We would also request that the State Department include it in the next edition of the Digest of United States Practice in International Law. If Congress believes that accession to the TAC via sole executive agreement is inappropriate, or disagrees with the manner in which the Executive implements TAC requirements, it has several tools available by which it may address these concerns. For example, Congress could enact new legislation that modifies or repudiates U.S. adherence to or implementation of the agreement. It could require the Executive to submit information to Congress or congressional committees regarding U.S. implementation of its TAC commitments. Congress could also limit or prohibit appropriations necessary for the Executive to implement the provisions of the TAC, or condition such appropriations upon the Executive implementing the agreement in a particular manner. While the TAC may impose obligations upon parties in their mutual relations as a matter of international law , its requirements do not appear to be of the kind that would create binding federal law enforceable by U.S. courts. Many of the agreement's clauses address parties' obligations in non-specific terms—e.g., requiring parties to "endeavor to develop and strengthen … ties" and "achieve the closest cooperation on the widest scale." Such clauses appear to lack the precision necessary to be considered legally enforceable, though they may nonetheless carry political or moral weight for TAC parties. More broadly, while the agreement establishes guidelines for parties in their relations with one another, it does not expressly require parties to modify any of their existing domestic laws, even if such laws arguably conflict with the principles espoused by the TAC. Instead, the TAC expressly calls on parties to resolve any dispute between them through diplomatic means. Accordingly, it does not appear that U.S. accession to TAC would have the effect of modifying or limiting the enforcement of existing domestic laws, though the United States would have an obligation under customary international law to execute its obligations under the TAC in good faith. Nonetheless, the TAC may have implications for U.S. policies, at least as a matter of international law. Some States that have acceded to the TAC, including the United States, negotiated side letters that address the issues discussed in the following sections. TAC Article 2 provides that a "fundamental" guiding principle in the relationship between parties is the "renunciation of the threat or use of force." This prohibition is similar to that contained in Article 2(4) of the U.N. Charter, which bars U.N. Member States "from the threat or use of force against the territorial integrity or political independence of any state." Unlike the U.N. Charter, however, the TAC does not provide an express exception to this bar in cases where force is used in self-defense. Even in the absence of a TAC provision recognizing parties' right to use force in self-defense, there is good reason to believe that the agreement is not intended to abrogate this right. Although TAC Article 2 lists six fundamental guiding principles in relations between TAC parties, including renunciation of the threat or use of force, it does not specify that these are the sole principles that may guide relations between State parties. Article 51 of the U.N. Charter recognizes that Members possess "the inherent right of individual or collective self-defense if an armed attack occurs." A nation's right to defend itself from attack is believed by many to be a peremptory norm ( jus cogens ), and accordingly any provision of an international agreement that derogated from this principle would not be legally binding. As such, it seems reasonable to interpret the TAC in a manner that would not be inconsistent with well-established principles concerning a nation's right to defend itself. Nonetheless, in negotiations concerning accession to the TAC, some States have found it necessary to exchange side letters in which it was made clear that parties to the TAC did not interpret the agreement as modifying parties' rights and obligations under the U.N. Charter, including as they relate to the right to self-defense. Related considerations might be raised with respect to the TAC's effect upon U.S. security arrangements. The United States is a party to numerous bilateral and multilateral security arrangements, including some which oblige parties to assist in the defense of any party that is attacked. Some TAC parties with security arrangements with the United States acceded to the TAC after reaching an understanding with ASEAN members that the TAC was not intended to affect other agreements to which they were parties. Prior to acceding to the TAC, the United States exchanged side letters reflecting its understanding that nothing in the TAC would affect its existing bilateral or multilateral relationships, its rights and obligations under the U.N. Charter, or its ability to take actions it "considers necessary to address a threat to its national interests." The TAC might also be interpreted as having implications for U.S. policy on matters occurring in the territory of another party to the agreement, if the policy is interpreted as violating the TAC parties' obligations concerning non-interference. TAC Article 2 provides that relations between parties shall be guided by the principle of "non-interference in the internal affairs of one another." This obligation could be interpreted as being a narrowly circumscribed requirement, prohibiting parties from actively attempting to undermine other parties' sovereignty or territorial integrity. However, it is possible that some countries might argue that the prohibition is more broadly applicable to TAC party activities towards one another, including, for example, criticism of another party's domestic human rights record. It is also possible that some countries may argue that the TAC bars the imposition of economic or other sanctions upon a TAC party on account of that party's domestic activities. This issue may be of particular concern for the United States on account of its stringent economic sanctions regime against Burma, a member of ASEAN whose consent is necessary for U.S. accession. State practice arguably conflicts with the view that the TAC is intended to deter parties from commenting upon or engaging on matters of international interest that arise within the territory of another TAC party. Indeed, some TAC parties have adopted specific measures, including economic sanctions, to deter human rights violations and other practices occurring in the territory of another party. For example, as mentioned above, both Australia and France, which are each parties to the TAC, have imposed sanctions upon Burma. Nonetheless, it is possible that U.S. sanctions policy may become an issue of contention with some TAC members. The United States and most other parties to the TAC are also parties to international agreements that obligate or permit members to take action to deter specified activities arising in other countries, including with regard to matters involving unfair trade practices, transnational criminal activity, international terrorism, and gross human rights violations. Further, all TAC parties are members of the United Nations, and may be required to comply with Security Council resolutions imposing economic sanctions upon a particular country (including, potentially, another party to TAC). In addition, Article 1 of the U.N. Charter provides that one of the purposes of the organization is "to achieve international cooperation ... in promoting and encouraging respect for human rights and for fundamental freedoms for all without distinction as to race, sex, language, or religion." This language arguably imposes a right and obligation upon U.N. Members to abide by these principles in their relations with other States. Some States acceding to TAC have exchanged side letters with ASEAN Members to clarify the parties' mutual understanding that the TAC is not intended to prevent parties from exercising rights and obligations under other international agreements, including the U.N. Charter. Side letters exchanged by the United States prior to its accession to the TAC also reflect this understanding regarding the TAC's relationship with other agreements. Although the TAC was "originally conceived as a legally-binding code of inter-State conduct among Southeast Asian countries," it was subsequently amended to permit the accession of States located outside Southeast Asia. Since that time, several non-Southeast Asian States have acceded to the TAC (see Table 1 ). While some provisions of the TAC clearly focus on parties' obligations with respect to the region of Southeast Asia, other provisions of the agreement could be interpreted as being applicable to relations between parties outside the region as well. In acceding to the TAC, some States outside Southeast Asia, including the United States, exchanged side letters to clarify their mutual understanding with ASEAN Members that the agreement was not intended to govern relations between TAC parties outside Southeast Asia, but only TAC parties' relations with Southeast Asian States. As previously discussed, when the TAC was amended to permit accession by States outside Southeast Asia, it limited their participation in the High Council to instances where the State was directly involved in the dispute to be settled. In contrast, Southeast Asian States are permitted to participate in all High Council meetings, regardless of whether they are parties to the dispute to be settled. The purpose of this limitation appears to have been to ensure that the focus of the TAC remained on Southeast Asia. In acceding to the TAC, Australia exchanged side letters with ASEAN members clarifying each side's understanding of the rights of States outside Southeast Asia pursuant to TAC Articles 14 and 16. The letters reflected the shared understanding that the High Council could not resolve a dispute in which a State outside Southeast Asia was directly involved without the State's consent, and that if the State agreed to the High Council being convened, it would be permitted to participate in the Council. The United States did not include a similar clarification in its side letter with the ASEAN Chairman. Appendix A. Side Letter from United States to ASEAN Concerning U.S Accession to the TAC and Mutual Understandings Concerning the Agreement Appendix B. Side Letters Between Australia and ASEAN Concerning Australia's Accession to the TAC and Mutual Understandings Concerning the Agreement H.E. Mr Somsavat Lengsavad Deputy Prime Minister and Minister of Foreign Affairs Lao People's Democratic Republic Your Excellency I have the honour to inform Your Excellency that Australia has decided to accede to the Treaty of Amity and Cooperation in South East Asia (the Treaty), in accordance with Article 18. The Australian Government is pleased to note that Australia's accession to the Treaty will provide further confirmation of the strong friendship, close ties and extensive common interests and objectives which Australia shares with ASEAN Member countries, both individually and collectively. The Australian Government's decision to accede to the Treaty has been greatly assisted by the extensive discussions which Australian officials have had with ASEAN counterparts on the Treaty. In that context, the Australian Government, in taking the decision to accede to the Treaty, is pleased to note the following understandings of key provisions of the Treaty, on a non-prejudice basis to ASEAN. First, Australia's accession to the Treaty would not affect Australia's obligations under other bilateral or multilateral agreements. Second, the Treaty is to be interpreted in conformity with the United Nations Charter, and Australia's accession would not affect Australia's rights and obligations arising from the Charter of the United Nations. Further, the Treaty will not apply to, nor affect, Australia's relationships with states outside South-East Asia. Finally, Articles 14 and 16 of the Treaty effectively provide that, when a state outside South-East Asia to the Treaty is directly involved in a dispute, the agreement of that state-party is required before the High Council can be convened. Should the High Council be convened, that state would be entitled to participate in the High Council. The Australian Government is pleased to note that it will lodge a formal instrument of accession to the Treaty following completion of Australia's domestic treaty process, including the necessary consultation with Parliament. I thank you for your assistance with this matter, and look forward to receiving your reply. Yours sincerely SIGNED Alexander Downer LAO PEOPLE'S DEMOCRATIC REPUBLIC Peace, Independence, Democracy, Unity, Prosperity Deputy Prime Minister, Minister for Foreign Affairs ___________ Vientiane, 23 July 2005 Excellency, I would like to express my thanks for Your Excellency's letter dated 13 July 2005 addressed to me as Chairman of the 38 th ASEAN Standing Committee, concerning the intention of Australia to accede to the Treaty of Amity and Cooperation in Southeast Asia. We believe that Australia's accession to the Treaty of Amity and Cooperation in Southeast Asia would further contribute to the strengthening of cooperation between ASEAN and Australia, particularly in the promotion of peace, security and cooperation in the region. I look forward to receiving Australia's formal instrument of accession to the Treaty. To: His Excellency Alexander Downer MP Minister of Foreign Affairs Parliament House Canberra ACT 2600 AUSTRALIA CC: - All ASEAN Foreign Ministers - Secretary-General of ASEAN
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On July 22, 2009, during Secretary of State Hillary Rodham Clinton's visit to Southeast Asia, the United States acceded to the Association of Southeast Asian Nations' (ASEAN) Treaty of Amity and Cooperation (TAC), one of the 10-nation organization's core documents, as had been amended by the 1987 and 1998 TAC Protocols. The move came less than six months after Secretary of State Clinton announced in Jakarta that the Obama Administration would launch its formal interagency process to pursue accession. This report analyzes the legal and diplomatic issues involved with accession to the TAC. ASEAN is Southeast Asia's primary multilateral organization. Its 10 member-nations include over 500 million people. Collectively, ASEAN is one of the United States' largest trading partners, constituting about 5%-6% of total U.S. trade. Geographically, Southeast Asia includes some of the world's most critical sea lanes, including the Straits of Malacca, through which pass a large percentage of the world's trade. The TAC was first negotiated in 1976 and subsequently amended to allow non-regional countries to accede. Fifteen countries have done so, including U.S. allies Japan, South Korea, and Australia, as well as China, Russia, and India. Within ASEAN, accession to the TAC by non-members often is seen as a symbol of commitment to engagement in Southeast Asia, and to the organization's emphasis on multilateral processes. The United States is the last major Pacific power to have acceded. The fact that the United States was not a party to the TAC had been one of many pieces of evidence that Southeast Asian leaders cited in arguing that the United States neglected Southeast Asia generally, and ASEAN specifically. Southeast Asian leaders generally have welcomed the Obama Administration's move, which seems to be designed to boost the United States' standing in Southeast Asia by expanding the multilateral component of U.S. policy in the region. Some U.S. and Southeast Asian officials and analysts say that expanding U.S. engagement with ASEAN will help boost Southeast Asia's political stature, particularly as China seeks to continue expanding its influence in the region. The major concern with accession is whether the TAC's emphasis on non-interference in other countries' domestic affairs will constrain U.S. freedom of action, particularly its ability to maintain or expand sanctions on Burma. Proponents of accession often note that Australia has imposed and expanded financial and travel restrictions on Burma since it acceded in 2005. Canberra's restrictions are far less extensive than the sanctions the United States maintains on Burma. The Administration and ASEAN negotiated and exchanged side letters designed to alleviate these concerns. Other objections to accession included arguments that it will accord greater legitimacy to the ruling Burmese junta; a view that ASEAN is insufficiently "action-oriented"; and a belief that the TAC is an untested, arguably ineffectual agreement. One issue for U.S. policymakers was whether accession to the TAC should take the form of a treaty, subject to the advice and consent of the Senate, or whether the President already has sufficient authority to enter the TAC without further legislative action being necessary. Ultimately, after consulting with selective offices in the Senate, the Administration decided that accession would take the form of an executive agreement, which does not require Senate approval.
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The Florida Everglades is a unique network of subtropical wetlands that is now half its original size. The federal government has had a long history of involvement in the Everglades, beginning in the 1940s with the U.S. Army Corps of Engineers constructing flood control projects that shunted water away from the Everglades. Many factors, including these flood control projects and agricultural and urban development, have contributed to the shrinking and altering of the wetlands ecosystem. Federal agencies began ecosystem restoration activities in the Everglades more than 15 years ago, but it was not until 2000 that the majority of restoration activities became coordinated under an integrated plan. With the Water Resources Development Act of 2000 (WRDA 2000; P.L. 106-541 ), Congress approved the Comprehensive Everglades Restoration Plan (CERP) as a framework for Everglades restoration. The legislation authorized $700 million for the federal share of appropriations for initial projects. According to the process established in WRDA 2000, additional Everglades projects are to be presented to Congress for authorization as their planning is completed. Once authorized, the projects will be eligible to receive federal appropriations, but must also receive appropriations from the State of Florida in order to be completed. In WRDA 2007 ( P.L. 110-114 ), three additional projects were authorized. Indirectly related to combined federal and state work under CERP is a subset of Everglades restoration projects being undertaken by the state. These projects may contribute to Everglades restoration, but are not formally credited toward non-federal requirements under CERP. The River of Grass acquisition by the State of Florida is the most recent of these "non-CERP" projects by the state. It involves a proposed land acquisition agreement by the South Florida Water Management District (SFWMD) to purchase large tracts of land south of Lake Okeechobee from the U.S. Sugar Corporation. The goal of the purchase is to acquire lands that will improve water quality and help regulate outflows from Lake Okeechobee. Under the plan, SFWMD would remove U.S. Sugar land from cultivation for sugarcane and citrus farming, and use it to move, store, and treat water flowing south to the Everglades. This proposal is of interest to Congress because it could affect the state's ability to contribute funding under CERP and, as a result, has the potential to alter the schedule of work on some CERP projects. The River of Grass land acquisition dates to mid-2008, and has been revised on multiple occasions since then. In June 2008, Florida Governor Charlie Crist and the U.S. Sugar Corporation announced that the State of Florida would pursue purchasing all of the firm's agricultural lands and assets (including 187,000 acres of farmland and additional associated sugar and citrus processing facilities) at a cost of $1.75 billion. The acquired sugarcane and citrus farmland around Lake Okeechobee would be used to store and treat water flowing south toward the Everglades and eventually into Florida Bay. Based on subsequent real estate evaluations, a slightly scaled-back version of the original proposal (180,000 acres) was approved by the SFWMD Governing Board in December 2008, at an estimated cost of $1.34 billion. The land acquisition would be financed by the sale of bonds issued by SFWMD, which would be repaid from a portion of the property taxes collected by the 16 counties that comprise SFWMD. Under Florida law, these bonds are subject to judicial review to determine whether they serve a "valid public purpose." In May 2009, SFWMD announced an amended proposal that further scaled back the original proposal. (See Table A-1 .) Under the amended proposal, SFWMD would purchase 40% of the lands originally envisioned (i.e., 73,000 acres) for $536 million. Notably, U.S. Sugar would lease back some of the land sold to SFWMD for a minimum of seven years, with provisions that would allow this arrangement to be extended for up to 20 years. SFWMD would have the option to acquire the other 107,000 acres included in the initial plan at a fixed price per acre during the first three years, and at the appraised market value during the next seven years. As a result of a combination of factors, including ongoing financial difficulties, SFWMD announced in August 2010 a second amended purchase agreement. This purchase, which proposes to scale down the River of Grass acquisition yet again, was approved by the SFWMD Governing Board on August 12, 2010. Under the revised agreement, SFWMD will purchase 26,800 acres immediately at a cost of $197 million. (See Figure A-2 .) The acreage consists primarily of sugarcane and citrus acreage in Hendry and Palm Beach Counties, and the majority of it will be leased back to U.S. Sugar Corporation until restoration projects can be fully designed. The remainder of the land from the initial proposed purchases (153,200 acres) would be available for optional purchases over a 10-year period. In contrast to previous versions of the acquisition, this land would be bought directly with SFWMD funds, and will not be funded through bonds. Since late 2008, opponents have filed objections in state court to the bonds initially issued by SFWMD. These opponents claim that SFWMD did not have authority to finance the transaction because the acquisition is not a "valid public purpose." A major sugar producing firm, Florida Crystals, has argued that the purchase gives an unfair advantage to its main competitor at taxpayer expense. Additionally, the Miccosukee Tribe of Indians, whose reservation lies south of U.S. Sugar lands, has argued that SFWMD is not financially able to meet the terms of the deal, which does not provide public benefits in the form of Everglades restoration. Supporters, including SFWMD and some environmental groups, argue that the land acquisition is in the public interest and will contribute significantly toward ecosystem restoration goals. On April 7, 2010, the Florida Supreme Court heard arguments from all sides on the opponents' appeal of an earlier court ruling that limits the amount of bonds the District could issue. The court's final decision could affect the latest version of the land acquisition, which will not be finalized until October 11, 2010. Several questions have been raised regarding previous versions of the proposed land acquisition by the State of Florida. Some questions center on the potential advantages and disadvantages of the land sale for restoring the Everglades, the effect of the land acquisition on Florida's role in implementing restoration projects under CERP, and the overall effect of the land acquisition on reducing excessive phosphorus in the ecosystem. Proponents of the land purchase point out several restoration benefits that they expect to result from the land acquisition. As currently proposed, the purchase would eventually take approximately 42 square miles of land in the Everglades Agricultural Area (EAA) out of production. This land was chosen for its high value and ability to contribute to other restoration goals. For instance, the 17,900 acres proposed for purchase in Hendry County are noted by SFWMD to be in the C-139 basin, an area with historically high phosphorus loads. Once this land is taken out of production, lower phosphorus inputs into the ecosystem are expected. Lands taken over by SFWMD could also be used to enlarge stormwater treatment areas that mitigate phosphorus outflows coming from Lake Okeechobee. If storage structures are built on this land at some point in the future, they could allow for increased flexibility to manage water during floods and droughts, as well as for ecosystem restoration. There are several concerns associated with the proposed land acquisition. These concerns range from the location and continuity of the land parcels to the timing and benefits of the purchase itself. Most of the remaining 26,800 acres that currently are planned for purchase are in two tracts south of Lake Okeechobee, with approximately 86% of the original acreage proposed for purchase in 2008 remaining under cultivation for the foreseeable future. (See Figure A-2 .) The fragmentation of land parcels may make it difficult to achieve some of the broader restoration objectives, including the original objective to restore a flow-way south to Everglades National Park that replicates the historical flow of the "River of Grass." Additionally, some contend that the land proposed for purchase is infested with canker (typically a microbial disease that affects the woody tissue of plants), rendering it useless for restoration. Some also note that potential benefits of the land purchase in restoring the Everglades are tempered by potential delays in land transfers and the initiation of actual restoration projects. Some have pointed out that under the terms of the deal proposed with U.S. Sugar, the majority of the land proposed for immediate purchase under the River of Grass acquisition will actually stay in production. Any delay in removing this land from cultivation and beginning restoration projects will lower the overall restoration value of the land, as the current effects of farming would continue. For example, a 10-year schedule could delay freeing up land for restoration projects until 2020, after most other restoration activities are expected to be well underway. Concerns about delays in restoration and a desire for near-term progress are shared by many stakeholders. According to the National Research Council (NRC), delays in restoring the Everglades are affecting the state of the ecosystem and closing opportunities for restoration. The NRC emphasized that "unless near-term progress is made, the Everglades ecosystem may experience irreversible losses to its character and function." Some question the effect of the proposed land acquisition on the implementation of CERP. The proposed acquisition by the State of Florida is not being carried out under CERP, and according to SFWMD, the purchase will not be credited toward the 50:50 state/federal cost share mandated under CERP. While SFWMD has publicly argued for the overall benefits of the land transfer for Everglades restoration, it has not directly linked the land purchase to any existing CERP projects, and it is unclear if the purchase is intended to benefit any future CERP projects. Some contend that the current purchase (and any future purchase of option lands) could affect other Everglades restoration projects, including those federal projects that require a non-federal cost-sharing partner under CERP. In 2008, the state suspended construction on the A-1 reservoir, a CERP storage reservoir in the EAA. The decision to abandon the project along with the announcement of the original proposed River of Grass purchase caused some to conclude that the River of Grass land acquisition was replacing a CERP project, and the suspension of construction on the reservoir was at issue in a recent lawsuit before the U.S. District Court in Miami. In his March 2010 ruling in this case, Judge Federico Moreno ordered that the A-1 reservoir project be reinstated. This ruling may further constrain financing for other restoration projects. Some also note that the land purchase could indirectly affect other CERP projects by creating a funding shortfall for these projects. State funding for all restoration activities, including CERP, is expected to decline in the coming years. In light of this, some have questioned whether the proposed funding for the land acquisition deal might be better spent on CERP projects. For instance, some have noted that the L-8 reservoir (a CERP project) may be a potential item for reduction. Significantly, state funding decisions for these projects will not be finalized until the end of the current fiscal year in September 2010. It is unknown whether the state will be able to fund its cost-share requirements for all ongoing CERP projects in FY2011. Some are concerned about the effect of the proposed land acquisition on phosphorus loading into the Everglades ecosystem. As discussed earlier, the proposed land acquisition has the potential to reduce phosphorus entering the Everglades ecosystem if stormwater treatment areas are constructed and sugar and citrus farms are taken out of production. The treatment areas would capture nutrient-rich outflow and runoff from agricultural areas and Lake Okeechobee itself, thereby reducing loads into other parts of the ecosystem. The state notes that some of the areas proposed for acquisition are known for previously having high nutrient loads. However, it is unclear if the 26,800 acres currently planned for purchase are strategically located to maximize phosphorus reduction. The ability of land to reduce phosphorus depends on its proximity to flows out of Lake Okeechobee, as well as other factors. Additionally, if purchasing the land delays other restoration projects intended to reduce phosphorus, phosphorus loads might not meet previously set targets. For example, the A-1 reservoir, discussed above, is intended to capture releases of water from Lake Okeechobee and reduce phosphorus input into the Everglades ecosystem. Delaying or abandoning this project could affect phosphorus mitigation. The proposed land acquisition is an investment in restoration that may be realized over a longer time horizon than many restoration projects that are currently planned or under construction, including federally authorized CERP projects. The impact of the land acquisition on other Everglades restoration projects will depend on budgetary decisions made in late September 2010, which could potentially reduce or delay state funding for some CERP projects. Near-term delays resulting from any funding reductions for CERP projects could affect the Everglades ecosystem, including those efforts pertaining to phosphorus mitigation and planned water storage capacity. Congress may have to decide whether currently planned CERP activities should be reconsidered in light of these circumstances.
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The Florida Everglades is a unique network of subtropical wetlands that is now half its original size. The federal government has had a long history of involvement in the Everglades, beginning in the 1940s with the U.S. Army Corps of Engineers constructing flood control projects that shunted water away from the Everglades. Many factors, including these flood control projects and agricultural and urban development, have contributed to the shrinking and altering of the wetlands ecosystem. Federal agencies began ecosystem restoration activities in the Everglades more than 15 years ago, but it was not until 2000 that Congress integrated the majority of restoration activities under an integrated plan, known as the Comprehensive Everglades Restoration Plan (CERP). The River of Grass acquisition is a proposed land acquisition by the State of Florida, which has the potential to affect the implementation of CERP. The proposal is to purchase tracts of land south of Lake Okeechobee from the U.S. Sugar Corporation. The state argues that the purchase would reduce phosphorus loads and help restore the historic north-south flow of water from Lake Okeechobee to the Everglades. Initially, acquisition of 187,000 acres was announced by Florida Governor Charlie Crist and subsequently approved by the South Florida Water Management District (SFWMD) in December 2008. Since then, the original proposal has been downsized on multiple occasions, both in terms of the size of the purchase and the purchase price. Most recently, a revised land purchase agreement was announced and approved by the SFWMD in August 2010. SFWMD now proposes a direct cash purchase of 26,800 acres, or approximately 14% of the original purchase proposed by the governor in 2008. The purchase would cost SFWMD $197 million. Questions have been raised regarding the proposed acquisition. Some of these questions center on potential positive and negative consequences of the land purchase agreement. These include the effectiveness of the land acquisition in reducing nutrient loads that are detrimental to the Everglades and in restoring historic flows, as well as the effect of the initiative's funding requirements on Florida's other restoration projects, including projects with a non-federal cost share requirement under CERP. Since state funding for CERP activities is expected to decline in the coming years, some have questioned whether the proposed funding for the land acquisition deal might be better spent on CERP projects. The impact of the land acquisition on CERP and other Everglades restoration projects will depend in part on budgetary decisions to be made by the state in late September 2010, which could potentially reduce or delay state funding for some CERP projects. Near-term delays resulting from any funding reductions for CERP projects may be of interest to Congress, as they would affect the overall federal effort to restore the Everglades ecosystem under CERP.
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The U.S. Supreme Court's decisions regarding the nature of the people's right to "keep and bear arms," as guaranteed in the Second Amendment to the U.S. Constitution, has focused some interest in the extent to which firearms are protected from the reach of creditors under either federal or state laws. State laws that protect certain property from creditors' claims generally are designed to apply in non-bankruptcy contexts, but may also be used in bankruptcy. Federal law also protects certain property from creditors' claims in bankruptcy. Additionally, a debtor in bankruptcy may be able to avoid liens against exempt property if a lien impairs the exemption and is either a judicial lien or a nonpossessory, nonpurchase-money security interest. Legislation introduced in the 112 th Congress, similar to legislation passed by the House in the 111 th Congress, would have allowed a specific federal exemption for firearms and would include firearms in the definition of household goods whose exemptions could be protected from impairment by liens. A number of states provide their own exemptions for firearms. The provisions of these states are provided in Table 1 . Section 522 of the U.S. Bankruptcy Code addresses the extent to which an individual debtor may elect to exempt equity in certain property from becoming part of the bankruptcy estate. Property exempted from the bankruptcy estate is not available to satisfy creditors. Among the exemptions explicitly provided in the Bankruptcy Code—the federal exemptions—are a homestead exemption in the amount of $21,625, a vehicle exemption in the amount of $3,450, and exemptions for jewelry, tools of the trade, and household goods. There is also a "wildcard" exemption of $1,150 that can also be applied to any property so long as the federal exemptions are available to the debtor. To the extent allowed under state law, the Bankruptcy Code permits debtors to choose between using the federal exemptions or those available under applicable state law. This is an "either/or" choice—debtors are not allowed to choose to use some state exemptions and some federal exemptions. When a petition is filed jointly by husband and wife or when the individual cases of a husband and wife are ordered to be jointly administered, each spouse must choose the same set of exemptions. However, debtors in many states have no choice to make because their state law prohibits the use of the federal exemptions. These federal exemptions are available to debtors only to the extent they are not prohibited by the applicable state. Puerto Rico, the District of Columbia, and 17 states allow debtors to choose between federal and state exemptions. In 2012, Virginia became the thirteenth state to provide some protection from creditors for debtors' firearms. The conditions for exempting firearms vary among the relevant states. Some states specify the number of firearms that may be exempted without regard to the value of the firearms. Other states limit the exemption to one firearm and further limit the claimed exemption by either the value of the firearm or the aggregate value of the statutorily exempt property in which the firearm is included. Oregon allows an exemption for one pistol as well as one rifle or shotgun, but limits the total exemption value of the two firearms to no more than $1,000. Several states put no limit on the number of firearms that may be exempted so long as the total value of the firearms, when aggregated with the value of certain other property is less than a specific amount. In these states, there is generally a limit to the value of each firearm. One state, Oklahoma, allows an unlimited number of firearms to be exempted so long as the total value of the firearms, alone, is no more than $2,000. In most of the states, the exemption is not controlled by the way in which the firearm is used. Several states, however, exempt only guns that are for personal use. Three of these specify that the firearms are to be "held primarily for the personal, family, or household use of [the debtor]." Oregon law specifies that the firearms must be "for the own use and defense of the citizen." Only one state, Louisiana, requires that the exempted firearm be used for business purposes. Both Montana and Nevada exempt "all arms ... required by law to be kept by any person" in addition to the one gun, selected by the debtor, that each allows. H.R. 1181 , the Protecting Gun Owners in Bankruptcy Act of 2011, was introduced on March 17, 2011, in the 112 th Congress. The bill paralleled an earlier bill passed by the House in the 111 th Congress, but not voted on by the Senate. The bill would have provided a firearms exemption that could be used in bankruptcy by a debtor who opted to use federal rather than state exemptions and was allowed to do so by the relevant state's law. The bill would have amended Section 522(d) of the Bankruptcy Code to add an exemption for the debtor's aggregate interest─up to a total value of $3,000—"in a single rifle, shotgun, or pistol or any combination thereof." The addition of this exemption would not have reduced the amount allowed for any other type of exemption under Section 522. Additionally, the bill would have amended Section 522(f)(4)(A) to include firearms in the definition of "household goods." As with the exemption for firearms, this provision would have applied to any number or combination of rifles, shotguns, and pistols so long as the aggregate value was no more than $3,000. Inclusion of firearms in the definition of household goods would not have increased the exemption available for firearms, but it would have allowed debtors to avoid liens that are nonpossessory, nonpurchase-money security interests on those firearms, under Section 522(f)(1)(B), as they are currently able to avoid such liens on other household goods. The bill would not have changed the maximum value of household goods whose liens could be avoided in bankruptcy. The last major action on the bill was referral to the Subcommittee on Courts, Commercial and Administrative Law for the House Judiciary Action. Currently, there has been no legislation introduced in the 113 th Congress that would provide a federal exemption under the Bankruptcy Code for firearms.
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The U.S. Supreme Court's decisions regarding the nature of the people's right to "keep and bear arms," as guaranteed in the Second Amendment to the U.S. Constitution, has focused some interest on the extent to which firearms are protected from the reach of creditors under either federal or state laws. State laws protecting certain property from creditors' claims may be used both in and outside of the bankruptcy context. Federal law may also protect certain property from creditors' claims in bankruptcy. Although a number of states have provisions explicitly shielding firearms from the claims of creditors, there is currently no such provision in the U.S. Bankruptcy Code (title 11). In the 111th Congress, legislation was passed in the House (H.R. 5827) that would have provided an explicit federal exemption in bankruptcy for a debtor's aggregate interest, up to $3,000, "in a single rifle, shotgun, or pistol, or any combination thereof." The bill also included the means for protecting firearms by including them─subject to the same value and type restrictions─in the definition of "household goods" for which nonpossessory, nonpurchase-money security interest liens could be avoided in bankruptcy. Similar legislation was introduced in the 112th Congress: the Protecting Gun Owners in Bankruptcy Act of 2011 (H.R. 1181). The Bankruptcy Code generally provides two options for claiming exemptions in bankruptcy─either the exemptions provided in 11 U.S.C. Section 522(d) or the exemptions available under state law. However, debtors may only choose to use the federal exemptions in Section 522(d) if their state specifically authorizes them to do so. Because the proposed federal exemption for firearms would be included in Section 522(d), debtors whose states do not authorize them to use the Section 522(d) exemptions would not benefit from the proposed change in exemptions. They might, however, benefit from the inclusion of firearms in the definition of household goods, because they could then have the option of freeing those firearms from liens that were based on a nonpossessory, nonpurchase-money security interest. There is great variety in the extent of the protection from creditors the states provide for firearms. The majority of states provide no explicit protection. Among the 13 states that provide protection, the conditions for providing that protection vary. Some states limit the exemption by both the number and value of the firearms; some do not limit the number but may limit either the value of each firearm or the aggregate value of all. Other states specify the type of firearms that can be exempted. In most states that allow an exemption for firearms, the exemption is not dependent upon the way in which the firearm is used. Several states, however, exempt only guns that are for personal use, and one state requires that the firearm be used for business purposes.
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This report provides a summary and analysis of selected provisions of S. 1733 , the Clean Energy Jobs and American Power Act. The topics covered include electric power and incentives for the development of natural gas technologies. The report also compares those provisions with counterparts, if any, in H.R. 2454 , the American Clean Energy and Security Act. Other aspects of S. 1733 and H.R. 2454 are covered in additional CRS reports. These reports are available in the climate change section of the CRS website, located at http://crs.gov/Pages/subissue.aspx?cliid=2645&parentid=2522 . The remainder of this report is divided into the following sections: Electric Power and Natural Gas Technologies. Electric Power Transmission and Related Technologies Subtitle H of Division A has two sections dealing with the use of low carbon emitting energy technologies. Section 181, Clean Energy and Accelerated Emission Reduction Program , directs the EPA administrator to "establish a program to promote dispatchable power generation projects that can accelerate the reduction of power sector carbon dioxide and other greenhouse gas emissions" (emphasis added). The term "dispatchable" is not defined in the bill, but would normally refer to power generating units that can be run at-will by system operators. In this sense a natural gas, nuclear, or coal unit is dispatchable while a wind or solar plant is not, because wind and solar generation is dependent on weather and diurnal conditions. The EPA administrator is directed to establish rules within 90 days of enactment for providing incentives to dispatchable power projects that generate 300,000 gigawatt-hours (Gwh) of electricity annually. To put this generation target in context, a reasonably large power plant with a capacity of 500 megawatts (i.e., 0.5 gigawatts) that operates the equivalent of 85% of the time would generate 3,723 Gwh annually. Therefore it would take about 81 of these 500 Mw plants to meet the goal of generating 300,000 Gwh annually under this program. To qualify for incentives, an eligible project must produce emissions of greenhouse gases (GHG) that are below the 2007 average emissions per megawatt-hour (Mwh) by the United States electric power sector, according to the following schedule ( Table 1 ): The bill speaks to reductions in the emissions of all GHG released by power plants, but information is readily available only for power plant carbon dioxide emissions (CO 2 is, in any event, the predominant GHG in the electric power sector). Table 2 , below, shows average CO 2 emission per Mwh for the electric power sector as a whole in 2007, the 2007 values for several specific combustible fuel sources, and estimated emissions for new natural gas plants. These estimates, which include no carbon controls, show that only new high efficiency natural gas plants can meet the reduction targets of 25% for 2010 to 2020 and 40% for 2021 to 2025. It does not appear that any combustible fuel source can meet the 65% target which begins in 2026 without carbon controls. Nuclear power is a dispatchable option which could meet these targets since carbon emissions are essentially zero. Geothermal power has very small emissions per Mwh ( Table 2 ) and is dispatchable, but with current technology plants are limited to small installations in the western United States. Another alternative could be to link wind or solar power with electricity storage, creating a combined system which could be dispatched as needed However, current electricity storage technologies are limited by cost, technical, and environmental factors. In allocating incentives the administrator is to give priority to projects with one or more of the following characteristics: Power generation and energy storage projects intended to integrate variable renewable electricity sources, such as solar and wind power, into the grid. Power generation projects with carbon capture and sequestration that do not qualify for other aid under S. 1733 . Projects that achieve the greatest reduction in GHG emissions per dollar of incentive payment. Several features of Section 181 are unspecified or unclear. These include: The total dollar amount and form of the incentives. By what point in time projects must enter service to qualify for incentives. Whether the emission reduction target varies for a project over time. For example, assume a project enters service in 2010 and must therefore meet the 25 percent reduction in GHG emission goal ( Table 1 ). If the project is still operating in 2021 to 2025, does it have to further reduce emissions to meet the 40% reduction target that begins in that period in order to continue to receive incentives, or does the higher target only apply to new units that enter service during that period? The bill states that "Not later than 3 years after the date of enactment of this Act, the Administrator shall provide incentives for eligible projects that generate 300,000 gigawatt-hours of electricity per year." It is not clear from this language if the Administrator must make all awards within three years of enactment, or must merely begin making awards by that deadline. Section 182 of Subtitle H, Advanced Natural Gas Technologies , would establish two programs for accelerating the deployment of advanced natural gas technologies. Under one program, for "Natural Gas Electricity Generation Grants," the EPA Administrator "may provide" (but apparently is not required to provide) research and development grants "to support the deployment of low greenhouse-gas-emitting end-use technologies, including carbon capture and sequestration technologies, for natural gas electricity generation." Under the second program, for "Natural Gas Residential and Commercial Technology Grants," the Administrator is directed to establish a grant program for research, development, demonstration, and deployment of low GHG emitting end-use technologies for the commercial and residential sectors. Grants can be made to private or municipal utilities, research and development establishments, and other types of businesses. Although these programs are under the direction of the EPA, the Secretary of Energy is the official directed to report to the Congress every 180 days on the status and results achieved by these programs. There are no directly comparable provisions in H.R. 2454 . Section 175 of Subtitle H of H.R. 2454 does provide for a government program to help develop and demonstrate high efficiency natural gas burning combustion turbines, for use in combined cycle power plants. The section directs the Secretary of Energy to carry out a multiyear, multiphase program of research, development, and technology demonstration that ultimately will lead to gas turbine combined cycle efficiency of 65%. H.R. 2454 contains several provisions relating to electric power transmission that have no counterparts in S. 1733 . These provisions are briefly summarized below. For more detail see CRS Report R40643, Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House of Representatives , coordinated by [author name scrubbed] and [author name scrubbed]. Subtitle F of Title I of H.R. 2454 deals with transmission planning and permitting. The subtitle provides for the following in respect to transmission planning: Establishes a national transmission planning policy, which states that transmission planning "should facilitate the deployment of renewable and other zero-carbon and low-carbon energy sources for generating electricity to reduce greenhouse gas emissions while ensuring reliability, reducing congestion, ensuring cyber-security, minimizing environmental harm, and providing for cost-effective electricity services throughout the United States…." Directs the Federal Energy Regulatory Commission to define electric transmission planning principles, based on the national policy, which can be used by planning entities. FERC is to facilitate coordination between state, regional, and industry transmission planning entities. In respect to permitting, the bill grants FERC new federal siting and permitting authority within the Western Interconnection. This authority to supersede state permitting decisions applies only to proposed transmission projects that meet certain criteria, including interstate projects "identified as needed in significant measure to meet demand for renewable energy." H.R. 2454 includes several provisions aimed at supporting development and installation of smart grid technologies (see Title I, Subtitle E). The bill would direct the Department of Energy and Environmental Protection Agency to identify products that could be cost-effectively equipped with smart grid capability. The legislation would also direct the Federal Trade Commission to initiate a rulemaking to determine whether smart grid information, such as potential dollar savings to the consumer, should be added to ENERGY GUIDE product labels. (ENERGY GUIDE is an existing federal program for labeling energy efficient products.) The legislation would establish requirements for electric power retailers to reduce their peak loads using smart grid and other energy efficient technologies; and would modify an energy efficiency public information program authorized by the Energy Policy Act of 2005 (EPACT05) to make it into a smart grid and energy efficiency information program. H.R. 2454 would also modify an EPACT05 energy efficiency appliance rebate program to add appliances with smart grid capabilities. Additionally, H.R. 2454 would require state regulatory authorities and self-regulating power suppliers (such as municipal utilities) to consider implementing standards intended to ensure that utility smart grid systems would be compatible with plug-in electric drive vehicles. Section 152 of Subtitle F of H.R. 2454 provides for net metering of federal agencies. Net metering is a ratemaking concept intended to encourage the development of "distributed generation" (i.e., electricity generated at the customer's site, possibly, but not necessarily, using renewable energy). Net metering is intended to make distributed generation more economical by requiring the utility that supplies electricity to a facility to also take any electricity generated by that facility, such as from rooftop solar panels or an on-site diesel generator. The ultimate utility bill to the facility is reduced by the amount of electricity supplied to the power company. Section 152 amends the Public Utility Regulatory Policies Act of 1978 to require state regulatory authorities to consider ordering utilities under their jurisdiction to implement net metering for federal facilities. It also requires non-regulated utilities (such as many municipal utilities) to make the same evaluation. The net metering standard must be adopted if it is consistent with state law and is found by the controlling regulatory authority to be "appropriate." Section 153 of Subtitle F would amend EPACT05 to provide for incentives for the development and construction of transmission lines and related facilities using currently non-commercial technology. The categories of technology include "advanced electric transmission property" (essentially high-efficiency underground transmission lines and associated equipment), "advanced electric transmission manufacturing plant" (plants that manufacture the "advanced electric transmission property"), and "high efficiency transmission property" (essentially high-efficiency overhead transmission lines and associated equipment). All three categories of technology would be added to the list of technologies qualifying for the new loan guarantee program added to EPACT05 by the American Recovery and Reinvestment Act of 2009. Additionally, "advanced electric transmission property" and "advanced electric transmission manufacturing plant" only would be added to the original loan guarantee program included in EPACT05. This program was originally created to support the development of low carbon and other advanced energy technologies.
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This report provides a summary and analysis of selected provisions of the chairman's mark of S. 1733, the Clean Energy Jobs and American Power Act. The topics covered include electric power and incentives for the development of natural gas technologies. The report also compares those provisions with H.R. 2454, the American Clean Energy and Security Act. In S. 1733, Subtitle H of Division A has two sections dealing with the use of low carbon emitting energy technologies. Section 181, Clean Energy and Accelerated Emission Reduction Program, directs the EPA administrator to "establish a program to promote dispatchable power generation projects that can accelerate the reduction of power sector carbon dioxide and other greenhouse gas emissions" (emphasis added). The term "dispatchable" is not defined in the bill, but would normally refer to power generating units that can be run at-will by system operators, such as natural gas, nuclear, or coal units. Several features of Section 181 are unspecified or unclear, including the total dollar amount and form of the incentives, whether the emission reduction target for a specific project would change over time, and the deadline for making incentive awards. Section 182 of Subtitle H, Advanced Natural Gas Technologies, would establish two grant programs for accelerating the development of advanced natural gas technologies in the power generation, commercial, and residential sectors. No parts of H.R. 2454 are directly comparable to sections 181 and 182 of S. 1733. Closest in intent is Section 175 of Subtitle H of H.R. 2454, which provides for a government program to help develop and demonstrate high efficiency natural gas burning combustion turbines, for use in combined cycle power plants. H.R. 2454 has several provisions relating to electric power transmission that have no counterparts in S. 1733. These provisions of H.R. 2454 involve transmission planning and permitting; development and deployment of smart grid technologies; requirements for electric utilities to reduce peak demand; net metering for federal agencies; and incentives for transmission technology development. These elements of H.R. 2454 are summarized in this report and discussed in more detail in CRS Report R40643, Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House of Representatives, coordinated by [author name scrubbed] and [author name scrubbed].
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Any legislative plan needs a thorough definition of the problem to be addressed and an explanation of what the appropriate solution might be. Solutions may include legislation, regulation, or media attention. A clearly defined issue makes the determination of the themes for developing the message and promoting the solution easier to explain to colleagues, supporters, opponents, constituents, and the press. Next, a time line for solving the problem should be determined. Is this a one-session, or one-Congress, or longer-term project? Is it one event or a coordinated series of events? Should the event(s) be held in the Member's district or state, in Washington, or throughout the country? Prior to beginning work on the solution, an in-depth determination of the extent of the problem needs to be undertaken. For example, is the problem limited to one district, state, or region, or is it nationwide? Should the solution address the specific issue or the policy in general? Consultation with local and state officials, community leaders, and constituents is integral at this stage. Discussions in Washington may include committee and subcommittee leaders, the party leadership, think tanks, and interest groups. One of the most important decisions is whether to conduct an "inside" or "outside" strategy, or possibly a combination of the two. Inside strategy entails work within the legislative process only, that is, legislation, hearings, committee and floor amendments, floor debate, and conference consideration. Advocates may or may not be involved in any of this activity. An outside strategy calls for advocates to generate mail, press, and office visits, often to force an inside strategy to occur. A combined strategy includes using Dear Colleague letters, coordinated one-minute or special order speeches, Member-to-Member lobbying, and group press conferences. What criteria are used to determine success? Political success? Press attention? Legislative success? Other? What is the duration of the project: one event, one session of Congress, two years, or longer? Are there other projects on this topic already underway? If so, should the Member conduct an independent project, or join forces? Does the political party or state of other Members involved influence the decision? Should it? Has the project ever been tried in the past? If yes, what Members tried it? What was the result? Is the project still needed? Are there lessons to be learned from the earlier attempt? What other Members, committees, or party leaders should be involved? What advocates should be involved? Which advocates will support, and which will actively oppose, the initiative? Is legislation the appropriate remedy for the problem? Will a free-standing measure be necessary, or is there a vehicle to which an amendment can be offered? Should the Member introduce the legislation alone or seek original cosponsors? Should those cosponsors be bipartisan? Should they be of the same "type," for example, women, philosophy, state and region, or district demographics, serving on the same committee? Should a companion measure be introduced in the other chamber? Should Dear Colleague letters be sent prior to introduction? Should they be sent periodically throughout the process identifying status? When should the legislation be introduced, for example, opening day, first or second session, a specific time of year? What should the legislation be titled? Is there a useful acronym to be found to assist in publicizing the legislation? Should a particular number be reserved, for example, H.R. or S. 2020 relating to eye care? Should a working group be created? Staff only or Members only? What role should the party leadership play? What of committee leadership? What type of coalitions should be created? If legislation is being considered on the issue (not necessarily the Member's measure), should the Member testify at hearings? Are there others the Member would recommend as witnesses? If a measure is being marked up, should the Member offer an amendment, assuming the Member serves on the committee? If not, should an ally offer an amendment on the Member's behalf? Should one-minute speeches or special order speeches be made to keep pressure on the committee or chamber and to maintain press visibility? How often and who should be included? Should a Rules Committee (House only) strategy be devised? Should opponents' strategy be monitored? If regulation is the appropriate solution, has the agency or executive branch been consulted? What is the appropriate timing? Should letters be written to the President? A Cabinet Secretary? Which advocates should be contacted? At what stage should they be included? What role should the advocates play—research, letters to Members, media appearances, briefings? Should a coalition of several groups be created? Dear Colleague letters One-minute or special order speeches Staff working group Member working group Speak on floor during consideration of related measure Press conferences News releases Op-ed pieces Syndicated columnists Editorial support, local and national TV or radio interviews Blogs Social media Determine time line for target dates for all activities Determine periodic dates to review progress and reassess strategy Meet with party campaign committees to discuss how project could help candidates. Can state or local officials be given a role in promoting the project? Action plans embody the strategies employed to achieve goals. The office's strategic plan should not only identify specific steps, but also the person(s) (including the Member) responsible for each step. It is also useful to include deadlines for completing action on each step. Periodic meetings to review progress on the plan may prove useful in keeping the project on track. Usually each person in the office, whether they have specific responsibility for parts of the plan, should be provided a copy of the plan. Identify appropriate executive branch agency(s). Meet with agency staff to review present programs and discuss legislative options. Meet with advocates to discuss problem and possible solutions. Determine if other legislation has already been introduced. Work with legislative counsel to draft legislation (or amendments). Obtain CBO cost estimate. Send out draft for comment to advocates, district and state leaders, constituents, others. Send out Dear Colleague letters. Determine appropriate Members to cosponsor legislation. Work with other chamber for companion legislation. Create staff working group after identifying other Members to be involved. Meet with committee and party leadership. Hold briefings on issue, for staff and Members. Develop local and national press strategy. Develop social media strategy. Introduce legislation after determining most advantageous time. Hold field hearing. Hold town hall meetings in district/state. Seek opportunities, in committee, on floor, in district/state, in press, to publicize initiative.
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The Congressional Research Service frequently receives inquiries about legislative planning. Legislative and office action plans are often used by congressional offices for almost every significant project, from organizing an extensive conference in the district or state to introducing and guiding legislation. A major action plan requires a firm understanding of the project's goal, a research strategy, and a time line for completing the project. This report presents some of the factors usually considered in preparing an action plan. The information is provided in three sections. The first provides an overview that lays out summary considerations. The second raises questions to consider in preparing an outline for a project. The third details a sample action plan.
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Throughout the early and mid-1970s, Congress laid the foundation of modern campaign finance policy. Before and after the Watergate scandal, Congress debated whether or how to regulate contributions, expenditures, and disclosure of campaign finance activities. In particular, the 1974 FECA amendments established much of the regulatory framework that remains today. The Supreme Court considered those matters in its landmark Buckley v. Valeo decision (1976). To this day, these topics continue to structure the policy debate. Perhaps because monumental questions surrounding how and whether to regulate political contributions and spending occupied Congress and the courts, a significant component of the 1974 FECA amendments—creating a new federal agency to administer FECA—received comparatively limited attention. That agency, the Federal Election Commission (FEC), would come to symbolize the fierce debate that occupies campaign finance policy overall. The FEC is responsible for civil enforcement of federal campaign finance law. The commission also administers public financing of presidential campaigns (applicable to participating candidates) and conducts outreach and educational activities. Members of the public, the media, campaign practitioners, and policymakers rely on campaign finance data disclosed on the FEC website—the agency's most public activity. Some allege that Congress designed the FEC to fail, most notably through a bipartisan, six-member structure that requires agreement from at least four commissioners for substantive action. Furthermore, some contend that recent years have marked a particularly problematic period in which, amid policy stalemates, some areas of campaign finance law have gone without adequate interpretation or enforcement. Others respond, equally vigorously, that Congress purposely insulated the FEC from excessive partisanship in the wake of Watergate and in one of the most sensitive areas of constitutionally protected political speech. They also caution that the commission cannot or should not do via regulation what Congress has declined to do by statute. Whether by design or coincidence, fundamental tensions about campaign finance law and regulation have been evident at the FEC throughout its history. Nonetheless, attention to working relationships among commissioners is increasingly part of the narrative about how the commission functions. Some commissioners have openly criticized their colleagues and the agency. As the FEC marked its 40 th anniversary in 2015, according to one media account, "officials past and present argued about whether to rent a theater, whether to publish a report, whether to serve bagels or doughnuts, and whether, in fact, the agency even had an anniversary worth noting." These and similar reports highlighting alleged dysfunction at the FEC are common. Some may be relevant for congressional needs as the House and Senate examine the FEC and form their own opinions on the agency. Discussions of the FEC's organization, duties, and major areas of policy debate—the focus of this report—are less common, but are at least as relevant for Congress. The report provides background information about key areas of controversy and context that might be relevant for Congress as the House and Senate approach their oversight duties, appropriate funds, consider nominations, and explore options for restructuring the FEC or maintaining the status quo. As discussed throughout this report, issues ranging from minor administrative matters to fundamental changes in campaign finance law might be relevant as Congress considers the FEC. Because there appears to be little congressional consensus about how or whether to address the FEC and its functions, this report provides a resource for Congress to examine which policy questions and options are of particular interest, if any. The report is not a legal analysis of commission activity, nor does it provide detailed discussion of relationships with potentially related agencies such as the Department of Justice or Internal Revenue Service. Another CRS report discusses the FEC's role in enforcing campaign finance law and regulation. This report uses the terms "FEC," "commission," and "agency" interchangeably. Some discussions of the FEC's authority, which are generally beyond the scope of this report, use the term "commission" to denote members of the FEC as opposed to agency staff. This distinction is not central to this report but is relevant for some enforcement debates, as noted primarily in another CRS report. Table 1 below summarizes recent legislation substantially devoted to the FEC. Congress most recently held an oversight hearing focusing on the FEC in 2011, as discussed later in this report. The Appendix at the end of this report lists major legislation devoted to the FEC and oversight hearings dating to 1995. The FEC is a six-member independent regulatory agency whose members serve six-year terms. They may continue in "holdover" status after those terms end. Commissioners are appointed by the President and subject to Senate confirmation. As discussed below, the current appointment method differs from the process Congress originally enacted but that was later invalidated. The Senate most recently confirmed commissioners in 2013, as shown in Table 2 . Congress most recently reauthorized the FEC in 1980 (FY1981). A professional staff of approximately 350 employees does the FEC's daily work. Most of these staff members are civil servants. FECA specifies two statutory staff positions: a staff director and general counsel. The commission also has a congressionally mandated inspector general. Figure 1 below shows major commission offices. As an independent agency, the FEC transmits its budget requests directly to Congress, and concurrently to the Office of Management and Budget (OMB). In FY2015, Congress appropriated $67.5 million to the FEC. The agency requested approximately $76.1 million for FY2016 in anticipation of negotiating a new lease on its office space. In recent years, the Financial Services and General Government (FSGG) appropriations bills ( H.R. 2995 and S. 1910 for FY2016) provided the initial legislative vehicle for FEC funding. Proposals for an entity resembling the FEC date to at least the early 1960s. Modern campaign finance policy took root in the 1970s with enactment of FECA and related amendments—where this report begins. Congress first vested campaign finance administrative authority within the House and Senate, and with the Comptroller General. Administering campaign finance first fell to those entities amid debate over whether Congress could or should cede overseeing its campaign activities to an outside body. At first, those duties primarily meant administering disclosure of financial activity, as the 1971 FECA principally mandated reporting requirements similar to those in place today. In what has been described as a "compromise" surrounding separation-of-powers matters and institutional prerogatives in the 1971 FECA, "Congress divide[d] the administrative and enforcement responsibilities for [FECA] among three supervisory offices." The Clerk of the House and Secretary of the Senate were responsible for administering the act for each chamber, respectively, while the Comptroller General, head of the General Accounting Office (GAO, now the Government Accountability Office), handled presidential campaign finance compliance. Longtime Committee on House Administration Chairman Wayne Hays championed the "supervisory officer" framework and staunchly opposed an independent campaign finance regulatory agency. The "supervisory officer" system generally facilitated effective disclosure of campaign finance activity, but enforcement concerns persisted. Some Members of Congress and other observers also raised concerns that three officers who were employed by the House and Senate were not sufficiently independent to administer and enforce the new law. Fundraising controversies in the 1972 election cycle increased calls for an independent campaign finance agency. As the Watergate scandal emerged in 1973-1974, congressional demand for an independent agency took on new momentum, eventually overcoming Representative Hays's preferred approach. The 1974 FECA amendments created the first version of the FEC. As noted below, the Supreme Court's 1976 Buckley decision invalidated the FEC's initial appointment structure. Independent campaign finance administration and enforcement was central to the early 1970s congressional debates over FECA and the 1974 amendments. The House and Senate considered proposals with different numbers of commissioners, appointment structures, and enforcement powers. The three-three structure (plus two later-invalidated ex officio members, discussed below) was unique but reflected elements of various congressional proposals. As campaign finance historian Robert Mutch explains, "No other government agency was so constructed. This unique appointment process appears to have been a grudging acquiescence to [a] form of independence while retaining as much congressional control as possible" through the House and Senate leadership's initial appointment powers. Over time, the FEC's bipartisan structure became central to its identity and to its controversy. Congress's choice to establish a politically balanced and even-numbered membership has been both praised as insulating the agency and criticized as thwarting its effectiveness. From the beginning, the bipartisan structure has made compromise on the most contentious issues difficult and has opened individual commissioners to charges of partisan bias. Congress originally designed eight positions for the FEC: six commissioners and two non-voting ex officio members (the Clerk of the House and Secretary of the Senate). Under that structure, two commissioners were appointed by the President, two by the President pro tempore of the Senate, and two by the Speaker of the House. Two federal court decisions altered the FE C's original design. First and most significantly, in Buckley the Supreme Court of the United States invalidated the original appointments method, holding that congressional appointments violated the Constitution's Appointments Clause. Almost 20 years later, a federal court again found fault with the FEC's appointment structure. In 1993, the U.S. Court of Appeals for the District of Columbia held in FEC v. NRA Political Victory Fund that the presence of the two congressional ex officio members violated constitutional separation of powers. In a broad revision of FECA in 1976, undertaken in response to the Buckley decision, Congress adopted the current appointment method. Today, all commissioners are presidentially appointed with Senate advice and consent. Members of the congressional leadership or committees of jurisdiction (the House Committee on House Administration and Senate Rules and Administration Committee) apparently continue to influence the appointment process. FECA specifies few qualifications for FEC commissioners, noting simply that they "shall be chosen on the basis of their experience, integrity, impartiality, and good judgment." As one former general counsel notes, although many commissioners are lawyers, "a commissioner does not have to be a lawyer and the commission has a long history of having non-lawyers serve as members." Commissioners typically have experience as congressional staffers, political professionals, election lawyers, or some combination thereof. Occasional vacancies reduce the number of sitting commissioners, but the FEC may exercise its core functions with as few as four members. No more than three commissioners may be affiliated with the same political party. In practice, the commission has been divided equally among Democrats and Republicans, although, as noted in Table 1 , one current commissioner identifies as an independent. FECA staggers commissioner terms so that two terms expire every other April 30 during odd-numbered years (e.g., 2017, 2019, etc.). This arrangement means that, at least by design, two new commissioners would assume office biennially. However, the President is under no obligation to make biennial nominations. Currently, FEC commissioners may serve a single six-year term. As another CRS report explains, for some federal boards and commissions, including the FEC, "[a]n individual may be nominated and confirmed for a seat for the remainder of an unexpired term in order to replace an appointee who has resigned (or died). Alternatively, an individual might be nominated for an upcoming term with the expectation that the new term will be underway by the time of confirmation." In fact, some FEC commissioners have assumed office when the term for which they were nominated was well underway. For example, on June 24, 2008, the Senate confirmed Donald F. McGahn and Steven T. Walther to terms that expired just 10 months later, on April 30, 2009. Both continued serving in their seats past the expiration of their terms, although they could have been replaced through subsequent appointments. These and other commissioners could remain in office because FECA permits FEC members to remain in office in "holdover" status, exercising full powers of the office, after their terms expire "until his or her successor has taken office as a Commissioner." As Table 2 above shows, as of late 2015, most current commissioners are serving in holdover status. Expired terms are, in and of themselves, not necessarily a policy concern because commissioners may remain in office until replaced. But, if the commission's membership fell below four members, as it did in 2008 (discussed below), it would lose its policymaking quorum. FECA requires affirmative votes from at least four commissioners to authorize most consequential agency activity, including making, amending, or repealing rules; issuing advisory opinions (AOs); and approving enforcement actions and audits. Matters without at least four votes for or against an action can have the effect of leaving questions of law, regulation, or enforcement unresolved, as some view the issues in question as having been neither approved nor rejected. The " Deadlocked Votes " section provides additional detail. The significance of the four-vote threshold became particularly evident in 2008. Following expired recess appointments and amid ongoing Senate consideration of FEC nominations, the agency had just two commissioners for the first six months of the year. In late 2007, in anticipation of only two commissioners remaining in office in 2008, commissioners amended the FEC's rules of internal procedure to permit executing some duties if the agency lost its four-member policymaking quorum. These revisions to the FEC's Directive 10 permit the commission to continue meeting with fewer than four members to approve general public information, such as educational guides; appoint certain staff; and approve other basic administrative and employment matters. After the Senate confirmed nominees in June 2008, the new commissioners faced a backlog of enforcement matters, advisory opinions, and other agency business. The FEC has maintained a full policymaking quorum since then. Throughout its history, the FEC has been controversial. Topics such as disagreements among commissioners and dueling perspectives on what the agency should do, and how, receive the most prominent and consistent attention in Congress, within the FEC, and in the media. Other topics, such as staffing and information technology, are less prominent but can substantially affect the agency's daily business. This section briefly summarizes selected but recurring areas of debate that might be relevant for Congress. Throughout its history, the FEC has been criticized for failing to reach consensus on key policy questions covering various topics. Perhaps most consequentially, these disagreements can include stalemates over rulemakings and enforcement actions. Both are major topics that this report does not cover in depth but which are addressed in other CRS products. In brief, some contend that the content of FEC rules—or protracted rulemakings—has undermined congressional intent in some cases. These criticisms were especially prominent after Congress enacted the 2002 Bipartisan Campaign Reform Act (BCRA), the most recent overhaul of federal campaign finance law. Complicated subject matter, protracted debate among commissioners, and litigation made some rulemakings lengthy and controversial. Rulemaking disagreements also occurred during other periods. In some cases, such as the post-BCRA environment, policy disagreements outside the agency can affect the rulemaking process at least as much as internal division. Public and interest-group perspectives can shape rulemakings through submitted comments. The FEC must attempt to reconcile those competing perspectives—as well as its own internal disagreements—to implement the law as written by Congress, and, often, as interpreted by courts. As noted below, most recently, the Supreme Court's 2010 Citizens United ruling has shaped the commission's policy debates and operating environment. Particularly after the Supreme Court issued its Citizens United decision, disagreements in areas ranging from disclosure to enforcement have been prominent at the FEC, in Congress, and beyond. In brief, Citizens United invalidated FECA's prohibitions on corporate and union treasury funding of independent expenditures and electioneering communications, thereby permitting new forms of corporate and union electoral activity. The decision did not affect the FEC per se, but it greatly influenced the environment in which the commission operates. Mirroring similar debate in Congress, the commission was unable to agree on rules implementing Citizens United for almost five years after the Supreme Court issued its decision in January 2010. A December 2011 Notice of Proposed Rulemaking (NRPM) posing questions about what form post- Citizens United rules should take remained open until late 2014, reflecting an apparent stalemate over the scope of the agency's Citizens United response. In October 2014, the commission approved rules to remove portions of existing regulations that Citizens United had invalidated, such as spending prohibitions on corporate and union treasury funds. The 2014 rules did not require additional disclosure surrounding independent spending, which some commenters had urged, but which others argued was beyond the agency's purview. Those favoring a deregulatory approach generally argue that the FEC has little additional role in issuing post- Citizens United rules, particularly without major statutory changes from Congress. Others argue that the FEC should instead pursue other rules, particularly to require additional disclosure surrounding spending that was previously prohibited. In one prominent recent instance, two commissioners even took initial steps to file a rulemaking petition with their fellow commissioners, calling for more expansive post- Citizens United rules. As stalemate over some policy areas has continued, some campaign lawyers have urged the commission to try to find compromise on potentially less dramatic but nonetheless consequential compliance questions, such as amending the agency's reporting forms to reflect recently permissible campaign activities. In other cases, some campaign practitioners have turned to the advisory opinion (AO) process to answer specific questions in lieu of final rules on overarching policy questions. "Deadlocked" votes are the most prominent and enduring indicator of policy disagreements within the FEC. Although 3-3 votes are the most obvious deadlocks, they may include any vote without at least four votes for or against a decision (e.g., 2-2; 3-2; 2-3, etc.). Unlike matters that a majority of the commission has definitively approved or rejected, actions without at least four votes for or against can have the effect of leaving questions of law, regulation, or enforcement unresolved. In these cases, deadlocked votes essentially halt substantive commission action on the matters in question. The FEC does not regularly compile and release summary deadlocks data. Most recently, the commission appears not to have produced an official, publicly available statistical summary since 2009. Using those data, CRS found that in 2008-2009, the FEC deadlocked on no rulemakings; on approximately 13% of closed Matters Under Review (MURs, the FEC's most significant enforcement cases); and on approximately 17% of advisory opinions (AOs). A CRS analysis of more recent FEC vote tallies found that in calendar year 2014, commissioners deadlocked on 24.4% of closed MURs. Results from other analyses vary based on methodology, time period, and the types of votes studied. Recently, commissioners and outside observers have disagreed at commission meetings and in the media about what deadlocks represent. That debate includes heated exchanges about whether deadlocks are, in effect, an effort to prevent reasonable rulemaking or enforcement, to prevent overzealous rulemaking or enforcement, or something else. Ambiguity surrounding deadlocks notwithstanding, apparent stalemates among commissioners—regardless of whether they are regarded as "deadlocks" per se—have featured prominently in consequential policy questions at the commission, such as the post- Citizens United rules; enforcement questions surrounding coordination among various political committees; and filling senior staff vacancies. Additional discussion appears elsewhere in this report. At the same time, some current and former commissioners (and outside observers) have noted that the FEC finds agreement on most issues. As then-FEC chairman Lee Goodman noted in his 2014 summary, "our Commission managed to act by majority vote in 93% of all matters (administrative and substantive), and to act by majority vote in 86% of substantive matters." Part of the ambiguity surrounding deadlocks arises because there is no standard method for counting deadlocks. Debate over how to count deadlocks typically centers around which things should be counted and which actions or time periods should be included. For example, Matter Under Review (MUR) 6729, which concerned disclaimers and reporting requirements, and which the FEC closed in 2014, illustrates that the episode could be counted at least two different ways. The commission took five votes on various questions regarding MUR 6729 at the agency's September 16, 2014, meeting. Three of those votes involved 3-3 deadlocks on motions supporting "reason to believe" that FECA either had or had not been violated and authorizing additional action. If using MURs as the "unit of analysis" (the thing being counted), MUR 6729 would be counted as a single deadlock because any one of the votes arguably precluded substantially resolving the matter. From this perspective, it matters more that the commission could not issue a decision and less why it could not do so. When examining votes, however, the analysis becomes more ambiguous. Should three deadlocks be counted? Should the two votes on which the commission reached agreement mitigate the deadlocks that occurred on other votes, etc.? Here, the individual disagreements are perhaps more important than the overall halt to the commission's decisionmaking that deadlocks imply. Both approaches might be valid, and both might be viewed as under-counting or over-counting deadlocks. Given their controversy and political sensitivity, deadlocked votes occupy much of the debate about the FEC's functioning. For some, deadlocks represent a failure to enforce campaign finance law or provide clear boundaries through rulemakings. For others, they signal that the commission is carefully considering what the law permits and prohibits. Focusing on deadlocks might or might not provide meaningful information. Deadlocks are about vote outcomes. In and of themselves, they reveal little about why the commission made its decision (or declined to make a decision) and what that might suggest for the future. Focusing on deadlock statistics could understate conflict if, for example, the commission postponed a vote—thereby avoiding a formal deadlock—because it feared that a deadlock would occur. On the other hand, focusing only on deadlock statistics can overstate deadlocks' importance if they overshadow the commission's ability to find consensus in other areas. As Congress determines whether oversight or other action regarding deadlocked votes is necessary, a threshold issue may be to consider whether deadlocks represent a public policy concern and if so, how. Occasional deadlocks might be expected given the complexity (and sometimes controversy) embodied in federal campaign finance law and regulation. In fact, Congress appears to have anticipated that the commission might be unable to reach consensus in some controversial cases, and perhaps intended for deadlocks to occur. According to one analysis, "In order to ensure that the Commission would not become a vehicle for partisan purposes, the Congress created an unusual conflict within the FEC" through the six-member structure. Commenting on the four-vote requirement, former commissioner Scott E. Thomas and his executive assistant, Jeffrey H. Bowman, continued, "These provisions were specifically designed to ensure that formal action on a matter before the Commission could go forward only on the affirmative vote of a mixed majority of Commission members." In addition, deadlocks might be viewed positively if enforcement actions being considered are perceived as unwarranted or excessive. Nonetheless, deadlocks mean that the commission has been unable to reach consensus about some element of law or regulation. As a result, at least in specific circumstances, deadlocks prevent campaign finance law from being enforced or preclude those seeking guidance from clearly knowing whether their planned activities will run afoul of the law. Despite disagreements in some areas, the FEC has consistently reached agreement on certain requests for legislative change. The FEC has varied its legislative requests in frequency, number, and prioritization over time. Congress is under no obligation to act on those recommendations. Recently the House and Senate have chosen not to do so, although Members have introduced legislation reflecting some recommendations. Figure 2 below shows those requests submitted at least twice since 2005. Especially high-priority items, based on frequency of the commission's recommendations, include the following: The FEC has proposed requiring Senate political committees (e.g., campaigns) to file their campaign finance reports electronically. Currently, Senate committees typically file paper reports. Paper filing causes delay and expense in making complete Senate data publicly available. Congress has declined to enact legislation requiring electronic filing. In some cases, electronic-filing legislation has been subject to amendments containing unrelated or controversial campaign finance provisions. Two requested changes concern campaign misconduct. First, the FEC has recommended broadening existing prohibitions on "fraudulent misrepresentation" of campaign authority, such as fundraising for fictitious political committees. Second, and somewhat similarly, the FEC has asked Congress to extend current restrictions on personal use of campaign funds to other kinds of political committees (e.g., parties or PACs). Both recommendations appear to reflect ongoing FEC concerns that some areas of questionable campaign conduct do not squarely fall within FECA or commission regulations. Particularly in the "personal use" instance, FEC audit staff have raised concerns over the past several years about embezzlement or other financial mismanagement as more money flows through political committees that, in many cases, remain largely volunteer operations. Congress has not actively addressed either topic through recent legislation or oversight. The agency has proposed making permanent the Administrative Fine Program (AFP), which provides streamlined enforcement for late or missing reports. The 113 th Congress extended the AFP until 2018. The AFP generally is noncontroversial and regarded as an effective tool for increasing FEC efficiency and encouraging compliance. The commission has requested authorization to convert some of its Senior Level (SL) management positions to Senior Executive Service (SES) status. The FEC contends that offering SES positions could provide a larger applicant pool because SES positions offer some additional benefits not available to SL appointees. It is unclear whether SES positions would, in fact, encourage more applicants. In general, SES appointees occupy the most senior civilian management positions in executive branch agencies. SL positions are more common in agencies that provide specialized or technical services and expertise. Congress has not recently considered legislation on this proposal. More detailed analysis could be relevant if Congress chooses to pursue any or all of the agency's recommendations. Commissioners have the greatest impact on agency policy, but administrative leadership and daily FEC management falls to staff. As Figure 3 below shows, as of late 2015, the FEC lacked permanent occupants in several senior positions. As the FEC IG noted in October 2015, some senior positions had been vacant for more than a year. Perhaps most notably, these include a vacancy in the general counsel position—the agency's chief enforcement official and legal advisor—dating to July 2013. Amid reported stalemate over how to fill the position, and reportedly reflecting commissioners' divisions over enforcement, the general counsel position was vacant for more than two years between June 2013 and August 2015. The commission appointed FEC attorney Daniel Petalas as acting general counsel in August 2015. The FEC Inspector General (IG) has raised concerns that "frequent turnover" in the general counsel, chief financial officer (CFO), and deputy staff director for management and administration positions "hinders the organization from efficiently and effectively carrying out the [FEC's] mission." FEC management has responded that it "understands the importance of filling these key, vacant positions" but that permanently doing so is "challeng[ing]." As noted in the " Information Technology " section, the IG also has questioned having a single person occupying the staff director and chief information officer (CIO) positions. In addition, although not necessarily related to senior-staff vacancies, FEC personnel consistently report low morale. In 2015, for example, responding FEC employees' "global satisfaction index," an Office of Personnel Management (OPM) measure of overall satisfaction with jobs, pay, organization, and "whether they would recommend their organization as a good place to work," stood at 43%. The FEC ranked 39 th of 41 small agencies. Since the agency's inception, some Members of Congress have proposed reorganizing the FEC to alter the number of commissioners or otherwise change the agency's structure. Most prominently, critiques typically propose eliminating the even-number commissioner structure to make deadlocks less likely. For some, in choosing the current bipartisan structure, Congress intentionally made the FEC "weak" with the agency being "designed to promote deadlock along party lines on issues that really mattered." Other observers warn that an odd number of commissioners could invite politicized decisionmaking. As one analysis explains, "The FEC's bipartisan design ... allows its regulations to carry weight. If not for this bipartisan design, every FEC action would be tinged with politics and viewed by some as illegitimate." Restructuring the FEC in any form that eliminated the even number of commissioners could reduce the potential for deadlocks and, therefore, perhaps improve the odds of consensus. Major restructuring could, however, also entail reforms well beyond addressing the comparatively narrow topic of deadlocked votes. In addition, a legislative overhaul of the agency is likely to be controversial. No overarching campaign finance legislation has been enacted since BCRA (2002). This context suggests that efforts to revamp the FEC may be difficult. On the other hand, the cyclical nature of support for campaign finance legislation suggests that changing the commission—or pursuing other major policy goals—could be accomplished provided sufficient demand exists within Congress or perhaps the broader public sphere. It is also important to note that although changing the number of commissioners is the most recurring and prominent restructuring option, it is by no means the only consideration that might be relevant. For example, scholars and other observers have occasionally proposed providing the general counsel with tie-breaking authority on deadlocked matters. A more enforcement-oriented agency with a powerful chair and administrative law judges is another option. Analysis of these and other options is beyond the scope of this report, but regardless of the reorganization option Congress considered, various questions of agency design and appointments likely would need to be addressed. Although commissioners have disagreed on many topics, in general, recent discussions at open meetings suggest that they see consensus on at least some transparency issues, such as initiating a major update to the agency's website, discussed in the " Website Upgrade " section of this report. The FEC also has found agreement on providing more formal ways for those regulated by the commission to interact with the agency. For example, in 2009, the FEC began permitting those seeking advisory opinions to appear before the commission to answer questions about the requests. This initiative is designed to address the "frustrat[ing]" situation in which requesters or their attorneys were in the audience during open meetings at which AOs were considered, but were not permitted to answer questions commissioners raised. Some have also proposed that the commission permit other interested parties to appear before the agency to comment on AO requests. The agency rejected such proposals in 2009 and 2015, although anyone may still submit written comments. Commissioners appear to be less unified on their views about some other transparency matters, such as largely unstructured public forums held in 2015 to solicit feedback on campaign finance and the agency generally. In these debates, commissioners do not necessarily differ on transparency per se, but on their interpretation of how and whether public input should be limited to those who are directly affected by a commission decision—such as a particular enforcement action or advisory opinion—or whether the commission also should solicit public feedback about campaign finance policy generally rather than on specific regulatory matters. Disclosure—a term of art referring to public reporting of information about contributions and expenditures—is a long-standing principle in campaign finance policy. Since the 1970s, Congress has relied on disclosure to prevent real or apparent corruption in campaign transactions. Even as more contentious policy questions, such as regulating the amounts one can give or spend, have evolved, Congress generally has continued to favor disclosure and courts generally have upheld it as within the government's purview. Facilitating disclosure falls to the FEC. Although some previous consensus on disclosure has eroded as recent Congresses have debated which transactions should be reported or by whom, the FEC generally is praised for its role in publicizing campaign finance data. "[W]hile most observers are content to dismiss the commission as a bureaucratic sideshow on the American political landscape, most also are willing to credit the agency with at least one major success.... [T]he FEC has built on earlier attempts to make campaign finance data open to public scrutiny and has made disclosure of campaign dollars an accepted and expected part of the electoral process." That assessment was written after the FEC's 10 th anniversary in 1985, not after its 40 th in 2015. Yet, the same observations ring true today. Although the commission's disclosure systems are sometimes criticized as outdated, the agency is generally well-regarded for providing timely access to campaign finance data. In FY2014, the FEC received almost 69,000 disclosure documents containing more than 26 million transactions. Presidential and House reports are generally available to the public via the FEC website within 48 hours. Because Senate reports are filed on paper and with the Secretary of the Senate, which then transmits them to the FEC, availability of those reports is delayed. As the FEC has explained, "A Senate campaign filing often consists of thousands of pages, and data from these filings consume a disproportionate amount of time to be integrated into the Commission's searchable databases." As the section on " The FEC's Legislative Recommendations " notes, the FEC has recommended that Congress require Senate political committees to file reports electronically and directly with the commission. Information technology (IT) is central to the FEC's public outreach and internal operations. This includes maintaining and upgrading the commission website, enhancing network security, and making ongoing updates to various software and hardware capabilities. IT costs routinely occupy more of the FEC's budget than any expense except personnel. For FY2016, the FEC expects IT to account for approximately 16% of the agency's budget. That amount is consistent with other recent requests. The FEC's IG "has identified [IT] security as a challenge for the agency" since FY2004. IT security became more publicly prominent in 2013 when reports emerged that the FEC website had been subject to several successful and attempted breaches. At least some of those attacks appear to have significantly impeded public access to data. Some of the website intrusions reportedly occurred during the October 2013 government shutdown. According to one media account, "[i]t took the agency weeks to get its campaign-finance disclosure system fully back up to speed after an attack by hackers in China disrupted its operation" when most agency staff were furloughed. While acknowledging some subsequent progress on IT issues, the IG and an auditor contracted by the IG continued to raise concerns about the commission's information security and various IT practices. The IG also has questioned the decision to permit one person to serve as both staff director and CIO. The FEC has agreed with some of the IG's IT recommendations. Concern about the FEC's IT challenges, and the agency's response to those challenges, appears to be ongoing. However, citing various "management actions and a recent commitment to establish more robust IT security standards, the OIG has removed Information Technology Security as a management challenge" from its October 2015 review. The IG reported that the agency nonetheless "continues to struggle with implementing IT projects" and said that it would continue to monitor the FEC's progress on IT issues. The FEC's website is the agency's primary outreach tool. Practitioners rely on the site for compliance information. The media and the public rely heavily on it for campaign finance reports and background information. Revamping the FEC website has been a major priority. The FEC began soliciting formal feedback about its website in 2009. In 2014, the commission partnered with 18F, "a digital services delivery team in the General Services Administration (GSA)" to solicit feedback from various governmental and nongovernmental sources about how they use the site and what features should be included on a new site. In October 2015, the commission launched a new "beta site" with substantially enhanced data analysis features. Work on the new site continues. The Federal Election Commission is one of the most roundly criticized agencies in Washington. Some contend that the commission has done too little and others say that it has done too much. These criticisms are familiar, but examining the agency's mission and the context in which it operates is less common. Because policy consensus has not yet emerged, this report has emphasized recurring topics that might rise to Congress's attention. If Congress decides to reexamine the FEC, more in-depth analysis of individual policy questions or matters of agency design likely would be required. As Congress examines the nation's campaign finance enforcement agency, it might first desire to consider whether the FEC established 40 years ago meets current needs. Broadly speaking, what should the FEC do and how should it do those things? If Congress chooses to alter the FEC at all, do the House and Senate primarily want a different agency or do they want a different set of laws for the agency to enforce? The latter option suggests a broad reexamination of federal campaign finance policy as it has existed for decades. For those who view the status quo as antiquated, reconsidering major topics such as contribution limits, disclosure requirements, and independent spending might be preferable to narrower technical changes. On the other hand, fundamental changes to campaign finance policy are likely to be controversial and protracted. Altering the FEC also likely would be contentious, but the approach would be more modest than overhauling campaign finance policy. The following questions raise more specific points for consideration. Does Congress want to change the status quo at all? If so, in which areas and how? Does Congress want the FEC to be primarily an enforcement agency, primarily a disclosure agency, or something else? If Congress wants the FEC to focus on one task over others, should another agency take on other duties? Is it sufficient for some tasks to be de-prioritized, etc.? To what extent should the commission have discretion to prioritize some aspects of its mission over others? Does Congress want to provide more or new direction? Does Congress want to retain the FEC's six-member, bipartisan structure? If Congress chose instead an odd number of commissioners, how, if at all, might that affect perceptions of the agency's legitimacy or partisanship? Does the FEC have sufficient appropriations to carry out its current mission and future ones? Does Congress want to examine relations among commissioners? If so, does it want to try to affect those relations through oversight, by influencing nominations, etc.? Does Congress want to consider the FEC's legislative recommendations? If so, which ones? Does Congress want to consider findings from outside critiques of the agency, such as those conducted by the FEC's inspector general or advocacy groups? As Congress considers the questions presented above and the issues noted throughout this report, it might also be important to ask which decisions are within the commission's purview and which things only Congress can change. The FEC can control much of its agenda. Commissioners can determine those areas where they can compromise and where they must disagree. They can set the overall tone for the agency and its staff. They can decide how to allocate resources and where to prioritize enforcement. Other factors are beyond the FEC's control. The agency cannot establish its own statutory mandate. It cannot unilaterally reconcile complex and sometimes ambiguous campaign finance law. Most importantly, the FEC cannot change the First Amendment provisions that so closely protect the very conduct that Congress has charged the commission with regulating.
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More than 40 years ago, Congress created the Federal Election Commission (FEC) to administer the Federal Election Campaign Act (FECA) and related amendments. Today, the FEC is responsible for administering disclosure of millions of campaign finance transactions; interpretation and civil enforcement of FECA and agency regulations; and administering the presidential public financing program. Six presidentially appointed commissioners, who are subject to Senate advice and consent, head the FEC. No more than three members may be affiliated with the same political party. Congress arrived at this bipartisan, even-numbered structure amid debate over how to properly insulate the campaign finance agency from political pressures. Although this structure ensures that commissioners must reach bipartisan agreement to make most decisions, it has not saved the agency from bipartisan criticism. Throughout its history, critics have alleged that the FEC fails to adequately regulate campaign finance activity or does so too stringently. Discussion of what the commission does, why it does so, and how is less common. This report provides selected information about the FEC's history and ongoing issues that are likely to be of interest to Congress for appropriations, legislative, or oversight activities. The discussion is organized around those factors that most actively shape the FEC: its structure and commission appointments; organizational issues; and debate over campaign finance policy. These selected topics represent both ongoing and recent areas of congressional activity. CRS Report R44319, The Federal Election Commission: Enforcement Process and Selected Issues for Congress, by [author name scrubbed] provides additional information about the FEC's enforcement process—a topic that is related to some of the issues discussed in this report but also distinct from the organizational and administrative themes considered here. As the FEC heads toward a half-century of regulating campaigns, perhaps the most fundamental question facing Congress and the commission is what the agency's mission should be today and in the future. As Congress monitors the FEC, it perhaps faces a choice similar to that facing the agency itself: whether to focus on major change—if any—or to emphasize managing routine business. Recent Congresses have engaged in oversight activities surrounding the FEC's enforcement practices and agency transparency. For more than 20 years, Congress occasionally has considered legislation to restructure the agency, particularly to change the number of commissioners, thereby reducing possibilities for deadlocked votes. H.R. 2931 in the 114th Congress is the latest such proposal. This report will be updated occasionally as events warrant.
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On July 6, 2006, a United States District Court ruled that former Representative Tom DeLay, who had earlier won the Republican primary nomination for Congress from the 22 nd District of Texas, could not have his name substituted on the general election ballot by the Republican party even if Mr. DeLay had changed his legal residence and voluntarily withdrew from the race. That decision was upheld on appeal by the United States Court of Appeals, and a request to stay the opinion was denied by Justice Scalia of the United States Supreme Court. In Ohio, a different result ensued a month later when Representative Robert Ney, who had won the Republican party nomination in an earlier May primary, formally announced his withdrawal from the race on August 14, 2006. In that instance, the Republican party in Ohio was permitted to have a "special primary" to nominate another candidate for the general election (although some questions had surfaced as to whether one of the candidates would be eligible to run in the primary and general election because of Ohio's "sore loser" law.) In Connecticut, the defeated candidate for the Democratic party nomination in the August 2006 primary, incumbent Senator Joseph Lieberman, appears to be able to be on the ballot either as an "independent" or nominee of a minor party in the general election in November, although a similar ballot position for the general election for one who had lost a party nominating primary would be barred in numerous states (including Ohio) because of the application of their so-called "sore loser" laws. Several years earlier, on September 30, 2002, former Senator Robert Torrecelli, the Democratic nominee for the United States Senate from New Jersey, voluntarily withdrew from the Senate race and, even at that late date, a new candidate was allowed to be chosen by the Democratic party in New Jersey and to have his name appear on the November ballot. Meanwhile in Missouri, the Democratic nominee for the United States Senate in the 2000 election, former Governor Mel Carnahan, died in a plane crash on October 16, 2000, three weeks before the general election, was not able to be substituted for, and continued to have his name on the ballot in the November general election. When the deceased candidate received the most votes in the ensuing election, a "vacancy" was declared and the acting Governor, under the 17 th Amendment and Missouri law, chose a temporary replacement until the next statewide election to fill the remainder of the term. This report will examine federal law and constitutional provisions to explain the seeming disparity in treatment concerning the placing and substitution of candidates names on the ballot for federal offices. In the course of this discussion, the report will analyze what have generally been characterized as "ballot access" issues in the states. Initially, it should be noted that under our federal system, an interesting division of jurisdiction occurs in the case of elections to the United States Congress. In the first instance, the terms of federal congressional offices and the qualifications of candidates eligible for federal offices are established and fixed by the United States Constitution, and are unalterable by the Congress itself or by any state unilaterally. The Constitution expressly provides, however, in the so-called "times, places and manner" clause, that the individual states have the general authority to administer congressional elections within their jurisdictions. Furthermore, the states, within constitutional parameters, have the authority to set the qualifications to vote for those federal offices at these elections. As to the final results of the election and seating in Congress, the Constitution provides that each House of Congress has the authority to be the final judge of the results of those congressional elections held in the states, and to judge the three constitutional qualifications for office (age, citizenship, and inhabitancy in the state when elected) of the Members-elect presenting themselves for membership in the institution. The states' authority over election administration and procedures for congressional elections is set out at Article I, Section 4, clause 1, of the United States Constitution, and provides as follows: The Times, Places and Manner of holding Elections for Senators and Representatives, shall be prescribed in each State by the Legislature thereof; but the Congress may at any time by Law make or alter such Regulations, except as to the Places of chusing Senators. Under this express constitutional authority of the states to regulate the "times, places and manner" of congressional elections, the states may promulgate regulatory and administrative provisions dealing with the mechanics and procedures of the elections for congressional office which are held within their jurisdictions. This procedural and administrative authority has been found to extend to such things as, for example, the form of the ballots, the positioning of candidates' names and party affiliations on the ballot, voting procedures and mechanics, counting votes and certifying winners, and the nominating and/or petition process generally, including the authority to enact reasonable requirements and regulations for a candidate's name to appear on the ballot—that is, so-called "ballot access" requirements for major party, new party, and independent candidates. In discussing the breadth of the legislative authority in the states over the conduct of federal elections, the Supreme Court explained as follows: The subject matter is the "times, places and manner of holding elections for Senators and Representatives." It cannot be doubted that these comprehensive words embrace an authority to provide a complete code for congressional elections, not only as to times and places, but in relation to notices, registration, supervision of voting, protection of voters, prevention of fraud and corrupt practices, counting of votes, duties of inspectors and canvassers, and making and publication of election returns.... It is this authority of the states over the ballot, the structure of the ballot, and concerning so-called "ballot access" requirements for political party nominees, new party nominees, and independent candidates, that has led to the varying and different treatment and requirements for placement, removal and/or substitution of a candidate's name on the ballot, depending on the state in which the congressional election is to be held. Since these matters are generally subjects of state law, within the parameters and requirements of the United States Constitution, it is the application of the particular state law that may result in a different outcome of a withdrawal of a congressional candidate who has won a major party nomination in a primary in Texas, as opposed to a withdrawal and substitution of a party-nominated candidate for Congress in Ohio or in New Jersey, the death of a nominated candidate in Missouri, or the ability to be on the ballot in Connecticut as an independent or the nominee of a new party in a general election after losing a party primary for the same office. Although the state legislatures have broad authority under the United States Constitution concerning the procedures for federal elections within their jurisdictions, the constitutional provision expressly provides a superceding, residual authority within the Congress to legislate different provisions for federal elections held in the states. This residual authority in Congress has been found to be as extensive and complete as the state legislatures' authority over such elections within their respective jurisdictions. After discussing the breadth and extent of the states' authority over election procedures for federal office, the Supreme Court explained the authority of Congress over such elections: This view is confirmed by the second clause of Article I, section 4, which provides that "the Congress may at any time by law make or alter such regulations," with the single exception stated. The phrase "such regulations" plainly refers to regulations of the same general character that the legislature of the State is authorized to prescribe with respect to congressional elections. In exercising this power, the Congress may supplement these state regulations or may substitute its own. It may impose additional penalties for the violation of state laws or provide independent sanctions. It 'has general supervisory power over the whole subject.' Ex parte Seibold, 100 U.S. 371, 387; Ex parte Yarbrough, 110 U.S. 651, 661; Ex parte Clark, 100 U.S. 399; United States v. Mosely, 238 U.S. 383, 386; Newberry v. United States, 256 U.S. 232, 255. Despite the broad, residual and superceding authority of Congress in this area, Congress has not extensively exercised this power with respect to the procedures for federal elections in the various states. Congress has, it may be noted, legislated in this area, for example, in 1872 to assure that there will be a uniform date for the election of Representatives and Senators throughout all of the states (the Tuesday immediately following the first Monday in November in the particular, applicable even-numbered election years), and has legislated a detailed system for regulating, reporting and disclosing the campaign finances of candidates to federal office. However, as a policy matter, and under Article I, Section 4, clause 1, Congress has traditionally allowed the states, within the framework of the federal constitutional and statutory mandates, to exercise the substantive control over the procedures and administrative details of elections within their own respective jurisdictions (and the states have then often further devolved immediate administrative and supervisory control over many election procedures to local and county authorities within their jurisdictions). This policy has generally recognized the principle that because of the varying political cultures, practices, and traditions across the nation, and from state-to-state, that operational authority over most of the election mechanics is more appropriately left to the states and localities. Thus, as shown by the recent instances regarding candidate-substitutions on the ballot for the United States House of Representatives and the United States Senate, the particular procedural laws of the state in question govern the resolution of the issue. In Texas, the courts looking at the matter of the attempted withdrawal of and replacement for former Representative Tom DeLay on the ballot for the United States House of Representatives from the 22 nd district of Texas, interpreted a Texas election law, in light of the United States Constitution's qualifications requirements, to find that former Representative Tom DeLay could not be replaced on the ballot by the Republican party after Mr. DeLay had won the nomination at a primary election. To prevent what has been described as the "gaming" of the nomination system with the use of so-called "straw" candidates, "stalking horses" or "place-holder" candidates, Texas law currently provides that when parties nominate candidates by primary election, one party is not permitted to later replace a candidate so nominated, unless the candidate is not "eligible" for the office. Since "eligibility" for the office of Representative in the United States Congress is established in and governed exclusively by the provisions of the United States Constitution—and those provisions require only that the candidate be 25 years of age, a citizen of the United States for seven years and, at the time of election, be an inhabitant of the state from which elected—Mr. DeLay was found not to be, at the time of the decision, "ineligible" under the United States Constitution for the congressional seat, and thus could not be replaced on the ballot under Texas law. In Ohio, however, after the withdrawal of a nominated candidate, the election laws of the State of Ohio permit the political party to name a substitute, or if the candidate withdraws at least 80 days before the general election, to have a "special election" primary to nominate a substitute. So although Representative Ney withdrew from the congressional election race in Ohio at an even later date than did former Representative DeLay in Texas, a special primary was allowed to be held in Ohio to substitute a name on the ballot as the Republican party's nominee for the general election for Representative. Similarly, in New Jersey, the state election laws provided for a specific procedure for the replacement of candidates who withdrew up to 50 days before an election, but the courts found that the state statute did not necessarily preclude party substitution for a withdrawn candidate closer to the election if the administrators of the election certified that the substitution could be made without significant disruption to election procedures. In Missouri, however, the Democratic nominee for United States Senator died in a plane crash so close to the November 2000 general election, on October 16, 2000, that the deadline under Missouri law for finalizing the ballot and programming machines had passed; the party therefore could not substitute another candidate, and the deceased candidate's name was left on the ballot. "Ballot access" rules and provisions in the states, the processes by which candidates are certified to have their names appear on the ballot and programmed into voting machines, are generally promulgated by states in an attempt to prevent the proliferation of frivolous candidates, ballot overcrowding and voter confusion, election fraud, and to facilitate generally proper election administration. While those interests of the state are certainly legitimate and significant, ballot access procedures must, under constitutional principles of the First and Fourteenth Amendments, provide a reasonable and not-impermissibly discriminatory method for new party and independent candidates to qualify for the ballot. That there may be different methods or "tracks" to the ballot, or differing requirements to have one's name placed on the ballot, depending on whether one is the nominee of a major political party, a minor or new party, or an independent candidate, is not necessarily constitutionally impermissible, as long as such methods do not "unfairly or unnecessarily burden" new party or independent candidates. In examining state laws which treat different candidates differently as far as ballot access, the courts will not always apply "heightened scrutiny" to determine if the hurdles imposed on new, minor or independent candidates by election procedures are, on balance, permissible. If the state laws impose only what are found to be "reasonable, nondiscriminatory restrictions" on the protected rights affected, then the regulations and procedures of the state would be upheld when they are sufficiently related to the legitimate state interests asserted. However, when the restrictions on rights are considered to be "severe," then the regulation in question "must be narrowly drawn to advance a state interest of compelling importance." The Supreme Court explained the analytic framework it employs for state regulations which work to limit access to the ballot and thus impact associational rights of voters, political parties, candidates, and their supporters: When deciding whether a State election law violates First and Fourteenth Amendment associational rights, we weigh the "character and magnitude" of the burden the State's rule imposes on those rights against the interests the State contends justify that burden, and consider the extent to which the State's concerns make the burden necessary. [citations omitted] ... Regulations imposing severe burdens on plaintiffs rights must be narrowly tailored and advance a compelling state interest. Lesser burdens, however, trigger less exacting review, and a State's "important regulatory interests," will usually be enough to justify "reasonable nondiscriminatory restrictions." Additionally, reasonable "ballot access" procedures, including filing requirements, filing deadlines, a show of qualifying support by new or minor party or independent candidates, "sore loser" laws and other restrictions on cross-filing and multiple candidacies, have been found generally to be within the state's purview to "regulate[ ] election procedures " to serve the state interest of "protecting the integrity and regularity of the election process....," and when found to be within the state's administrative authority over election procedures, were not deemed to be impermissible "additional qualifications" for federal office, even though they may create certain procedural hurdles or requirements which a candidate must overcome to be placed on the ballot. The distinction between permissible, procedural "ballot access" regulations by the states, such as the "sore loser" laws and the requirements for independents or new party candidates to demonstrate some level of support (such as a certain number of signatures on a petition) to appear on a ballot, as opposed to prohibited "additional qualification" requirements added by the states was explained by the Supreme Court in U.S. Term Limits, Inc.: The provisions at issue in Storer and our other Elections Clause cases were thus constitutional because they regulated election procedures and did not even arguably impose any substantive qualification rendering a class of potential candidates ineligible for ballot position. They served the state interest in protecting the integrity and regularity of the election process, an interest independent of any attempt to evade the constitutional prohibition against the imposition of additional qualifications for service in Congress. And they did not involve measures that exclude candidates from the ballot without reference to the candidate's support in the electoral process. In California, the statutory scheme upheld by the Supreme Court, in Storer v. Brown, supra, worked to prevent a ballot position to an independent candidate not only if that candidate had run in and been defeated in a primary election of a political party (a so-called "sore loser" provision), but also if that person had "voted in the immediately preceding primary" or "had a registered affiliation with a qualified political party at any time within one year prior to the immediate preceding primary election." This so-called "disaffiliation" requirement, along with the "sore loser" provision, were found by the Supreme Court to further important and compelling state interests: A candidate in one party primary may not now run in that of another; if he loses in the primary, he may not run as an independent; and he must not have associated with another political party for a year prior to the primary.... The direct primary in California is not merely an exercise or warm-up for the general election but an integral part of the entire election process, the initial stage in a two-stage process by which the people choose their public officers. It functions to winnow out and finally reject all but the chosen candidates. The State's general policy is to have contending forces within the party employ the primary campaign and primary election to finally settle their differences. The general election ballot is reserved for major struggles; it is not a forum for continuing intraparty feuds. The provision against defeated primary candidates running as independents effectuates this aim, the visible result being to prevent the losers from continuing the struggle and to limit the names on the ballot to those who have won the primaries and those independents who have properly qualified. The people, it is hoped, are presented with understandable choices and the winner in the general election with sufficient support to govern effectively. Section 6830(d)(Supp. 1974) carries very similar credentials. It protects the direct primary process by refusing to recognize independent candidates who do not make early plans to leave a party and take the alternative course to the ballot. It works against independent candidates prompted by short-range political goals, pique, or personal quarrel. It is also a substantial barrier to a party fielding an "independent" candidate to capture and bleed off votes in the general election that might well go to another party. ... California apparently believes with the Founding Fathers that splintered parties and unrestrained factionalism may do significant damage to the fabric of government. The Federalist, No. 10 (Madison). In a somewhat similar vein, the Supreme Court upheld a Minnesota statute which prohibits, as do the laws of many other states, a candidate from appearing on the ballot as the candidate of more than one political party, often referred to as "fusion" candidacies. While the Court noted some potential burden on the First and Fourteenth Amendment rights of association and speech of a political party and its supporters in such anti-fusion laws, the Court found the burdens to be "not severe," as the laws "do not restrict the ability of the New Party and its members to endorse, support, or vote for anyone they like," nor do they "directly limit the party's access to the ballot." As such, the Court found that the state's interests "to reduce election- and campaign-related disorder," and the interests put forward by the state of "avoiding voter confusion, promoting candidate competition (by reserving limited ballot space for opposing candidates), preventing electoral distortions and ballot manipulations, and discouraging party splintering and 'unrestrained factionalism,'" were sufficient state interests promoted by this ban. Certain states have statutory provisions that have become known as "sore loser" laws. "Sore losers" have been described by one United States Court of Appeals as follows: "'Sore losers' are candidates who lose a major party primary but insist on running on a minor party ticket" or as an independent in the general election. The laws in several states now prohibit one who has run and lost in a primary, from obtaining a place on the ballot in the general election as an independent or as a minor party candidate. In early state litigation, in 1902, a Minnesota statutory scheme preventing an unsuccessful congressional candidate at a primary election from having his name printed on the general election ballot as an independent for the same congressional office was upheld against a challenge that it created an additional qualification to office, as long as the candidate could run in a write-in campaign. Similarly, in 1934 a Nebraska Supreme Court ruled that a candidate who was defeated in the primary election for the office of Governor could not by petition have his name printed on the general election ballot even for another office, that of United States Senator, since the statutory scheme preventing those defeated at the primary from being on the ballot in the general election did not create an additional qualification for congressional office. In the only case found voiding a "sore loser" law's application to a congressional candidate, the North Dakota Supreme Court in 1942 ruled that the state statute was inapplicable to congressional candidates on the basis that it impermissibly created an additional qualification for congressional office. The clear trend in litigation in federal courts has been favorable to state "sore loser" laws as a species of "ballot access" provisions that help states maintain the integrity of the nominating and election process by preventing "interparty raiding," carrying "intraparty feuds" into the general election, "unrestrained factionalism," ballot clutter, and voter confusion. In Williams v. Tucker , a three-judge federal district court upheld the provisions of the Pennsylvania election code which worked to require a candidate to choose between a primary nomination or an independent petition route to the general election, and which barred both state and federal candidates who lost in the primary election from running again in the general election as independent candidates. The court in Williams v. Tucker relied significantly on the Supreme Court decision and reasoning in Storer v. Brown , in justifying certain state regulations on the nomination, ballot, and general election procedures. The court there found that the laws in question, "which have the combined effect of preventing a candidate defeated in the primary from obtaining a position on the general election ballot as the candidate of a political body, do not for this reason violate the first amendment or the equal protection clause of the fourteenth amendment." As part of the administrative duties involving ballot access, preparation and printing of the ballots, a state must by necessity, because of the exigencies of time and duties, limit or establish a time-frame or deadline by which the ballot must be "set" or finalized, that is, a reasonable time before the general or primary election when no more candidates may be placed on the ballot or programmed into the voting machines. Courts have noted that states have a "compelling interest" in setting deadlines and in finalizing the ballot "so that general election ballots can be properly and timely prepared and distributed." One of the consequences of not having a "set" ballot at some reasonable point prior to an election (and of allowing last-minute changes in the candidates on the printed ballot and on voting machines), would be the disenfranchisement of military and other absentee voters, since such last-minute changes would not allow sufficient time before election day to prepare, print, mail out and then to receive back by mail new absentee ballots with such changes. As found by one federal court, with an election a "mere five weeks away" even if plaintiffs had prevailed on the merits of their arguments against their exclusion from the ballot, the court would have still refused to require the state to change its ballots by including petitioners' names, since the court recognized the overriding administrative necessities of deadlines to insure "time available for election officials to complete their election preparations" before the election. The court noted the "risk [of] substantial disruption of the electoral process" that could ensue by changing a ballot after the state-established administrative deadline for finalization of those ballots, and noted the "tight schedule" of election officials, and the myriad duties and responsibilities that are valid administrative reasons for reasonable deadlines for finalizing ballots: Last minute voter registration, processing of many absentee ballot requests, supervising the printing of voting machine ballots, sample ballots, tally sheets, and instruction sheets, instruction classes for election judges and clerks [ footnote : mailing of absentee ballots and classes for election judges and clerks have already begun], final preparation of voter lists and signature cards, and distribution of voting machines and supplies remain to be accomplished before [the] November [election]. Courts have thus been loathe to require or allow parties to force changes to ballots close to an election, that is, at the "eleventh hour," with an election "close at hand," or with "the imminence of election," because of "the potential for seriously disrupting the State's electoral process." With an election "less than three weeks away," a federal court refused to require the changing of a ballot to add petitioners' names, even on a strong First Amendment showing by petitioners, since "much of the ballot and voting machine preparation" had already taken place, and there needed to be a balancing and a proper weight given to the state's needs and interests in an "orderly" election, including the prevention of the "possible disenfranchisement of absentee and military voters caused by eleventh hour changes to the ballot." Justice Marshall, on circuit, turned down on October 1 a request to order names to be printed on a ballot for an upcoming November election citing, among other reasons, the state's concern for the potential "chaotic and disruptive effect upon the electoral process," since the "Presidential and overseas ballots have already been printed; some have been distributed. The general absentee ballots are currently being printed." The filing deadline and requirement for finalizing the ballots are among the reasons that a political party might not be allowed under state procedures to substitute a nominee on the ballot after a particular time prior to an election. This is often the reason that a candidate who died or withdrew shortly before an election would still have his or her name on the ballot and programmed into voting machines, at the time of the election. States interpreting their own statutes might show differing degrees of leniency as to such deadlines, particularly, as in the case of the United States Senate election in New Jersey in 2002, if election administrators attest that the change can be implemented in the time remaining before the election without significant disruption or disenfranchisement of absentee voters. Overly long filing deadlines for parties and candidates, particularly with respect to the deadlines established for the collection of signatures on petitions for new, minor party or independent candidates, might also be used, however, as a device or method to burden or to improperly keep those candidates off of the ballot. Recent cases have affirmed that some filing deadlines, particularly when combined with stringent signature requirements for petitions, may unfairly burden the First and Fourteenth Amendment rights of rights of voters and the parties and candidates that they support. In Ohio, all political parties are required by the Ohio Constitution to nominate their candidates by a primary election. Furthermore, all minor parties (parties which receive less than 5% of the vote) are required by statute to file a petition with the Secretary of State—containing signatures of 1% of the total votes cast in the previous election—120 days in advance of the required state primary. In presidential election years, with the presidential primary being moved from May to the first Tuesday in March, a minor party would have to garner signatures and submit a petition to participate in a primary for the November election almost one full year before that November general election. Under these circumstances, and considering the track record of the State of Ohio (which the court indicated had the fewest minor party candidates for President of any of the most populous states), the combination of such laws and requirements was found in a recent decision to have imposed a "severe" burden on the associational rights of the voters seeking to associate with this party, as well as a severe burden on the party seeking support and the placement of its candidates on the ballot, which was not justified by any countervailing, compelling state interest. The court there noted: "Deadlines early in the election cycle require minor political parties to recruit supporters at a time when the major party candidates are not known and when the populace is not politically energized." Among the requirements differing from major party candidates that a state may impose upon new, minor, and independent candidates as a condition to appearing on the ballot, is that the candidate show some "modicum of support" by the electorate, in the interest in weeding out frivolous candidates and cluttering the ballot with multiple candidates, leading to voter confusion. In Green Party of Arkansas v. Daniels , the United States District Court in Arkansas, in August of 2006, found that restrictive petition requirements for new parties to have their candidates appear on the ballot (signatures totaling 3% of the number of votes for Governor or presidential elector—which would be 24,171 signatures—as compared to only 10,000 for independent candidates) would burden the "rights of individuals to associate for the advancement of political beliefs, ... the right of qualified voters, regardless of political persuasion to cast their votes effectively" and the "right of citizens to create and develop new political parties." The court there determined that these burdens were not justified by a "narrowly drawn" recognition scheme that served "a compelling state interest." The court found from the history of ballot access by new party and independent candidates in Arkansas, that the 10,000 signature requirement would suffice to meet the state's asserted interests and needs: The 10,000 signature threshold is a sufficient modicum of support to serve the state's interest in avoiding cluttered ballots and the evidence shows quite clearly that the three percent requirement is much higher than necessary as it imposes a severe burden under the First and Fourteenth Amendments on the associational rights of the Green Party and the candidates who are plaintiffs in this case because they cannot get on the ballot otherwise. In New Mexico, a statutory scheme was upheld by the United States District Court of New Mexico in a decision released September 18, 2006. The New Mexico statutory scheme in question provided for a two-step petition requirement for new parties to have their candidates appear on the ballot. In the first step, a political party seeking recognition as a "minor political party" must file a petition containing signatures from at least one-half of one percent of the total votes cast for the office of Governor of New Mexico (or President of the United States) at the preceding election in New Mexico. After the party is certified, the party may then nominate candidates for public office as prescribed in the party's rules, and must then certify the names of candidates by the second Tuesday in July,—and with such certification provide another petition for each candidate with signatures of one percent of the total votes cast for the office of Governor of New Mexico (or President of the United States) at the preceding election. The Libertarian Party in New Mexico filed the original petition to be recognized as a "minor political party," but did not file the petitions required at the second step for its candidates to appear on the ballot, but rather filed a law suit claiming that the two-step petition process violated the First and Fourteenth Amendment rights of association and speech of its party, its members and candidates. The court there, focusing primarily (as did the complaint) on the second, 1% signature requirement, did not believe that the "character and magnitude" of the burdens imposed on new and minor parties, their candidates and supporters, were severe enough to overturn the requirements. The court noted that the Supreme Court in the past has allowed petition requirements of between 1% of the total vote cast for Governor in the preceding election (in Texas), and, in Georgia, up to 5% of the number of voters eligible to vote in the last election for the office in question. In this case the court found that the second petition requirement of a 1% showing of support legitimately supported the goals of the state "avoiding overloaded ballots and frivolous candidacies, which in turn diminish victory margins, contribute to the cost of conducting elections, confuse and frustrate voters, increase the need for burdensome runoffs, and may ultimately discourage voter participation and in the electoral process." As to the dual petition requirements taken together, the court conceded that "it is more burdensome for a political organization to obtain the necessary signatures" for becoming a minor party, and then shortly thereafter having to obtain signatures for its list of candidates. However, the court concluded that on the whole "the burdens are still substantially less than the burdens imposed by schemes previously upheld by the Supreme Court." The court concluded: The State has separate interests in ensuring support for a political party and ensuring a modicum of support for a particular candidate nominated by that party. The fact that these two petitions may, under certain circumstances, occur in the same election cycle does not create a sufficient burden to outweigh the important State interests served by the requirements. In some cases a court may look not only to the number of petition signatures required for a candidate to be placed on the ballot, or to the length of time before an election that a petition must be filed by new, minor, or independent candidates, but may also look to the totality of circumstances in finding unnecessary burdens on the First and Fourteenth Amendment rights of supporters, voters, parties, and candidates. In Lee v. Keith , decided on September 18, 2006, the United States Court of Appeals for the Seventh Circuit found the Illinois statutory scheme for independent candidates to be overly burdensome, and not a narrowly drawn provision which advances the state interests asserted. The statutory scheme for independents to be on the ballot for the State General Assembly required nominating petitions to be filed 92 days before the March primary for that office, or 323 days before the November general election, required the obtaining of signatures from voters equaling 10% of the vote in the last general election (raised in 1979 from 5%), and disqualified anyone who signs such a petition for an independent candidate from voting in the primary. As noted by the court, since one year from the institution of these requirements (1980), "not a single independent candidate for state legislative office has qualified for ballot access." The court concluded in that case: When measured by comparison to the ballot access requirements in the other 49 states or by the stifling effect they have had on independent legislative candidacies since their inception, the combined effect of Illinois' ballot access requirements for independent General Assembly candidates falls on the "severe" end of this sliding scale.... Because Illinois' ballot access requirements combine to severely burden the rights of candidates and voters to launch and support independent candidacies, they must by "narrowly drawn" to advance s "compelling" state interest.... We conclude that these ballot access requirements, in combination, severely burden First and Fourteenth Amendment rights and are not narrowly drawn to advance Illinois's interest in avoiding the political instability of party splintering and excessive factionalism and the ballot clutter of frivolous candidacies. We do not question that these are important state interests; they have long been recognized as such.... But the Supreme Court has also observed that the interest in political stability "does not permit a State to completely insulate the two-party system from minor parties' or independent candidates' competition and influence," ... and that is effectively what Illinois has done.
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In July of 2006 federal courts ruled that former Representative Tom DeLay, who had earlier won the Republican primary nomination for Congress from the 22nd District of Texas, could not have his name substituted on the general election ballot by the Republican party even if Mr. DeLay had changed his legal residence and voluntarily withdrew from the race. In Ohio, however, a different result ensued a month later when Representative Robert Ney, who had won the Republican party nomination in an earlier May primary, formally announced his withdrawal from the race on August 14, 2006, but was permitted to be replaced through a "special primary" to nominate another candidate. In Connecticut, the defeated candidate for the Democratic party nomination in the August 2006 primary, incumbent Senator Joseph Lieberman, appears to be able to be on the ballot either as an "independent" or nominee of a minor party in the general election in November, although a similar ballot position for the general election for one who had lost a party nominating primary would be barred in numerous states (including Ohio) because of the application of their so-called "sore loser" laws. Several years earlier, on September 30, 2002, former Senator Robert Torrecelli, the Democratic nominee for the United States Senate from New Jersey, voluntarily withdrew from the Senate race and, even at that late date, a new candidate was allowed to be chosen by the Democratic party in New Jersey and to have his name appear on the November ballot. Meanwhile in Missouri, the Democratic nominee for the United States Senate in the 2000 election, former Governor Mel Carnahan, died in a plane crash on October 16, 2000, three weeks before the general election, was not able to be replaced on the ballot, received the most votes in the ensuing election, and the "vacancy" created was filled by a temporary replacement named by the Governor. It is the constitutional authority of the states in the United States Constitution, at Article I, Section 4, clause 1, concerning the "times, places, and manner" of federal elections, which allows the states to promulgate their own laws, rules and regulations regarding the ballot, the structure of the ballot, and concerning so-called "ballot access" requirements for political party nominees, new party nominees, and independent candidates, that has led to the varying and different treatment and requirements for placement, removal and/or substitution of a candidate's name on the ballot, depending on the state in which the congressional election is to be held. This report discusses the extent of the states' authority over the procedures of federal elections, examines the limitations placed by the courts on the ability of the states to limit or regulate "ballot access," that is, the requirements of minor or new party candidates, or independent candidates, to have their names printed on the ballot and programmed into voting machines, and analyzes the new cases on ballot access that have been handed down by the Federal courts in recent months.
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Section 101 establishes the Public Company Accounting Oversight Board (Board), a new,independent regulatory body, to oversee the auditing of issuers (public companies which are subjectto the federal securities laws). The Board's oversight of auditors is for the purpose of protecting theinterests of investors. The Board shall not be an agency or establishment of the United States Government and shallbe a nonprofit corporation subject to the District of Columbia Nonprofit Corporation Act. Noemployee shall be deemed an officer, employee, or agent of the federal government. The Board is subject to the oversight of the Securities and Exchange Commission, andsubject to this oversight the Board shall register public accounting firms which prepare audit reportsfor issuers subject to SEC registration, establish standards concerning the preparation of auditreports, conduct inspections of registered public accounting firms, conduct investigations anddisciplinary proceedings where justified upon registered public accounting firms, perform otherduties as determined by the SEC, enforce compliance with the Act, and set the budget and managethe operations of the Board and its staff. The Board shall have five members, who shall be prominent individuals of integrity with ademonstrated commitment to the interests of investors and the public. They must understand thefinancial disclosures required of issuers under the securities laws and the obligations of accountantsconcerning the preparation and issuing of audit reports concerning these disclosures. Only two members of the Board shall be or have been certified public accountants. If oneof those persons is the chairperson, that person may not have been a practicing certified publicaccountant for at least five years before appointment to the Board. Each Board member must serveon a full-time basis and may not have other employment while serving on the Board. No Boardmember can share in the profits of or receive payments from a public accounting firm, except forfixed continuing payments under standard retirement arrangements, subject to conditions imposedby the SEC. Not later than ninety days after the Act's enactment, the SEC, after consulting with theChairman of the Board of Governors of the Federal Reserve System and the Secretary of theTreasury, shall appoint the chairperson of the Board and other initial members and shall designateeach person's term of service. The term of service of each Board member is five years, except that the terms of office of theinitial Board members shall expire in annual increments. Any Board member appointed to fill avacancy occurring before the expiration of the term of the predecessor shall be appointed only forthe remainder of that term. No person may be a member or chairperson of the Board for more than two terms, whetheror not consecutive. A member of the Board may be removed by the SEC for good cause. The Board may issue rules concerning its operation and administration and other matters,subject to the approval of the SEC. The Board must submit an annual report to the SEC; the SEC shall transmit a copy of thatreport to the Senate Committee on Banking, Housing, and Urban Affairs and the House Committeeon Financial Services. Section 102 requires that, beginning 180 days after the Commission determines that theBoard can fulfill its duties, it shall be unlawful for any person not a registered public accounting firmto prepare or issue or participate in the preparation or issuing of any audit report concerning anyissuer. Each accounting firm must submit as part of its application for registration the names of allissuers for which it prepared or issued audit reports during the preceding calendar year; the annualfees received from each issuer for audit services, other accounting services, and non-audit services;other current financial information as requested by the Board; a statement of the firm's qualitycontrol practices; a list of all accountants associated with the firm who help to prepare audit reports;information concerning civil, criminal, or administrative actions or disciplinary proceedings pendingagainst the firm or any person associated with the firm in connection with any audit report; copiesof any disclosures filed by an issuer with the Commission concerning accounting disagreements; andany other specified information. The Board shall approve a completed application for registration not later than 45 days afterthe date of receipt unless the Board issues a notice of disapproval or requests more information. Each registered public accounting firm shall submit an annual report to the Board and may berequired to update reports more frequently. Registration applications and annual reports shall bemade available for public inspection. The Board shall assess and collect a registration fee and an annual fee from each registeredpublic accounting firm to cover the costs of processing and reviewing. Section 103 requires the Board to establish by rule such quality control standards to be usedby registered public accounting firms in the preparation and issuing of audit reports, as required bythe Act or the rules of the Commission or as necessary or appropriate in the public interest or for theprotection of investors. The Board may consult with professional groups of accountants or advisorygroups. The Board's rules shall require that each registered public accounting firm must keep workpapers for at least seven years, provide a concurring or second partner review of the audit report, anddescribe in each audit report the internal control structure and procedures of the issuer. The Board shall cooperate with professional groups of accountants and advisory groups inthe examination of the need for changes in accounting standards. Section 104 requires the Board to conduct a continuing program of inspections to assess thedegree of compliance of each registered public accounting firm. Inspections shall be conductedannually for each registered public accounting firm providing audit reports for more than 100 issuersand at least once every three years for each firm providing audit reports for 100 or fewer issuers. Section 105 requires the Board to issue rules concerning fair procedures for the investigationand disciplining of registered public accounting firms and associated persons of the firms. TheBoard may conduct an investigation of any act or practice by a registered public accounting firmwhich may be a violation of the Act, the Board's rules, or the securities laws concerning preparationand issuing of audit reports and liabilities of accountants. If a registered public accounting firm or person associated with the firm refuses to cooperatewith the investigation, the Board may impose such sanctions as suspending or revoking theregistration of the public accounting firm. The Board may refer an investigation to the Commission, any other federal functionalregulator, the Attorney General of the United States, the attorney general of one or more states, andthe appropriate state regulatory authority. For the most part information received by the Board concerning an investigation shall beprivileged and confidential in any proceeding in federal court, state court, or administrative agencyuntil presented in connection with a public proceeding. If the Board finds that a registered public accounting firm has violated the Act, the rules ofthe Board, or the securities laws concerning audit reports and accountants, it may impose appropriatesanctions, including temporary suspension or permanent revocation of registration; a civil penaltyfor each violation in an amount not more than $100,000 for a natural person or $2,000,000 for anyother person; if in a case involving intentional or other knowing conduct, a fine not more than$750,000 for a natural person or $15,000,000 for any other person; censure; or any other appropriatesanction. Such sanctions as registration suspension and revocation and the larger monetary penaltiesshall apply only to intentional or knowing conduct, including reckless conduct, or in repeatedinstances of negligent conduct. Section 106 states that any foreign accounting firm which prepares or furnishes an auditreport concerning any issuer is subject to the Act and the rules of the Board and the SEC issuedunder the Act to the same extent as a United States public accounting firm. Audit workpapers of theforeign accounting firm shall be produced if a United States public accounting firm relies upon theopinion of a foreign accounting firm in auditing an issuer. The Commission and the Board may exempt any foreign public accounting firm from anyprovision of the Act or from rules of the Board or the Commission in the public interest or for theprotection of investors. Section 107 provides that the Commission shall have oversight and enforcement authorityover the Board. No rule of the Board shall become effective without prior approval by theCommission. The Board is to be treated as a registered securities association for purposes ofapproval of its rules by the Commission. The Commission may modify a sanction imposed by theBoard upon a registered public accounting firm if it finds that the sanction is not necessary orappropriate or is excessive, oppressive, or inadequate. Section 108 allows the Commission to recognize as "generally accepted" for purposes of thesecurities laws any accounting principles established by a standard setting body that is a privateentity, has a board of trustees the majority of whom are not and have not been for two yearsassociated with a registered public accounting firm, is funded as required, has adopted proceduresto ensure prompt changes to accounting principles necessary to reflect changing business practices,and considers the need to keep standards current. This standard setting body must have the capacityto assist the Commission. The standard setting body must submit an annual report to theCommission and the public. The SEC shall conduct a study on adoption by the United States financial reporting systemof a principles-based accounting system to replace the rules-based accounting system. Section 109 concerns funding of the Board and the standard setting body, known as theFinancial Accounting Standards Board. The Board and the standard setting body shall establish anannual budget, which is subject to approval by the SEC. The budget of the Board shall be payable from annual accounting support fees assessed uponpublicly traded companies. Section 201 prohibits a registered public accounting firm which performs an audit for anyissuer to provide to that issuer any non-audit service, such as bookkeeping, financial informationsystems design, actuarial services, management functions, investment banking service, and legalservices. Accounting firms may provide certain other non-audit services, including tax services, foran audit client if the activity is approved by the audit committee of the issuer. Section 202 requires that all auditing services and non-audit services provided to an issuerby the auditor of the issuer be preapproved by the audit committee of the issuer (or, if no suchcommittee exists, the entire board of directors of the issuer). Approval by an audit committee of anon-audit service to be approved by the auditor shall be disclosed to investors in periodic reports. Section 203 prohibits a registered public accounting firm from providing audit services toan issuer if the lead audit partner has performed audit services for the issuer in each of the fiveprevious fiscal years. Section 204 requires each registered public accounting firm performing an audit for an issuerto report to the audit committee all critical accounting policies and practices, all alternativetreatments of financial information, and other material written communications. Section 206 makes it unlawful for a registered public accounting firm to perform any auditservice if a chief executive officer, controller, chief financial officer, or chief accounting officer wasemployed by that independent registered public accounting firm and participated in any capacity inthe audit of that issuer during the one year period preceding the date of the initiation of the audit. Section 301 requires each member of the audit committee of the issuer to be a member of theboard of directors of the issuer and to be independent otherwise. In order to be consideredindependent, a member of an audit committee may not accept any consulting, advisory or othercompensatory fee from the issuer or be an affiliated person of the issuer or any subsidiary. Each audit committee must establish procedures for the treatment of complaints concerningaccounting or auditing matters and anonymous submissions by employees of the issuer concerningquestionable accounting or auditing matters. Section 302 directs the Commission to issue a rule requiring for each company filing periodicreports under the Securities Exchange Act of 1934 that the principal executive officer and theprincipal financial officer certify in each annual or quarterly report that the signing officer hasreviewed the report and that, based on the officer's knowledge, the report does not contain untruestatements and does not omit statements resulting in a misleading report and that the financialstatements fairly represent the financial condition of the company. The signing officers areresponsible for establishing and maintaining internal controls. The signing officers must discloseto the issuer's auditors and to the audit committee significant deficiencies in the internal controls andany fraud which involves management or employees who have a significant role in the issuer'sinternal controls. The requirements of this provision shall not be diminished if an issuer reincorporates ortransfers domicile or offices from inside the United States to a foreign country. Section 303 declares unlawful any officer's or director's taking any action fraudulently toinfluence, coerce, manipulate, or mislead any independent public or certified accountant engaged inauditing financial statements for the purpose of making those financial statements materiallymisleading. Section 304 provides that, if an issuer is required to prepare an accounting restatementbecause of material noncompliance of the issuer as a result of misconduct, the chief executive officerand the chief financial officer shall reimburse the issuer for any bonus received during the during theprevious twelve month period and any profits from the sale of securities of the issuer during thattwelve month period. Section 305 gives the SEC the authority to bar a person from serving as an officer or directorif that person committed a securities law violation and his conduct demonstrated unfitness to serveas an officer or director. The Commission may also seek in federal court any equitable relief appropriate or necessaryfor the benefit of investors. Section 306 prohibits directors or executive officers from engaging in transactions involvingany equity security of the issuer during any blackout period if the director or officer acquires theequity security in connection with service or employment as a director or officer. A "blackoutperiod" is defined as any period of more than three consecutive business days during which theability of not fewer than 50% of the participants or beneficiaries under all individual retirementaccount plans maintained by the issuer to purchase or sell any equity of the issuer held in anindividual account plan is temporarily suspended by the issuer or by a fiduciary of the plan. This section also requires that participants in retirement plans be provided with written noticeat least 30 days before a blackout period. There are two exceptions to the 30 day notice: 1. thedeferral of the blackout period would violate ERISA provisions requiring fiduciaries to actexclusively on behalf of participants and ERISA provisions requiring trustees to act prudently intheir decisions concerning plan assets could not be complied with or 2. the inability to provide noticeis because of unforeseeable events or circumstances beyond the reasonable control of the planadministrator. The Secretary of Labor may assess a civil penalty against a plan administrator of up to $100a day from the date of the plan administrator's failure or refusal to provide notice to participants andbeneficiaries. Section 307 requires the Commission to issue rules in the public interest and for theprotection of investors to set forth minimum standards of professional conduct for attorneys whopractice before the Commission in representing issuers. The rules must require an attorney to reportevidence of a material violation of securities law or breach of fiduciary duty by the company or itsagent to the chief legal counsel or to the chief executive officer of the company. If the counsel orofficer does not respond to the evidence, the attorney must report the evidence to the audit committeeor to the board of directors. Section 308 allows civil penalties levied by the Commission as a result of any judicial oradministrative action to be placed into a disgorgement fund for the benefit of harmed investors. TheSEC may also accept gifts and bequests for this fund. Section 401 requires each financial report filed as part of periodic disclosures by an issuerto reflect all material correcting adjustments identified by a registered public accounting firm. The Commission is required to issue rules providing that annual and quarterly financial reports filed with the Commission shall disclose all material off-balance sheet transactions that mayhave a material current or future effect on financial condition, changes in financial condition, orsignificant components of revenues or expenses. The Commission must also issue rules providing that pro forma financial informationincluded in any report filed with the SEC shall not contain an untrue statement of a material fact oromit to state a material fact necessary in order to make the pro forma financial information notmisleading. The SEC is required to conduct a thorough study of special purpose entities, including thepotential exposure faced by investors. Section 402 prohibits personal loans of any kind by an issuer to a director or executive officerof the issuer. Section 403 requires insiders, defined as officers, directors, and 10% shareholders, to filewith the SEC reports of their trades of the issuer's stock before the end of the second business dayon which the trade occurred or at such other time if the SEC determines that the two-day period isnot feasible. Beginning within one year after passage of this Act, the filing shall be doneelectronically and the information shall be provided on an Internet site within one day after filing. Section 404 requires the Commission to prescribe rules requiring each annual report tocontain an internal control report which shall state the responsibility of management for establishingand maintaining an adequate internal control structure and procedures for financial reporting and anassessment of the effectiveness of the internal control structure and procedures of the issuer forfinancial reporting. Section 405 exempts registered investment companies from certain disclosure requirements,such as filing a statement assessing the effectiveness of internal controls. Section 406 requires the SEC to issue rules to require each issuer to disclose whether or not,and, if not, the reason why, it has adopted a code of ethics for senior financial officers, such as theprincipal financial officer, comptroller, or principal accounting officer. Section 407 requires the Commission to issue rules to require each issuer to disclose whetheror not, and, if not, the reason why, the audit committee of that issuer has at least one member whois a financial expert. A "financial expert" is a person who: 1. has an understanding of generallyaccepted accounting principles and financial statements; 2. experience in the preparation or auditingof financial statements of generally comparable issuers; 3. experience in the application of theseprinciples in connection with the accounting for estimates, accruals, and reserves; 4. experience withinternal accounting controls; and 5. an understanding of audit committee functions. Section 408 requires the Commission to review disclosures by issuers at least once everythree years. Section 409 requires each issuer to disclose in plain English to the public on a rapid andcurrent basis additional information concerning material changes in the financial condition andoperations of the issuer. Section 501 requires the Commission or a registered securities association or nationalsecurities exchange within one year to adopt rules designed to address conflicts of interest facingsecurities analysts. These rules must restrict the pre-publication clearance of research orrecommendations by investment bankers not directly responsible for investment research, limit thesupervision and compensatory evaluation of research personnel to officials not engaged ininvestment activities, and protect securities analysts from retaliation or threats of retaliation byinvestment banking staff because of unfavorable research reports. The rules must also require a stock analyst to disclose the extent to which he owns stockbeing discussed, whether he or his employer has received any income from the company whose stockis being discussed, whether his employer has had any business dealings within the past year with thecompany, and whether the analyst's compensation was tied to investment banking revenue. Section 601 authorizes the appropriations of the SEC for fiscal year 2003. It shall receive$776,000,000, of which $102,700,000 shall be available to fund additional compensation, includingsalaries and benefits; $108,400,000 shall be available for information technology, securityenhancements, and recovery and mitigation activities in light of the attacks on September 11, 2001;and $98,000,000 shall be available to add at least 200 qualified professionals to provide enhancedoversight of auditors and audit services and support staff to strengthen full disclosure. Section 602 authorizes the Commission to censure any person or deny to any person theprivilege of appearing or practicing before the Commission if the Commission finds that person notto possess the qualifications to represent others, to be lacking in character or integrity or to haveengaged in unethical or improper professional conduct, or to have willfully violated or willfullyaided or abetted the violation of the securities laws or regulations. Section 603 allows a court to prohibit a person from participating in an offering of pennystock. Section 604 authorizes the SEC to bar from the securities industry persons who have beensuspended or barred by a state securities, banking, or insurance regulator because of fraudulent,manipulative, or deceptive conduct. This title requires that a number of studies and reports be conducted. For example, theComptroller General is required to conduct a study concerning factors leading to the consolidationof public accounting firms. The Commission is required to conduct a study concerning the role andfunction of credit rating agencies in the operation of the securities market. The Commission is alsorequired to conduct a study of securities professionals who have aided and abetted violations of thefederal securities laws. The Commission must review and analyze its enforcement actionsconcerning violations of securities law reporting requirements and restatements of financialstatements over the past five years. The General Accounting Office is required to conduct a studyon the role of investment banks and financial advisers in assisting public companies in manipulatingtheir earnings and obscuring their true financial condition. GAO is specifically directed to addressthe role of investment banks in the bankruptcy of Enron and the failure of Global Crossing. Section 801 indicates that Title VIII of the bill may be cited as the "Corporate and CriminalFraud Accountability Act of 2002." Section 802 creates two new federal crimes. 18 U.S.C. § 1519 imposes criminal sanctionsfor destruction, alteration, or falsification of records in federal investigations and bankruptcy. Underthis section, anyone who "knowingly alters, destroys, mutilates, conceals, covers up, falsifies, ormakes a false entry in any record, document, or tangible object with the intent to impede, obstruct,or influence the investigation or proper administration of any department or agency of the UnitedStates or any case filed under title 11 [of the United States Code, dealing with bankruptcy], or inrelation to or in contemplation of any such matter or case" would be subject, upon conviction, toimprisonment of up to 20 years, a fine under title 18 of the United States Code, or both. Under 18U.S.C. § 3571, individuals convicted of a felony may be fined the greater of either the amount setforth in the offense statute or an amount not more than $250,000, while the maximum fine for anorganization convicted of a felony would be the greater of the amount set forth in the offense statuteor an amount of not more than $500,000. This section also provides for an alternative fine based onpecuniary gain or loss. If anyone has derived pecuniary gain from the offense or if the offense resultsin pecuniary loss to any person, the defendant may be fined not more than the greater of twice thegross gain or twice the gross loss, unless the imposition of a fine under this subsection would undulycomplicate or prolong the sentencing process. New 18 U.S.C. § 1520, in part, provides criminal sanctions for destruction of corporate auditrecords. Under subsection 1520(a)(1), an accountant who conducts an audit of an issuer of securitiesto which 15 U.S.C. § 78j-1(a) applies is required to maintain all audit or review workpapers for 5years after the end of the fiscal period within which the audit or review was concluded. Subsection1520(a)(2) directs the SEC to promulgate rules and regulations within 180 days, after a notice andcomment period, regarding record retention relating to such an audit or review, and authorizes theSEC to amend or supplement them. Anyone who knowingly and willfully violates 18 U.S.C. §1520(a)(1) or any rules or regulations promulgated under 18 U.S.C. § 1520(b) is subject to a fineunder title 18 of the U.S. Code, (3) imprisonment of not more than 10 years, or both. (4) The provisions ofnew 18U.S.C. § 1520 do not alter any other obligations or duties imposed by federal or state laws orregulations regarding record retention. (5) Section 803 renders debts incurred in violation of securities fraud laws nondischargeable inbankruptcy proceedings. More specifically, it amends 11 U.S.C. § 523(a) by adding a newsubsection (19) providing that a discharge under 11 U.S.C. §§ 727, 1141, 1228(a), 1228(b), or1328(b) does not discharge an individual debtor from a debt that meets two criteria: (1) the debt isfor a violation of federal securities laws; state securities laws; regulations under federal or statesecurities laws; common law fraud, deceit or manipulation in connection with the purchase or saleof any security; and (2) the debt results from a judgment, order, consent order, or decree entered ina federal or state judicial or administrative proceeding; a settlement agreement entered into by thedebtor; or a court or administrative order for damages, fine, penalty, citation, restitution,disgorgement, attorney fee, cost, or other payment owed by the debtor. While creating no new private rights of action, section 804 modifies 28 U.S.C. § 1658 toestablish a statute of limitations for private rights of action involving a claim of fraud, deceit,manipulation, or contrivance in violation of a securities regulatory requirement committed on orafter the effective date of the Act. The new limitation period is the earlier of either 2 years afterdiscovery of the facts constituting the violation or 5 years after the commission of the violation. Section 805 directs the U.S. Sentencing Commission to review and amend the sentencingguidelines for obstruction of justice and violations of 18 U.S.C. §§ 1519 and 1520 to ensure that theyare sufficient to deter and punish such offenses. In addition, it directs the Commission to providea specific offense characteristic sentencing enhancement under Guideline 2B1.1 for a fraud offenseendangering the solvency or financial security of a substantial number of victims. Further, theCommission is directed to make certain that the organizational sentencing guidelines under Chapter8 of the U.S. Sentencing Guidelines are sufficient to deter and punish organizational criminalmisconduct. The Commission must promulgate these guidelines or amendments within 180 daysof enactment of the Act. Section 806 adds new 18 U.S.C. § 1514A, which creates a civil action to protect employeesof publicly traded companies against discrimination in the terms and conditions of employment inretaliation for whistleblowing in securities fraud cases. This section covers situations where suchemployees have engaged in any lawful act to provide information, to cause information to beprovided, or otherwise to assist any investigation by a federal regulatory or law enforcement agency,a Member of Congress or congressional committee, or a person having supervisory authority overthe employee or investigative authority for the employer, regarding any violation of 18 U.S.C. §§1341 (mail fraud), 1343 (wire fraud), 1344 ( bank fraud), 1348 (securities fraud againstshareholders), or any SEC rule or regulation; or of any federal law regarding fraud againstshareholders. In addition, 18 U.S.C. § 1514A authorizes an employee alleging such wrongfuldischarge or other discrimination to seek relief by filing a complaint with the Secretary of Labor,using procedures set forth in 49 U.S.C. § 42121(b)(1). In the absence of delay due to bad faith ofthe employee, if the Secretary of Labor does not issue a final decision within 180 days, the employeemay bring an action in the appropriate U.S. District Court, seeking de novo review. (6) The section requires that anaction brought pursuant to 18 U.S.C. § 1514A(b)(1) must be commenced within 90 days after thedate on which the violation occurs. (7) Remedies provided an employee prevailing in an action undersection 1514A(b)(1) includes all relief necessary to make him or her whole, including reinstatementwith pre-discrimination seniority status, back pay with interest, and compensation for any specialdamages incurred due to the discrimination, including litigation costs, expert witness fees, andreasonable attorneys fees. (8) Section 1514A(d) leaves the employee with all rights, privileges or remedies under federal or statelaw or any collective bargaining agreement. Section 807 creates a new securities fraud crime with penalties including a fine under Title18, U.S. Code. (9) Theoffense covers anyone who knowingly executes or attempts to execute a scheme or artifice to defraudany person in connection with a security of an issue with a class of securities registered under 15U.S.C. § 78l or required to file reports under 15 U.S.C. § 78o(d); or to obtain by false or fraudulentpretenses, representations or promises, any money or property in connection with purchase or saleof a class of securities registered under 15 U.S.C. § 78l or required to file reports under 15 U.S.C.§78o(d). Upon conviction an offender would face up to 25 years in prison, a fine under Title 18,U.S.C., or both. Section 901 designates this title of the Act as the "White-Collar Crime Penalty EnhancementAct of 2002." Section 902 adds a new 18 U.S.C. § 1349 to the U.S. Code, which indicates that any personwho attempts or conspires to commit an offense under 18 U.S.C. § 1341-1348 (dealing generallywith fraudulent acts of various types) shall face the same penalties as those provided for the offensethat was the object of the attempt or the conspiracy. Section 903 increases the potential maximum term of imprisonment available uponconviction for mail fraud (18 U.S.C. § 1341) or wire fraud (18 U.S.C. § 1343), other than mail fraudor wire fraud affecting a financial institution, from five years to twenty years. Section 904 raises the maximum criminal penalties available upon conviction of anyonewillfully violating Title I, subtitle B, part 1 of ERISA, or any regulation or order issued thereunder. Heretofore, 29 U.S.C. § 1131 provided that individual offenders faced a maximum fine of $5,000(unless a larger fine was imposed under 18 U.S.C. § 3571), (10) a maximum term ofimprisonment of 1 year, or both. Section 904 of the Act increases the maximum fine for anindividual defendant convicted under 29 U.S.C. § 1131 to $100,000, and the maximum term ofimprisonment to 10 years. Under the new language in this offense provision, organizationaldefendants will face an increased fine level, raised from $100,000 to $500,000. It is noteworthy thatthe increased maximum term of imprisonment changes this offense from a misdemeanor to afelony. (11) Section 905 directs the U.S. Sentencing Commission, within 180 days of the date ofenactment of the Act, to review, and, as appropriate, to amend the applicable sentencing guidelinesand related policy statements to implement the Act, thereby ensuring, among other things, that thepertinent guidelines and policy statements reflect the seriousness of the offenses, the growingincidence of such fraud offenses, and the need to modify these guidelines and policy statements todeter, prevent, and punish such offenses. Section 906 creates a new 18 U.S.C. § 1350, dealing with corporate responsibility forfinancial reports. Subsections 1350(a) and (b) require the chief executive officer and chief financialofficer (or their equivalent) of an issuer to certify the accuracy of periodic financial statements filedby the issuer with the SEC under 15 U.S.C. §§ 78m(a) or 78o(d) and the compliance of those reportswith statutory requirements in 18 U.S.C. § 1350. Anyone who makes such a certification knowingthat the report accompanying the certifying statement does not meet the statutory requirementswould, upon conviction, face up to $1 million in fine, up to 10 years in prison, or both. Anyonewillfully certifying compliance knowing that the periodic report accompanying the statement doesnot comport with the requirements of 18 U.S.C. § 1350 would face a fine of up to $5 million,imprisonment of not more than 20 years, or both. (12) Section 1001 states that it is the sense of the Senate that the federal income tax return of acorporation should be signed by the chief executive officer of the corporation. Section 1101 designates this title of the Act as the "Corporate Fraud Accountability Act of2002." Section 1102 amends 18 U.S.C. § 1512 to add a new subsection (c) which defines a newcrime. Under this new subsection, anyone who corruptly alters, destroys, mutilates, or conceals arecord, document, or other object with the intent to impair the object's integrity or availability for usein an official proceeding or who otherwise obstructs, influences, or impedes such a proceeding, orattempts to do any of these things, faces a maximum of 20 years in prison, a fine under Title 18, U.S.Code, (13) or both. Under Section 1103 , 15 U.S.C. § 78u-3 is amended to afford the SEC the right, during thecourse of a lawful investigation of possible securities law violations by an issuer of publicly tradedsecurities or its directors, officers, partners, controlling partners, agents, or employees, the power,under specified circumstances, to petition a U.S. district court for temporary freeze authority. Thismechanism would become available when the SEC deems it likely that the issuer will be makingextraordinary payments to any of those persons. In response to such a petition, the court may requirethe issuer to escrow those payments in an interest-bearing account for 45 days under courtsupervision. Unless impracticable or contrary to the public interest, the court will give those affectednotice and an opportunity to be heard. An order entered under this provision may be extended forup to 45 additional days upon good cause shown. If the issuer or any of those persons referenced ischarged with a securities law violation before the expiration of such an order, the order shallcontinue in effect, subject to court approval, until the conclusion of pertinent legal proceedings. Otherwise, the order will terminate and the payments will be returned to the affected recipients. Section 1104 directs the U.S. Sentencing Commission to review sentencing guidelinesapplicable to securities fraud, accounting fraud, and related offenses, to consider sentencingenhancements for officers or directors of publicly traded corporations who commit such offenses,and to report thereon to Congress. The section specifies considerations that should be taken intoaccount by the Commission in making its review. The U.S. Sentencing Commission is directed topromulgate resulting new guidelines or amendments to existing guidelines within 180 days of thedate of enactment of the Act. Section 1105 amends 15 U.S.C. § 78u-3 to provide the Commission authority, in anycease-and-desist proceeding under Section 78u-3(a), to issue an order prohibiting anyone who hasviolated Section 10(b) (15 U.S.C. § 78j(b)) or related rules or regulations from acting as an officeror director of any issuer of a class registered under Section 12 (15 U.S.C. § 78l) or required to filereports pursuant to section 15(d) (15 U.S.C. § 78o(d)), if the person's conduct demonstrates unfitnessto serve in such capacity. In addition, it amends 15 U.S.C. § 77h-1 to authorize the SEC, in such acease-and-desist proceeding, to issue an order prohibiting any person who has violated section17(a)(1) (15 U.S.C. § 78q(a)) or related rules or regulations from acting as an officer or director ofsuch an issuer if the person's conduct demonstrates unfitness to serve in such a capacity. In eitherof these types of orders prohibiting service as an officer or director of such an issuer, the prohibitionmay be conditional or unconditional and may be permanent or for such time as the SEC maydetermine. Under Section 1106 of the Act, the criminal penalties available under 15 U.S.C. § 78ff(a) forindividual defendants are increased from a maximum fine of $1 million to $5 million and amaximum term of imprisonment from 10 years to 20 years, or both, while the maximum fine fororganizational defendants is increased from $2.5 million to $25 million. (14) Finally, Section 1107 amends 18 U.S.C. § 1513 to add a new subsection which provides,upon conviction, for imposition of a sentence including a fine under Title 18, U.S. Code;imprisonment for up to 10 years; or both; upon anyone who knowingly takes harmful action,including interference with the lawful employment or livelihood of any person, with intent toretaliate for providing truthful information to a law enforcement officer regarding the commissionor possible commission of any federal offense.
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On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002, P.L.107-204 . This law has been described by some as the most important and far-reaching securitieslegislation since passage of the Securities Act of 1933, 15 U.S.C. §§ 77a et seq ., and the SecuritiesExchange Act of 1934, 15 U.S.C. §§ 78a et seq ., both of which were passed in the wake of the stockmarket crash of 1929. The Act establishes a new Public Company Accounting Oversight Board which is to besupervised by the Securities and Exchange Commission. The Act restricts accounting firms fromperforming a number of other services for the companies which they audit. The Act also requiresnew disclosures for public companies and the officers and directors of those companies. Among theother issues affected by the new legislation are securities fraud, criminal and civil penalties forviolating the securities laws and other laws, blackouts for insider trades of pension fund shares, andprotections for corporate whistleblowers. This report will not be updated.
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A "grand coalition" government of Germany's two largest parties, the Christian DemocraticUnion/Christian Socialist Union (1) (CDU/CSU) and the Social Democrats (SPD) led by CDUcandidate Angela Merkel took office on November 22, 2005, after the two parties worked out anagreement on a coalition governing program. The German federal election of September 18, 2005,had produced no clear winner or direction for the next government. Some see this government asshort-lived and unlikely to succeed, while others believe that only such a coalition has the combinedstrength to implement potentially painful but needed economic and social benefits reforms, assumingthat it can overcome partisan politics. Foreign policy is likely to play a secondary and lesscontentious role, given the press of domestic business and a general consensus on most internationalissues. The atmosphere of U.S.- German relations has already improved since the Merkelgovernment took office, as reflected by the successful first official visit of Chancellor Merkel toWashington on January 13, 2006. On May 22, 2005, German Chancellor Gerhard Schroeder surprised his country byannouncing that he would seek early federal elections in September 2005, a year ahead of schedule. His decision followed the resounding defeat suffered by his Social Democrats (SPD) in the stateelection in North Rhine-Westphalia, a traditional SPD stronghold. (2) This was the most recent ina string of state election losses that had given the Christian Democratic Union (CDU) oppositionfirm control of the German Bundesrat (upper house of parliament). The sluggish economy,persistently high unemployment, as well as concern about welfare and labor reforms, both enactedand planned, were widely seen as principal reasons for the SPD defeat. Early elections are rare in Germany because the German Basic Law (Constitution) makes itvery difficult for the Bundestag (lower house of parliament) to be dissolved. Only the President candissolve parliament and only after a vote of no confidence in the government. German PresidentHorst Kohler set new elections for September 18, 2005 after the Bundestag held a vote of noconfidence in the government which the Chancellor himself initiated on July 1, 2005. Before theelection was held, the decision was reviewed and approved by the German Constitutional Court. The election gave no party the necessary majority with its preferred coalition partner. Although the Christian Democratic Union/Christian Social Union (CDU/CSU) got the most votesby a slim margin, it had an unexpectedly weak showing compared to pre-election polls and in lightof the general disgruntlement with the previous government. Analysts attributed the weak showingto the fact that voters were deeply skeptical of whether a CDU/CSU government could accomplishmore than its predecessor and were also worried about some of the CDU reform ideas. Accordingto official results, the CDU/CSU received 35.2 percent of the vote, barely beating out the SocialDemocrats (SPD) with 34.3 percent of the vote. This left neither party in a position to form agovernment with just its most likely coalition partner. The Free Democratic Party (FDP) actuallydid better than expected with 9.8 percent of the vote and ahead of the Greens who received 8.1percent. The new Left Party, a union of east German former communists and a breakaway factionof the SPD, received 8.9 percent of the vote, enough to be seated as a faction in the Bundestag. Theformer communist party (PDS) did not achieve the 4 percent threshold to gain seats in theBundestag. Voter turnout was 77.7 percent, slightly less than in the 2002 election. (3) Table 1. Major Party vote percentages in the last three GermanFederal Elections
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A "grand coalition" government of Germany's two largest parties, the Christian DemocratUnion/Christian Socialist Union (CDU/CSU) and the Social Democratic Party (SPD) led by CDUcandidate Angela Merkel took office on November 22, 2005, after the German federal election ofSeptember 18, 2005, had produced no clear winner. Some experts believe that the coalition will befragile, short lived, and will accomplish little with each side trying to gain political advantage overthe other. Such negative expectations are not shared by other analysts who believe that only sucha large coalition can implement potentially painful but needed economic and social reforms,assuming that it can overcome partisan politics. The most difficult and crucial areas on which the coalition must cooperate if the governmentis to succeed involve social and economic policy. Government success will be important, not justfor Germany, but also for Europe and global economic health. Experts believe that Angela Merkel,as Chancellor, wants to speed domestic social and economic reforms. It is not clear whether she willhave broader domestic support to do so, especially among the SPD base. Many observers expect more continuity than change in German foreign policy under the"grand coalition" government. On most issues, the CDU/CSU and the SPD are not far apart.Germany is expected to continue to give priority to multilateral approaches to solving internationalproblems. Many expect Chancellor Merkel to balance traditional strong Franco-German cooperationwithin the EU with closer ties to the United Kingdom, and other countries such as Italy, Spain, andPoland. She is expected to pursue European integration as a corollary rather than in opposition to thetransatlantic partnership. U.S. officials and many experts hope for improvement in U.S.-German bilateral relationsunder the Merkel-led government. Merkel has given priority to reducing the strains in transatlanticrelations, as well as improving negative German public opinion regarding the United States. The newGerman government is unlikely to fundamentally change the German stand on Iraq, meaning thatit will provide some financial and training assistance outside Iraq, but no military personnel on theground. It is likely to continue to take a lead in efforts to stabilize Afghanistan. Chancellor Merkelis expected to continue Germany's domestic and international efforts to combat terrorism. TheUnited States, Germany, and the EU are working together to oppose Iran's development of nuclearweapons. Chancellor Merkel has indicated that she will not support a lifting of the EU armsembargo against China, which the United States also opposes. A number of differences are likelyto continue even under the Merkel government, such as on the treatment of terror suspect prisoners,extra-judicial "renditions," environmental policy, and the International Criminal Court. ChancellorMerkel's first official visit to Washington and her talks with President Bush on January 13, 2006,were designed to demonstrate that a new positive chapter had opened in bilateral relations, althoughdifferences were discussed candidly. The two leaders agreed on most points, including the urgencyof addressing Iran's nuclear ambitions. This report will be updated.
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The JTRS program originated in the mid-1990s and was intended to replace the 25 to 30families of radio systems used by the military -- many of which could not communicate with eachother -- with software-based radios that could operate across the entire radio frequencyspectrum. (1) JTRS isintended to permit the Services to operate together in a "seamless" manner via wireless voice, video,and data communications through all levels of command, including direct access to near real-timeinformation from airborne and battlefield sensors. (2) Described as a "software-defined radio" JTRS is envisioned tofunction more like a computer than a conventional radio and is to be upgraded and modified tooperate with other communications systems by the addition of software as opposed to redesigninghardware - a more costly and time-consuming process. DOD also asserts that in "many cases, asingle JTRS radio with multiple waveforms (3) can replace many separate radios, simplifying maintenance" andthat because JTRS is "software programmable, they will also provide a longer functional life" (4) with both features offeringpotential long-term cost savings. It is also planned that JTRS will be interoperable with currentDOD radio systems, the Pentagon's Global Information Grid, (5) and the communicationssystems of selected allied nations. (6) JTRS has been characterized by the Army as a key complementary enabler of the FCSnetwork that would enable FCS sensors and combat systems to acquire and engage targets at adistance as well as preventing them from being engaged by enemy systems. (7) To a significant extent, theArmy has linked progress in the development of a number FCS subsystems to progress in the JTRSprogram. The JTRS program was originally broken into five "clusters' with each cluster having aparticular Service "lead." Table 1. JTRS Clusters a. Form factor radios are essentially miniaturized radios that soldiers would carry, as well as radios for weight and power-constrained platforms -- such as FCS Unattended Ground Sensors andIntelligent Munitions. In early 2004, DOD merged Clusters Three and Four into a single program -- the Airborne,Maritime, and Fixed Station Program (AMF JTRS) -- jointly managed by the Navy and the Air Force-- because studies suggested that developing the clusters together would result in a more efficientprocurement process and a better overall product. (8) All JTRS Clusters are being developed concurrently and there isno requirement that one cluster is completed before another cluster can be developed. Because theFCS program is heavily dependent on Clusters One and Five, this report will address only issuesinvolving these two clusters being developed by the Army. (9) Developmental. JTRS has experienced a numberof developmental difficulties to date. Some of the more notable difficulties are discussed in thefollowing sections. Size and Weight Constraints and Limited Range. According to a Government Accountability Office (GAO) report: To realize the full capabilities of the WidebandNetworking Waveform, (10) including transmission range, the Cluster One radio requiressignificant amounts of memory and processing power, which add to the size, weight, and powerconsumption of the radio. The added size and weight are the results of efforts to ensure the electronicparts in the radio are not overheated by the electricity needed to power the additional memory andprocessing. Thus far, the program has not been able to develop radios that meet size, weight, andpower requirements, and the current projected transmission range is only three kilometers -- wellshort of the 10-kilometer range required for the Wideband Networking Waveform ... The ClusterOne radio's size, weight, and peak power consumption exceeds helicopter platform requirements byas much as 80 percent. (11) The inability to meet these fundamental design and performance standards has raisedconcerns that Cluster One may not be able to accommodate additional waveforms (current plan isfor Cluster One to have four to eight stored waveforms) as intended and that it may be too bulky orheavy to fit into the stringently weight and size-constrained FCS Manned Ground Vehicles(MGVs) (12) as well asthe Army's helicopter fleet. Some are concerned that to meet these physical requirements, the Armymay significantly "dumb down" Cluster One performance specifications. (13) According to the Army,however, it continues to make progress in terms of reducing Cluster One's weight and size and inincreasing its transmission range, however incorporating all of the desired waveforms into ClusterOne is proving to be difficult. (14) Cluster Five radios were also reportedly experiencing similarsize, weight, and power difficulties - difficulties more pronounced as some Cluster Five versions aresupposed to weigh no more than one pound. (15) Current reports on Cluster Five progress appear to be moreoptimistic than Cluster One. General Dynamics reports that they have been able to achieve systemscompatibility between Cluster Five units and three other key FCS components, the Non-Line of SightLaunch System, the Unattended Ground Sensor, and the Intelligent Munitions System. (16) DOD convened a mini-Defense Acquisition Board (17) (DAB) for the Cluster Oneprogram on October 11, 2005 and, according to one report, plans to hold another review onNovember 21, 2005. (18) Information concerning the October 11 review was not publically released and there is some renewedconcern that the Cluster One program is in trouble. Another report suggests that the airborne versionof Cluster One, despite significant re-engineering, still exceeds weight limitations. (19) The issue appears to bethat Boeing has had difficulty reducing the radio's weight below 66 kilograms - with 52 kilogramsbeing the maximum allowable weight for the airborne version of Cluster One. (20) According to Boeingofficials, it would be possible to achieve the 52 kilogram weight limit but it would require significantdesign changes to a design that is already well established and not easily changed. (21) Despite this difficulty,certain aspects of the Cluster One program have shown improvement - according to Boeing officials- with the first version of the Wideband Networking Waveform apparently operational on someversions of Cluster One. (22) Security. Security for JTRS has emerged as asignificant developmental difficulty. According to one expert, one of the program's biggest problemsis security, "namely encryption, as JTRS encryption is software-based and is, therefore, vulnerableto hacking." (23) Computer security experts generally agree that software used for any purpose is vulnerable, as nocurrent form of computer security offers absolute security or information assurance. According toGAO, JTRS will be required to operate applications at multiple levels of security and in order tomeet this requirement, developers will have to not only account for traditional radio securitymeasures but also computer and network security measures. (24) In addition, NationalSecurity Agency (NSA) (25) security concerns about JTRS interface with radio systems ofU.S. allies, and the requirement for JTRS to be interoperable with DOD's Global Information Grid(GIG), are also expected to pose developmental challenges. (26) One such security-relatedchallenge is that DOD's Global Information Grid will also interface with the Internet, which bringswith it a whole additional set of security concerns for JTRS. (27) Interoperability with Legacy Radio Systems. Somehave expressed concerns that the goal of making JTRS "backward compatible" with legacy radiosmay be technologically infeasible. (28) Reportedly, early program attempts at cross-banding (29) to synchronize incompatible legacy radio signals proved to be too complex and current Army efforts are focusingon using the Wideband Networking Waveform to link with legacy radio frequencies. (30) One report suggests thatwhile the Wideband Networking Waveform can receive signals from legacy radios, legacy radioscannot receive signals from JTRS and to rectify this situation, the Army is looking at using 19different waveforms to facilitate JTRS transmissions to legacy systems. (31) Incorporating up to 19different waveforms into a JTRS radio has the potential to significantly increase memory andprocessing power requirements which, in turn, could drive up JTRS size, weight, and powerrequirements. Recently, the Joint Staff asked the Services to prioritize JTRS waveforms and theArmy reportedly identified four waveforms as initial priorities for FCS and other complementaryprograms. (32) Cluster One Stop Work Order. On April 25, 2005,DOD issued a "Show Cause" letter to Boeing- the lead contractor for JTRS Cluster One - stating thatit was considering cancelling the contract for the first phase of Cluster One due to Boeing's "anticipated failure to meet cost, schedule, and performance requirements." Shortly after thisdecision, work on Cluster Five was also partially suspended, due in part to developmental problems,changing technical requirements, and a contract award protest, and also because progress in ClusterFive was heavily leveraged against progress on Cluster One. (33) As a result of the workstoppage, DOD lifted its requirement for Services to obtain a DOD waiver before purchasingnon-JTRS radios and the Services were authorized to purchase legacy radios, such as the SingleChannel Ground and Airborne Radio System (SINCGARS), which has been in service since the1980s. (34) JTRS Alternatives. Some analysts suggest that thereare alternatives to JTRS that are already commercially available. Companies such as HarrisCorporation -- a Cluster One team member - produces a software-defined radio (Falcon IIAN/PRC-117F(C)) and Thales -- a Cluster Five team member and the lead contractor for SOCOM'sCluster Two radio -- both produce software-defined radios that are already in use in the field. (35) It should be noted,however, that these software-defined radios currently in use only run a subset of the current forcewaveforms, and the Wideband Networking Waveform and Soldier Radio Waveform -- both FCSprogram requirements -- would not be available on these radios. (36) Another possible solutioncould be to use existing software-defined radios and to acquire a commercial wideband system suchas WiMax (37) -- anon-line-of-sight commercial broadband networking technology that could be modified for militaryuse. (38) Experts suggestthat a system such as WiMax could provide the military with more bandwidth and enhancedover-the-horizon mobile communications. (39) The Army asserts, however, that if a system such as WiMax wasadopted for use, that it would require NSA certification not unlike current certification efforts forJTRS. (40) The greaterbandwidth and over-the-horizon mobile features of WiMax could address concerns that FCS mightnot have sufficient bandwidth and the perceived over-reliance on unmanned aerial vehicles (UAVs)and other airborne platforms - which are subject to hostile fire and weather constraints - to retransmitJTRS signals over extended distances. Boeing Retains Cluster One Contract. On July 19,2005, the Army reportedly decided to keep Boeing as the Cluster One lead contractor but wouldcontinue to assess the program's progress. (41) No details were publically released as to why the Army decidedto keep Boeing as the lead contractor but some suggest that it was not because Boeing demonstratedprogress in correcting noted design deficiencies, but instead because Boeing had a strong legal caseagainst the Army if the Army had decided to terminate its contract with Boeing. Work on ClusterFive radios - which, unlike Boeing, was never formally suspended by DOD - has continued in areasthat were not dependent on Cluster One technologies and General Dynamics has reportedly madeprogress in addressing size and power concerns raised by GAO in their report. (42) Experimentation. In October 2005, the Armyinitiated what it calls "Experiment 1.1" to test elements of the FCS network - including JTRS. (43) The experiment, slatedto run through early 2006, is to test other network components including the System of SystemsCommon Operating Environment (SOSCE) (44) and Networked Battle Command Systems. (45) The intent is to test thenetwork inside of formations and down to the soldier level and also to link sensors to soldiers andvarious FCS items in preliminary stages of development such as unmanned aerial vehicles (UAVs),unmanned ground vehicles (UGVs) and unattended munitions systems. Because manned groundvehicles are not yet developed, network items - including JTRS- are to be placed in surrogatevehicles (modified High Mobility Multi-Wheeled Vehicles -- HMMWVs). These vehicles are to use early developmental models of the Cluster One radio. The programmanager for FCS, Brigadier General Charles Cartwright, expects to receive 42 "pre-engineering"development models of Cluster One in December 2005 and also plans on using Cluster Five unitsin Experiment 1.1 -- and, possibly, a second "Experiment" -- in 2006. (46) The Army has a number of specific objectives for Experiment 1.1 including: FCS risk mitigation; Support the development of the Army's modular force Brigade Combat Teams(BCTs); (47) Gain knowledge to support further development of FCScapabilities; Provide information that could lead to program improvements and perhapsmore rapid development, and To show the progress and maturity of the FCS program and the FCS networkin an operational environment. (48) Given these objectives, it is not unreasonable to assume that the early development models of JTRSCluster one will undergo considerable experimentation and testing. If this is the case, theexperiment's results could potentially have significant ramifications for the future of the Cluster Oneprogram, particularly if Cluster One's performance fails to meet the Army's expectations. Spin Out One. The Army's FCS program consistsof four "spin outs" -- formerly known as spirals -- that will introduce FCS technologies and systemsto the current force. These fielding spin outs are slated to occur in 2008, 2010, 2012, and 2014 toan experimental brigade and then two years later to the rest of the Army. The first spin out of FCStechnology in 2008 is to emphasize improved munitions and sensors connected in an initial versionof network capabilities. (49) These network capabilities are thought to include Clusters Oneand Five, Wideband Networking Waveform, Warfighters Information Network-Tactical(WIN-T), (50) and theSystem of Systems Common Operating Environment (SOSCOE). In Spin Out One, Clusters One andFive are planned to be used in conjunction with other FCS systems such as Unattended GroundSensors (UGS), the Intelligent Munitions System (IMS), and the pre-production model of theNon-Line of Sight Cannon (NLOS-C). GAO asserts that "it is unlikely that Cluster One radios will be available for the first spiral[now referred to as spin out] of the FCS network, slated for FY2008 and that Cluster Five radiosmight not be available for the first spiral." (51) Some reports suggest that JTRS program progress is being made,particularly in the Cluster Five program where technology workarounds necessitated by the ClusterOne stop work order, have helped Cluster Five to "achieve a degree of compatibility" with other FCScomponents due to be tested in Spin Out One. (52) If, however, Cluster One and Five are not available by 2008,reports suggest that the Army is planning to use pre-production models and/or surrogate softwaredefined radios of lesser capabilities in their place. (53) On July 28, 2005 the JTRS program underwent a Defense Acquisition Board (DAB) reviewand although results have not been publically disclosed, the Secretary of the Army, Francis Harvey,reportedly acknowledged that DOD would restructure the entire JTRS program. (54) In August, the JTRS JointProgram Executive Office (JPEO) submitted a proposal to DOD which details how it would manageall JTRS Cluster efforts (as opposed to the management structure depicted in Table 1) with the intentof achieving near-term success by delivering usable capabilities to the field now, while pursuing thelong term goal of fielding a complete interoperable software defined radio over time. (55) Preceding the JTRSprogram restructuring, Boeing and Science Applications International Corporation (SAIC) -- whoserve as lead systems integrators for the entire 18 system FCS program -- announced in June 2004that Cluster One and Five programs would be restructured to better meet the needs of the FCSprogram. (56) Whilesupporters suggest that this restructuring might help to focus JTRS development efforts and providedefinitive design guidance to JTRS developers, critics say that this is just another in a series ofprogram "restructurings" -- the Army added two years of additional effort and $458 million toCluster One in December 2004 to address developmental problems (57) -- for a program that startedin 1999 and "has a long ways to go before it can be used in military operations." (58) According to GAO, (59) the Cluster One program is expected to cost $15.6 billion todevelop and acquire over 100,000 Cluster One radios and $8.5 billion to develop and acquire over300,000 Cluster Five radios, and the Army has reportedly requested $156.7 million in FY2006 forJTRS. (60) Cost growthfor Cluster One has been of significant concern as noted by GAO: Since the program entered systems development in2002, the contractor has overrun cost estimates by $93 million - nearly 28 percent above what wasplanned. Although the program attempted to stabilize costs by adding approximately $200 millionto the contract in January 2004, costs continued to grow steadily thereafter. In addition, thecontractor has increasingly fallen behind schedule and has had to devote more resources thanoriginally planned. In January 2005, the prime contractor estimated that the total costs for the ClusterOne radio and waveform development would be $531 million more than what was originallybudgeted, reaching $898 million at completion. However, according to program officials, sincecontract award, the prime contractor has not demonstrated strong cost estimating and costmanagement techniques, and it is difficult to estimate with any confidence what the overall programis likely to cost. (61) Given this history of cost overruns and the inability to forecast and manage program costs,some say a strong case could be made to permanently stop work on Cluster One while still in theProduct Development and Demonstration Phase of development, and transfer program elements thatshow promise to another developer already in the JTRS program or a developer not in the programbut with demonstrated communications systems proficiency. The Senate passed its version of the FY2006 Defense Authorization Bill ( S. 1042 ) on November 15. A conference agreement on the Defense Appropriations Bill( H.R. 2863 ) has been delayed in part because the House has not formally appointedconferees. Both the Senate and House Reports recommend cuts for the entire JTRS program and theArmy's JTRS programs are addressed in the following sections: Senate - In its report on the FY2006 Defense Authorization Bill (62) the Senate AppropriationsCommittee voiced its support for JTRS and the ongoing JTRS review by DOD's Program ExecutiveOffice (PEO) but noted "the Army's Cluster 1 program faces significant technical challenges" furthernoting that "these challenges could impact the program efforts in the Navy and Air Force." TheAppropriations Committee also called for a DOD assessment and a revised JTRS program plan tobe provided to the defense committees. Committee recommended adjustments for the Army'sprograms are in Table 2 . Table 2. Army JTRS Senate-Recommended Adjustments --FY2006 Defense Appropriations ($ thousands) House -- The House Appropriations Committee Report on the FY2006 DefenseAppropriations bill (64) while critical of the Army's Cluster One and Five programs recommended fully funding waveformdevelopment and funding to continue hardware development. The House also calls for a detailedDOD report on JTRS to the House Armed Service Committee. Appropriations Committeerecommended adjustments for the Army's programs are in Table 3 . Table 3. Army JTRS House-Recommended Adjustments --FY2006 Defense Appropriations ($ thousands) a. Includes requested amounts for JTRS waveform development and Program Management Office activities and Cluster One and Five hardware development. JTRS aviation development andintegration amounts are not included in JTRS program total. b. This reduction is for the integration of aircraft (helicopter) versions of JTRS Cluster One units. With these House and Senate figures, it is unlikely that a conference committee would fullyfund the JTRS program; actual recommended program cuts for the FY2006 Defense Appropriationsbill are pending the outcome of a conference. It is unclear how these yet-to-be-determined programcuts would impact not only the Cluster One and Five programs, but also how they would impact theoverall FCS program. Following a House-Senate conference report, the Army would likely issuean assessment on how the cuts impact both the JTRS and FCS programs. The Viability of the Cluster One Program. Whileboth Clusters One and Five have experienced a number of developmental difficulties, it appears thatthe Cluster Five program has "divorced" itself from Cluster One through technological workaroundsand has achieved a degree of program success reportedly having achieved compatibility with anumber of FCS systems. Cluster One, however, seems to be progressing to a lesser extent with itsfirst "test" likely to be in Experiment 1.1 later on in 2005. The performance of Cluster One in thisexperiment might prove to be a useful metric to help decision- makers determine if the Cluster Oneprogram is a viable one or if another course of action should be pursued. Although not believed tobe included in Experiment 1.1, the airborne version of Cluster One might warrant furtherexamination. It appears that in order for the airborne version to meet the weight limit of 52 kilogramsthat significant capability trade offs may be required to this system that is already in the advancedphases of development - likely resulting in additional delays and significantly increased costs. Given this situation, Congress might review the Army's performance expectations for ClusterOne during Experiment 1.1 testing. Will Cluster One's performance impact on the Army's decisionto continue with what some call a "troubled program" or will the Army opt to stick with ClusterOne's developers no matter what the outcome, and attempt to rectify identified deficiencies throughadditional funds and further program delays? Another issue that might be considered forcongressional review is the state of the airborne version of Cluster One. Some suggest that theprogram has reached an impasse due to aircraft weight and size constraints, and that the only wayto meet these requirements is to redesign the system into a significantly less-capable version -- acourse of action that could further delay the program and carry with it significant cost implications. Security. Congress may decide to examine theissue of security in greater detail. According to GAO, in addition to a requirement to change JTRShardware to accommodate processing and memory capacity upgrades for enhanced security, thecurrent design of JTRS has been judged by the National Security Agency as: Not sufficient to meet security requirements to operatein an open networked environment. Specifically, particular versions of JTRS radios will be used byallied and coalition forces, requiring the Army to release specific source code of the softwarearchitecture to these forces. To address the release, the National Security Agency has requiredchanges to the security architecture. (65) Although GAO expresses security concerns about JTRS use by allied and coalition forces,it is not readily apparent how pervasive a problem security is for JTRS and other components of theFCS network. Given the stated security challenges of software-defined radios, it is conceivable thateven if Cluster One and Five can meet the Army's communications and data transmissionrequirements, that security deficiencies might preclude the operational employment of Clusters Oneand Five. It can be argued that network security would take on an even a more significant role in FCSthan compared to the Army's current force. FCS Manned Ground Vehicles -- lighter and less heavilyarmored than the M-1 Abrams and M-2 Bradleys that they are intended to replace -- would relyextensively on situational awareness provided through the FCS Network for their survivability.Furthermore, this network-provided situational awareness would have a significant impact on FCS'sability to engage enemy forces beyond line-of-sight. Given this significant reliance on the FCSNetwork for survivability and for target acquisition and engagement, potential adversaries might seekto identify and exploit security weaknesses in the FCS network -- including JTRS -- as a means toattack FCS units. One potential adversary -- China -- has "likely established information warfareunits to deploy viruses to attack enemy computer systems and networks" and China's "recentexercises have incorporated offensive [computer] operations, primarily as first strike against enemynetworks." (66) Apotential scenario for consideration is that if an adversary obtained FCS-related source code, theycould engineer a virus that could be introduced into the FCS network and computers. While somemay consider this an improbable scenario, the reported recent discovery by Russian security expertsof the first known computer virus spread by cell phone networks suggests otherwise. (67) The Army is not unaware of these security challenges and notes that network security andinformation assurance are an "ever growing priority, regardless of FCS development." (68) As part of this recognition,the Army FCS program conducts bi-monthly information assurance architecture developmentreviews with the Army staff sections responsible for Intelligence (G-2) and Information andCommunications (G-6) and the National Security Agency and Office of the Secretary ofDefense. (69) JTRS Alternatives. With its history ofdevelopmental difficulties, program delays, and additional costs, some suggest that the JTRS ClusterOne program might be a candidate for cancellation. In this view, Congress might opt to explorealternatives to Cluster One with the Army and DOD. A possible starting point for such a reviewmight be an examination of software-defined radios already in service within the U.S. military orcommercially available through other manufacturers. Some critics argue that the military shouldadopt commercially available and emerging telecommunications technology. One example of sucha technology is third- generation cellular technologies that encompass streaming video, nettedcommunications, and data and voice communications over Internet provider networks. (70) While proponentsmaintain that third-generation cellular could exceed JTRS performance capabilities, critics of thecommercial approach note that these technologies need to be ruggedized, customized to fit onspecific vehicles and systems, and require specialized encryption, and therefore the "off the shelfapproach" might be equally as expensive as developing JTRS. After a thorough technical andcost-based evaluation of these and other JTRS alternatives, some project the best course of actionmay be to continue Cluster One development as currently planned.
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The Joint Tactical Radio System (JTRS) is a Department of Defense (DOD) program thatwould play a significant role in the U.S Army's proposed Future Combat System (FCS) program. (For a more detailed description of the FCS program see CRS Report RL32888 , The Army's FutureCombat System(FCS): Background and Issues for Congress , by [author name scrubbed].) JTRS,envisioned as a family of software programmable radios, has been described as the "backbone" ofthe FCS and is intended to link the 18 manned and unmanned systems that would constitute FCS.Two JTRS sub-programs managed by the Army -- Cluster One and Cluster Five -- have experienceddevelopmental difficulties, delays, and cost overruns which calls into question their viability. Thisreport will be updated on a periodic basis.
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The National Security Agency (NSA), one of the largest components of the U.S. Intelligence Community, hasreached a major watershed in its history. Responsible for obtaining intelligence from international communications, (1) NSA's efforts are being challenged by the multiplicity of new types of communications links, bythe widespread availability of low-cost encryption systems, and by changes in the international environment inwhich dangerous security threats can come fromsmall, but well organized, terrorist groups as well as hostile nation states. NSA was established in 1952 as a highly compartmented secret codebreaking effort undertaken by a handful of military officers and civilians, but the Agency hasgradually become an acknowledged government agency responsible for signals intelligence (sigint). This evolutionhas been in significant measure a result ofcongressional initiatives. Congress provided the statutory framework for NSA and its activities. Laws have beenenacted that carefully prescribe the limits ofNSA's electronic surveillance of U.S. persons. Congress has been increasingly inclined to take public notice ofproblems at NSA and is supporting reforms thatare designed to make NSA more effective in current technological and geopolitical environments. The challenges facing NSA are formidable; a difficult operational environment as well as limitations on spending levels for intelligence call into question thefuture capabilities of NSA. Public interest in NSA has been heightened in recent months by some members of theEuropean Parliament who allege that the UnitedStates and a few other countries are cooperatively engaged in systematic electronic eavesdropping in order topromote the commercial interests of U.S.corporations. This Report will attempt to provide an unclassified description of NSA's evolution, the technical andoperational environment that now exists, andindicate some issues that the executive branch and Congress will be facing in coming years. An unmistakable change affecting NSA has been the openness with which its policies and problems are now discussed both by the Agency's leadership and bycongressional oversight committees. Until very recently NSA was the most secretive intelligence agency, moreshielded from public scrutiny than the CentralIntelligence Agency (CIA). Only the most elliptical references were made in public to the sigint mission, and atone time, NSA employees identified themselvesonly as working for the Defense Department. In the past few years, however, senior intelligence officials frequentlydescribe NSA's problems and reportsaccompanying intelligence legislation include extensive commentary on the challenges facing NSA and theapproaches encouraged by Congress. These changeswere made possible by the absence of a superpower competitor capable of exploiting any inadvertent security slipand by the need to justify intelligence spendingat a time when international climate is apparently more benign. These factors removed inhibitions against NSA"going public" and, at the same time, created apolitical environment that would require public understanding of NSA's mission if the Agency could continue toobtain the funding necessary to update itsoperations. For decades Congress was content to consider the signals intelligence effort and the organization of NSAprimarily as the responsibility of the executive branch.For a quarter century after the end of the Second World War, NSA and the nation's other intelligence agenciesundertook their activities with little publicity andwith congressional interest limited to a handful of members of armed services and appropriations committees. Theintelligence investigations of the 1970s,however, led to well-publicized hearings that placed many secrets, including those of NSA, on the public record. Of greater enduring significance was theestablishment of select intelligence committees in both the House of Representatives and the Senate. Thesecommittees were granted the authority to conductoversight over the intelligence activities of the Federal Government, including NSA. They became, along with theappropriations committees, the points ofcontact between the intelligence agencies and Congress. As a result of the extreme sensitivity of much intelligenceinformation, the two intelligence committeescame to act essentially as surrogates for the Congress and the public in regard to intelligence agencies. Until themid-1990s much of interest of the committees, asreflected in report language and public hearings, centered on the CIA and especially its operations directorate. Sigintactivities were undoubtedly matters ofcongressional concern, but they were very rarely the focus of public attention. (2) In recent years, with the end of the Cold War the two intelligence committees have had much more intensive concern with NSA as reflected in more detailedreport language on NSA's activities. The extent of oversight is reflected by comments in the report on the FY2000Intelligence Authorization bill( H.R. 1555 ) by the House intelligence committee: In the last two Congresses, the committee has been direct in its identification of process and management problemsthat require attention. The committee believes that NSA management has not yet stepped up to the line. There havebeen some efforts at reform, but there are stillseveral areas where change is not only needed but is critical for NSA's future. (3) Congress has taken a more open interest in NSA at a time when the Agency's roles and missions are facing significant reformulation. Congress has providedguidance for NSA's future direction and has made budgetary allocations based on its sense of appropriate goals,personnel policies, and organizational structure. Most observers believe, moreover, that, given the fluid state of international affairs and information technologies,that further congressional attention is likely asNSA changes to adapt to its new environment. The primary targets of electronic surveillance during the Cold War were the communications of hostile militaryorganizations and governments. Most of suchcommunications were encrypted; in many cases this message traffic could be read only sporadically, if at all(although useful information can often be obtainedwithout actually reading the actual messages). Some communications were carried on land lines that could beintercepted only if they could be physically tapped,inevitably a difficult undertaking. It was, nonetheless, the government and military circuits that provided the mostimportant intelligence of military capabilities,hostile intentions, and diplomatic maneuvers that could place this nation's security at risk. Civiliancommunications-telegraphs, telephones, facsimile devices,etc.-were usually unencrypted and often sources of valuable information, albeit of secondary priority. In the past decade, two important trends have combined to change the nature of electronic surveillance efforts. The end of the Cold War meant policymakers andmilitary officials had a wider range of countries that they were concerned with and placed much greater emphasison "non-state actors"-terrorist groups andnarcotics smuggling organizations that have come to be seen as genuine national security threats. These links arenot necessarily easy targets given the greatexpansion in international telephone service that has grown by approximately 18% annually since 1992. Intelligenceagencies are faced with profound "needle-in-a-haystack" challenges; it being estimated that in 1997 there were some 82 billion minutes of telephone serviceworldwide. (4) The technologies used in civilian communications circuits have also changed; in the past decade reliance on microwave transmissions (which can be interceptedwith relative efficiency) has been increasingly displaced by fiber optic cables. (5) Fiber optics can carry far more circuits with greater clarity and through longerdistances and provides the greater bandwidth necessary for transmitting the enormous quantities of datacommonplace in the Internet age. Inevitably, fiber optictransmission present major challenges to electronic surveillance efforts as their contents cannot be readilyintercepted, at least without direct access to the cablesthemselves. The widespread use of fiber optics may also affect requirements for expensive sigint satellites sincetransmissions over fiber optic cables cannot beintercepted from space-based platforms. (6) In addition to the widespread use of fiber optic cable, civilian communications have been marked by increased access to high-quality encryption systems formerlyavailable only to governments and militaries. Some systems are available at no cost on the Internet and others canbe obtained commercially at minimal expense. This has led to an extensive debate in the United States about the need for export controls on sophisticatedencryption systems. Although it is universallyacknowledged that commercial encryption systems available throughout the world present major challenges tointelligence (and law enforcement) agencies, U.S.intelligence officials have argued that permitting export of high-quality U.S. systems with associated systemssupport would greatly extend the capabilities ofother governments and hostile groups to protect their communications. After extensive discussions within theexecutive branch and Congress, steps have beentaken to loosen, but not remove, U.S. restrictions on encryption exports. (7) NSA officials were active in criticizing unrestricted encryption exports andobserverssuggest that these views, which were shared by many in Congress especially within the intelligence and armedservices committees, may have fueled presscriticism of NSA. Changing threats, coupled with the evolving global technological environment, have undoubtedly made NSA's tasks far more difficult. The proliferation ofcommunications throughout the world and the spread of encryption may make electronic surveillance almostimpossible. Much equipment acquired for Cold Warmissions is not effective against new targets. In some cases, NSA must resort to analyses of traffic patterns-whois communicating with whom, when, and howoften-to provide information that may not be obtainable through breaking of codes and reading of plaintext. A major shortcoming was revealed in January 2000 when a software anomaly in the communications infrastructure curtailed NSA's operations for some 72 hours. An intensive and expensive effort was required to restore operations. A subsequent assessment found that thefundamental problem was not technical, butdoctrinal and organizational. (8) NSA has employed many highly gifted scientists, engineers, and mathematicians. However, shifting geopoliticalconcerns and budget reductions required in theearly 1990's led to early retirements and fewer newly hired employees. During the same period, the Agency wasalso required to move towards a personnelstructure more closely reflective of national demographics. Simultaneously, a revolution in communications andinformation technologies was launched in manysmall, start-up firms whose culture and salary and personnel benefit levels were radically different from those ofgovernment agencies. As the extent of theseproblems became apparent, Congress has provided guidance in several areas. At least since the enactment of the National Security Agency Act of 1959 NSA's personnel policies have been the subject of congressional interest. That Act inessence established a separate personnel system for NSA. By the mid-1980s the House Intelligence Committeebecame concerned with the relatively smallnumbers of African-Americans, Hispanics, and women within the NSA workforce. (In 1993, blacks constituted 9%of the total number of NSA employeeswhereas the national labor force percentage was just over 10; the NSA Hispanic percentage was 1.2, whereas thenational average was just over 8; for AsianAmericans, the national figure was 2.9, at NSA it was 0.9.) (9) One congressional initiative included provisions in the FY1987 Intelligence Authorization Act( P.L.99-569 ) amending the National Security Agency Act to establish an undergraduate training program to facilitatethe recruitment of minority high schoolstudents with skills in mathematics, computer sciences, engineering and foreign languages. Recruitment efforts weremade in colleges with higher concentrationsof Hispanic students and efforts were made to ensure equal consideration in promotions. By 1996, NSA had mademeasurable increases in minority and femalerepresentation in the general workforce and in leadership positions. (10) These initiatives were not welcomed by all NSA personnel, with someofficials expressingconcerns that others would receive preference at their own expense. (11) Since the mid-1990s public congressional hearings and publishedcommittee reports havenot given extensive discussion to diversity issues. Although efforts continue to increase the diversity of NSA'sworkforce, other personnel issues have complicatedhiring and promotion policies. Since the end of the Cold War, the nature of sigint targets has changed; the sheer quantity of communications has dramatically risen and sophisticated encryptionsystems are increasingly available throughout the world. These changes in targets and technologies have requireda substantially different NSA workforce. Longstaffed by civil servants and military personnel who made their whole careers in cryptologic specialities; NSAofficials must now be able to shift rapidly amongdisparate sigint efforts and varying targets. Different skill mixes are required at NSA at a time when technicalspecialists in communications, computer services,and encryption systems are in high demand throughout the economy. Observers believe that entry- and mid-levelgovernment salaries are not equal toopportunities currently available in an especially dynamic sector of the economy; furthermore, workers in technicalfields often shift jobs in short periods and itmay not be possible to retain them solely on the basis of the career benefits of federal service. (12) As has been the case with other intelligence agencies, staffing levels at NSA have been reduced during the past decade. Many analysts and others who spent theircareers focusing on Soviet and Warsaw Pact issues no longer directly relevant to U.S. security concerns have retiredor moved into new specialities. Some mediaobservers suggest, however, that NSA continues to be burdened by an "old guard" of Cold War-era careerists whosetalents are not precisely suitable to emergingmissions. Although such charges are difficult to document (and may only reflect bureaucratic politics), it isgenerally acknowledged that NSA will have to adoptan altered personnel structure. FY2001 Intelligence Authorization legislation (passed by both houses, but vetoedby the President because of concerns not directlyrelated to NSA) would provide authority for NSA to offer early retirement and voluntary separation pay toemployees with 20 or 25 years of service (depending onage). This provision was inserted to provide the NSA Director with the opportunity to institute personnel changesthat are considered necessary and reflects theintelligence committees view that "the situation at NSA is unique, not only in the enormity of the task ofmodernization, but also in the direct impact on nationalsecurity should NSA modernization fail." (13) One approach that has been adopted is to increase reliance on contracting out personnel services although security considerations can complicate the use ofnon-career personnel. (14) In some cases it has beenpossible to acquire the services of some retired NSA officials who are able to receive the relevant clearanceswith little delay. In other situations NSA is able to compartmentalize some activities and make use of specialistswho do not need access to sensitive information. Some observers warn, however, that contract personnel will tend not to be as committed to the Agency's missions,and may work subsequently fornon-government concerns with an increased possibility of unauthorized sharing of classified information. In recent years, congressional oversight committees have become concerned about the effect of the changedinternational threat environment and new technologieson NSA's future effectiveness. The requirement to replace aging satellite systems in particular have placed pressureson intelligence spending across the board;the size and extent of NSA's budget inevitably meant that it would be subject to close scrutiny. Thus, in 1997 theSenate Select Committee on Intelligenceestablished a Technical Advisory Group (TAG) to review the U.S. sigint effort along with other technical challengesfacing the Intelligence Community. TheTAG was composed of leading U.S. scientists and experts in technology and intelligence and has made twoclassified reports on NSA's capabilities. According tothe Senate Committee, the TAG identified serious deficiencies; "as resources have been reduced, the NSAsystematically has sacrificed infrastructuremodernization in order to meet day-to-day intelligence requirements. Consequently, the organization begins the21st Century lacking the technologicalinfrastructure and human resources needed even to maintain the status quo, much less meet emerging challenges." (15) One media account indicates that the TAG'sconclusions were highly critical: "`We told them that unless you totally change your intelligence-collection systemsyou will go deaf," one involved official[stated]. "You've got ten years."' According to the account, the Group "urged that the agency immediately begina major reorganization, and start planning for therecruitment of several thousand skilled computer scientists." (16) According to the Senate report, the TAG also recommended new business procedures and additional resources. The report indicated that the FY2001authorization bill would likely reflect TAG recommendations, with resources being shifted to long-terminfrastructure modernization at the expense of someshort-term collection. (17) The House Permanent Select Committee on Intelligence also reached the conclusion in 1998 that "very large changes in the National Security Agency's cultureand method of operations need to take place." (18) The Committee indicated its approach: First, the committee is funding and mandating external management reviews. Second, the committee is attempting toinfuse fresh thought, needed expertise (especially in systems engineering), and greater fairness by insisting thatsignificant portions of certain categories becontracted out and that outside proposals and expertise be solicited, notably in systems engineering, advancedresearch and development, and in developmentactivities.... Third, fences have been placed on portions of the budget, with the prospect that a considerable amountof money could be reprogrammed for other[Intelligence Community] needs if NSA does not develop detailed strategic and business planning. (19) The House committee envisioned "a far more radical revision of the budget process than presently contemplated." Emphasis would be placed on "a new culture inwhich all team together on a new architecture." Aware of the challenges facing the Nation's sigint effort and responsive to congressional concerns, the senior leadership of NSA has been moving to make drasticchanges in NSA's operations and organization. Upon becoming NSA's director in March 1999 Air Force Lt. GeneralV. Michael Hayden assigned a number ofmid-level NSA officials to review the Agency's organizational structure. Known as the New Enterprise Team, thegroup recommended a new executiveleadership team, the development of strategic business plans, the acquisition of agency wide managementinformation systems, and hiring a financial managementofficer. A separate report by a smaller group of outside experts with experience in the telecommunications industrymade similar recommendations. (20) The two sets of recommendations reflected a consensus by these advisory groups (and by congressional overseers) that NSA requires more centralizedmanagement, that separate divisions that had long enjoyed functional independence need greater coordination toreduce duplicative functions, and that there needsto be a strategic vision of how the Agency is to adapt to changed geopolitical and technological environments. Bothreports reflected confidence in the importanceof NSA's missions, but both were highly critical of NSA's management and personnel structures. The outsideexperts concluded: "The most serious issues areleadership, accountability, and empowerment, as evidenced by great dissatisfaction with decision making withinthe Agency." (21) The NSA officials noted theAgency's fundamental problems: "lack of governance, lack of leadership, and lack of strategic alignment." Althoughsome specific criticisms reflect the inherentlimitations of government agencies in comparison with the civilian telecommunications industry, NSA was urgedto take special steps to hold middle managersresponsible for personnel decisions. Although NSA has traditionally hired recent college graduates and retainedthem until retirement, changes in technology, inthe international environment, as well as disparities in government and civilian salaries, imply that in the future theremay be fixed-term positions and upgradedsalary levels for some critical technical specialists. NSA was also urged to move away from its traditional preference for performing all functions in-house rather than to look for creative ways to find civiliancontractors not just as sources of manpower but as "solution providers," and to make hard choices over prioritiesrather than to make across-the-board budgetaryreductions. The outside team of experts urged NSA not only to take advantage of the potential advantages ofoutsourcing but also to bring in mid- and upper-levelmanagers from successful businesses. In November 1999, Hayden launched "100 Days of Change"-another series of managerial initiatives responsive to the recommendations of these groups. Hesubsequently summarized NSA's challenges: "maintaining a strong infrastructure of people and facilities in a timeof constrained budgets; accurately forecastingtechnology trends in the face of an explosion of information systems; and reacting agilely to new technologicalinnovations." (22) With congressional support Hayden has brought in industry experts from civilian firms to develop a comprehensive business plan for the Agency that will enableit to perform in a transformed global information technology arena. An initial step was the appointment of a newchief financial manager from private industry inJanuary 2000. He has also hired a chief information officer, a senior acquisition executive, and created atransformation office. It is hoped that these officials willprovide the capability for strategic planning and centralized coordination that NSA has been criticized for notmaintaining. In July 2000 it was announced thatWilliam Black, Jr., a former NSA official who had retired and found employment in a high-tech consulting firm,Science Applications International Corporation,would be appointed deputy director. Black replaces Barbara McNamara who has been widely blamed in somemedia accounts (23) as part of an "old guard" thathasdelayed NSA's transition to post-Cold War challenges. McNamara has been assigned as head of NSA's liaisonoffice in London. In October 2000, further adjustments in NSA's management structure were announced. General Hayden will serve as Director and Chief Executive Officer andintends to focus on implementing the changes necessary to keep NSA relevant to the needs of the rest of theGovernment. Deputy Director Black will also serveas Chief Operating Officer and be responsible for day-to-day operations. A new Executive Leadership Team willbe created to concentrate on overall strategicplanning issues, composed of Hayden, Black, and the deputy directors for operations, information assurance, andtechnology. (24) In June 2000 NSA announced that it intended to contract out "non-mission related" information technology (IT) support-information technology functions that arenot part of its core cryptologic efforts. (25) A $4billion IT contract, to be known as Project Groundbreaker, will be awarded for handling many of the Agency'sextensive and varied requirements for information processing including desktop and workstation computers, email,network operations, software and telephonesystems. (26) Hayden indicated that NSA divisionstraditionally had undertaken much of their own IT work to support their ongoing operations, with inadequateconcern for overall financial implications for the entire Agency. He was quoted in one account: I knew exactly how much activity X cost. I knew when we spent the money, I knew what it cost, I knew when it wasappropriated. But we didn't really have the ability to aggregate all activity Xs and portray them to the agency as,"Hey, by the way, do you realize that is whatactivity X cost you around the world and do you really want to be spending [this] percentage of your budget onactivity X as opposed to activity Y?" We couldn'tdo that. We couldn't pull the thread and aggregate what it was we were doing as an enterprise in order to makestrategic decisions ondirection. (27) Hayden realizes that a more centralized system, with much work outsourced to a civilian contractor, may result in having to say "no to legitimate daily operationalneeds because the system can't handle it. That is the big change." (28) On November 8, 2000 NSA announced the accomplishment of the initial phase of its new acquisition program and indicated an intention to solicit industry forconcept studies for sigint modernization. This initiative is known as Trailblazer and the studies are expected to beundertaken in 2001. Few observers deny that significant structural changes in NSA's organization are warranted, but some caution that the changes thus far envisioned may not resolvethe expected problems. Skeptics note, in particular, that outsourcing is no panacea, that it may mean the loss ofexperienced personnel with longstanding ties toNSA without necessarily reducing overall costs to the taxpayers. Further, they argue, the necessity of grantingsensitive clearances to contractor personnel mayincrease risks of compromising classified information and processes. All agree that costs of background securityinvestigations will increase. Other objections may be raised concerning the consolidation of IT functions in a centralized office. The flexibility of individual components to design uniquesystems may be jeopardized, and the NSA Director has acknowledged that certain legitimate functions may haveto be curtailed. Observers note that many of thetechnological advances in the past decade have been made by decentralized organizations that permit componentdivisions to establish their own operationalpractices and develop their own IT solutions without micro-management from a headquarters staff. The External Team argued that "intelligence targets will continue to be increasingly transnational in nature, and . . . alignment to geographical locations andentities is obsolete." Although all observers would agree that NSA cannot maintain uniform depths of area expertisefor all potential concerns, some suggest thatthere are areas that will be of intense concern to the U.S. Government for decades to come and dispersing areafamiliarities acquired over many years would beseriously mistaken. Congressional observers strongly support the use of NSA's budget to establish priorities. They do not indicate that they believe NSA has mishandled funds; theydo maintain that the Agency has not managed its budget to achieve managerial goals. In 1999 the House IntelligenceCommittee noted that "In the last twoCongresses, the committee has been direct in its identification of process and management problems that requiredattention," but "NSA management has not yetstepped up to the line." The committee added that it "looks forward to the opportunities for change that presentthemselves with the introduction of a newDirector of NSA." (29) The Senate Intelligence Committee has urged that the NSA Director should have greater authority over the 70% of cryptologic resources that are currentlymanaged by the military services. The military services operate collection sites, undertake initial analysis, andprovide direct support to military commanders.NSA is responsible for tasking their efforts and for final analysis of the data they collect. Since service cryptologicelements support both NSA and militarycommanders there are inevitably differences over their disposition and responsibilities. Although the SenateIntelligence Committee advocates the NSA Directorhave "centralized direction across the SIGINT infrastructure as he implements his modernization strategy," (30) some in DOD (and perhaps in Congress as well)would argue, however, that the need to configure sigint resources in direct support of operational commanderswould argue against such augmented authorities forthe leader of a Washington-area agency. The House Committee, in reporting its version of the FY2001 Intelligence Authorization Act in May 2000 ( H.R. 4392 ), accepted the need formanagerial changes at NSA. Criticizing the traditional independence of NSA's divisions, the Committee arguedthat: Each type of communication-radio, satellite, microwave, cellular, cable-is becoming connected to all the others. Each new type of traffic shows up on every type of communication. Unfortunately, as the global network hasbecome more integrated, NSA's culture has evolvedso that is seemingly incapable of responding in an integrated fashion. The House Committee argued that NSA must, as a result, "prepare itself for complex, prioritized, carefully timed and integrated systems acquisitions that, inaggregate, rival the complexity of programs commonly managed by the NRO, the Defense Department, andcommercial industry." (31) The House Intelligence Committee's recommendations for significant shifts in NSA's budget have not yet been accepted. DOD urged that the changes not beapproved pending a review of the results of Hayden's initial reorganization efforts. (32) In particular, DOD, with support by the Senate Armed Services Committee,views with concern any efforts to give the DCI influence over NSA that would detract from that of the Secretaryof Defense. These separate approaches may noteasily be reconciled. A major issue related to sigint in the post-Cold War environment is the erosion of distinctions between foreign and domestic threats. For example, an attack fromoutside the borders of the country through cyberspace could result in major damage to U.S. institutions, butresponsibilities for monitoring potential threats arecomplex and in some ways ill-defined. Constitutional principles and statutes sharply distinguish betweeninformation gathering by foreign intelligence anddomestic law enforcement agencies and efforts to involve NSA in surveillance of U.S. persons have been sharplyrestricted. Various administrative arrangementshave been made to facilitate cooperation between NSA and the FBI and other law enforcement agencies in gatheringinformation on threats with both foreign anddomestic components, but many uncertainties remain. Many observers strongly oppose the use in court cases ofinformation derived from sigint provided by NSAat the same time, sigint specialists are highly reluctant to see NSA diverted from its foreign intelligence missionsto tasks that may risk involvement in domesticcontroversies. Congress, included in the FY2001 Intelligence Authorization bill ( H.R. 4392 , Section 606)a requirement for a report from theAttorney General regarding actions taken in regard to the dissemination of intelligence information within theJustice Department. (This provision replaced anearlier version that would have required the establishment of procedures to accomplish this dissemination.) (33) NSA and counterpart agencies in a number of other countries, especially Great Britain, have come under much criticism in the European Parliament for allegedlymonitoring private communications of non-U.S. businessmen in a coordinated electronic surveillance effort knownas Echelon in order to support domesticcorporations. Some critics go further and charge that NSA's activities represent a constant threat to civil libertiesof foreigners and U.S. persons as well. ThoughNSA has reassured congressional oversight committees that the Agency complies strictly with U.S. law, thesecontroversies will undoubtedly continue. (34) The National Security Act establishes sigint as a recognized function of the U.S. Government and requires thatit is usually to be carried out by NSA. The U.S.Government thus has accepted responsibility for electronic surveillance activities that are condemned (but notnecessarily eschewed) by some foreign countries. Although some specialists in international law argue that electronic surveillance is inherently illegal, U.S. officialscontend, based on constitutionalresponsibilities, statutes, and long-established practice, that electronic surveillance related to national security andpreventing terrorism and international narcoticssmuggling is a legitimate function of the U.S. government. Unlike some foreign countries, the U.S. has not asserteda right to conduct electronic surveillance tosupport its "economic well-being." Managing this effort in a changing geopolitical and technological environment, according to knowledgeable observers and congressional overseers, requires thatNSA's organization and operations be substantially altered. This process is currently underway to strengthen theNSA Director's role in managing the Agency,but many uncertainties remain that will determine NSA's future. No national security official can confidently predictwhat collection priorities will exist in fiveyears time, nor can the equipment acquisition priorities be firmly projected very far into the future. Withcongressional encouragement, the current leadership ofNSA is drawing increasingly on talent available in the civilian community to offset the difficulties involved inretaining talented technological experts in a verytight sector of the labor market. This effort may not result in the stable, loyal workforce that, in the past, led toNSA's gradual successes against Cold War targets. Some observers also believe that NSA will ultimately require significant budgetary increases at a time when thereis a determination to restrict overall governmentspending. The future success of NSA is by no means guaranteed. The current NSA Director's managerial initiatives and the move to use outside contractors have widespreadsupport, but these efforts may not achieve all their intended goals. NSA may not be adaptable to radically changingdevelopments in internationaltelecommunications and the bewildering emergence of terrorist groups previously unheard of. The wider publicmay come to view NSA's activities as inherentthreats to privacy that outweigh the value of information acquired. Attention will be paid to the costs and benefitsof allocating additional funds to NSA at a timewhen there are sure to be competing demands. The current level of congressional concern with NSA is unlikely to diminish. Observers expect that, in the face of attacks on NSA by some in the media and by anumber of European parliamentarians, members of Congress will be asked to defend or criticize not only NSA'soperations, but also its statutory roles andmissions. Funding for NSA's efforts to adapt to altered geopolitical and technological environments will have tobe balanced against other competing needs. To amuch greater extent than in the past, observers expect that Congress will continue to involve itself in internalchanges in the Agency designed to acquiretechnological capabilities to acquire information at a time when the volume of communications is expandingexponentially, and access is greatly complicated bythe spread of sophisticated encryption systems. Codemaking and signals intelligence (sigint) have long been functions of governments and militaryorganizations. (35) Although the United States gavelessattention to codemaking and codebreaking than the major European powers, U.S. forces during World War Iestablished a fairly extensive military sigint effort. Inthe 1920s and 1930s, the services maintained a small sigint effort and, for a time, the State Department collaboratedwith the Army in operating an American"Black Chamber" that attempted, with limited success, to intercept and decrypt foreign diplomatic communications. By the time the United States entered WorldWar II, U.S. codebreakers were able to decrypt some codes of Japan, Germany, and other foreign countries. Successin breaking Japanese diplomatic codes,achieved through "the exercise of the greatest ingenuity and utmost resourcefulness"was acknowledged publiclyafter the end of the war in the congressionalreport regarding the attack on Pearl Harbor. (36) During the course of World War II, sigint efforts proved to be exceptionally valuable especially in regard to acquiring military information. The crucial victory atMidway in June 1942 that halted Japan's advance in the Pacific was gained through sigint. The Allies' ability tokeep supplies flowing across the North Atlanticdepended on limiting U-boat attacks; this too was accomplished through good sigint. Some observers haveconcluded that sigint enabled the Allies to end the warat least a year earlier than would otherwise have been possible. During World War II, cooperation with the British in sigint collection and analysis proved very fruitful. Although both countries were initially reluctant to sharetheir codebreaking secrets, they gradually came to appreciate the advantages of sharing both collection and analysis. Anglo-American cooperation did not endwith the conclusion of hostilities in 1945, but actually expanded with the beginning of the Cold War and theexpansion of U.S. security interests throughout theworld. The relationship with the British would eventually encompass the Canadians, Australians, and, to a lesserextent, the New Zealanders. After the War, the Army and the Navy, and subsequently the newly independent Air Force all continued sigint collection. An effort was made to coordinate theservices' sigint efforts in a single organization known as the Armed Forces Security Agency established by theSecretary of Defense in 1949. Coordinationproblems were not, however, resolved until October 1952 when President Truman established the National SecurityAgency in an effort to provide a moreeffective structure for coordinating signals intelligence activities. Truman had determined that the sigint functionwas "national," that it would serve civilianpolicymakers in the State Department and the White House as well as the military. This action was taken in a secretmemorandum that was not made public at thetime. NSA became the U.S. focal point of a global sigint effort. Signals are collected at field stations throughout the world, most of which operated by the militaryservices. Some initial processing and analysis may have be performed at the collection site, but in general the "take"is forwarded to NSA, which moved itsheadquarters from Arlington, Virginia to Fort Meade, Maryland in 1957. After decryption and analysis, the resultantdata is provided to "all-source" intelligenceagencies such as the CIA or the Defense Intelligence Agency (DIA). NSA has always been staffed by a combinationof civil servants and active duty militarypersonnel, but the Agency also provides operational guidance to sigint collection stations maintained by thecryptologic elements of the military services(collectively described as the Central Security Service (CSS)). During the Cold War, NSA's operations, along with those of allied countries) were primarily directed at the Soviet Union, its Warsaw Pact allies, and CommunistChina. Massive efforts were made to collect sigint dealing with military threats to the U.S. and its allies. In additionto sigint provided to national-level decisionmakers, tactical sigint collection, analysis and reporting was incorporated in military operations, including thoseoccurring in the Korean and Vietnam Wars. For many years NSA's efforts did not receive much public scrutiny. Congressional oversight was conducted by small sub-committees of armed services andappropriations committees without public hearings. The first major legislation dealing directly with NSA was theNational Security Agency Act of 1959 (P.L.86-36). This Act did not describe the functions of NSA, but dealt with "housekeeping" matters such as pay andallowances, training, property acquisition, andleasing, It exempted NSA from the requirement to provide detailed information regarding organizational andfunctional matters to the Civil Service Commission(the predecessor of the Office of Personnel Management). These authorities are, in general, similar to thoseexercised by the Director of Central Intelligence(DCI) in regard to the CIA. The act has been amended from time to time and serves as the statutory basis for NSA'spersonnel policies that derive from its uniquemission, including special pay and allowances for overseas travel, professional and foreign language training, andproperty leasing, and use of the NSA. An exception to the practice of congressional reticence regarding NSA was a report on a widely publicized defection in 1960 of two NSA employees to the SovietUnion. (37) The committee criticized personnelsecurity procedures as shockingly lax and in part as a result of congressional criticism of the handling of theMitchell/Martin case DOD tightened the security practices at NSA to ensure that background investigations werecompleted prior to granting access to cryptologicmaterials. In 1964 P.L. 88-290 (known as Title III of the Internal Security Act of 1950) was enacted to establishrequirements for security investigations forpersons working at NSA. Observers note that it was an early reflection of the importance of congressional oversight. It gave the NSA Director authority toterminate the employment of NSA personnel "whenever he considers that action to be in the best interest of theUnited States." Such actions can be takennotwithstanding usual civil service procedures for personnel actions. In 1996 these provisions were superseded byenactment of the FY1997 National DefenseAuthorization Act ( P.L. 104-201 , sections 1631-1635) which established intelligence personnel policies for theentire Defense Department, including authority toterminate employees "in the interests of the United States." Appeals of decisions to terminate can only be made tothe Secretary of Defense. (38) In the mid-1970s, public concerns that U.S. intelligence agencies were spying on domestic groups opposed to the Vietnam War led to hearings by selectcommittees in both chambers. (39) Interest in NSAcentered on "watch lists" that had been maintained to collect communications of U.S. citizens who weresuspected of ties to hostile foreign countries and groups. (40) There was also interest in a project, known as Shamrock, by which copies of internationaltelegramswere provided to NSA on a daily basis by three telegraph companies. These practices had been terminated by theearly 1970's, but Members of Congressconsidered that the Agency should be held accountable for them. (41) (The desire to bring such practices under the constraints of statutory law contributed topassage of the Foreign Intelligence Surveillance Act of 1978.) During the hearings conducted by the Senate Select Committee to Study Governmental Operations with respect to Intelligence Activities (known as the ChurchCommittee after its chairman, Senator Frank Church), for the first time a Director of NSA testified in open sessionto give a public overview of NSA'sresponsibilities. Lt. General Lew Allen, Jr., citing the statutory and other authorities under which NSA carried outits responsibilities, stated: This mission of NSA is directed to foreign intelligence, obtained from foreign electrical communications and alsofrom other foreign signals such as radars. Signals are intercepted by many techniques and processed, sorted andanalyzed by procedures which reject inappropriateor unnecessary signals. The foreign intelligence derived from these signals is then reported to various agencies ofthe government in response to their approvedrequirements for foreign intelligence. (42) Allen also explained in some detail the practice of establishing "watch lists" by which "words, including individual names, subjects, locations, etc." could beidentified within a stream of communications to separate useful information from the vast quantities of chatter. Particular attention was paid to retrievinginformation relating to terrorism, narcotics, and-a particular concern of the Johnson and NixonAdministrations-foreign influences on domestic groups suspectedof fomenting civil disturbances in the U.S. in protest against the U.S. role in the Vietnam war. Allen indicated that, pursuant to presidential direction, the Secretary of Defense had established NSA in accordance with his statutory authorities. He noted furtherthat "for the past 22 years [i.e., since circa 1953], Congress has annually appropriated funds for the operation of theNSA, following hearings before the ArmedServices and Appropriations Committees of both Houses of Congress in which extensive briefings of the NSA'ssignals intelligence mission have beenconducted." (43) The Church Committee concluded: The National Security Agency is one of the largest and most technically oriented components of the United Statesintelligence community. Its basic function is collecting and processing foreign communications and signals forintelligence purposes. NSA is also responsible forcreating and supervising the cryptography of all United States Government agencies, and has a special responsibilityfor supervising the military services'cryptologic agencies. Another major responsibility is protecting the security of Americancommunications. The Committee regards these functions as vital to American security. NSA's capability to perform these functionsmust be preserved. The Committee notes that despite the fact that NSA has been in existence for several decades,NSA still lacks a legislative charter. Moreover,in its extensive investigation, the Committee has identified intelligence community abuses in levying requirementson NSA and abuses by NSA itself in carryingout its functions. These abuses are detailed in the domestic portion of the Committee report. The Committee findsthat there is a compelling need for an NSAcharter to spell out limitations which will protect individual constitutional rights without impairing NSA's necessaryforeign intelligencemission. (44) Thus, even a committee widely perceived as antagonistic to intelligence agencies concluded that NSA's sigint mission is "vital to American security." It urged,however, a better statutory framework for the Agency and an enhanced role for congressional oversight to ensurethat NSA was not misused in ways that wouldundermine American liberties. The complete final report of the House Select Committee on Intelligence (known as the Pike Committee) was never made public, but its publishedrecommendations also included a proposal that the existence of NSA be recognized by specific legislation, that suchlegislation provide for civilian control ofNSA, and that the role of NSA with reference to the monitoring of communications of Americans be defined. (45) Many of the most important statutory provisions relating to NSA were enacted in the wake of these congressional investigations. Congress passed the ForeignIntelligence Surveillance Act of 1978 (FISA) (50 USC 1801) which establishes procedures for electronicsurveillance in the United States for foreign intelligencepurposes. (46) It provides that the Attorney Generalmay authorize surveillance in situations wherein the target is communications of foreign powers; in cases inwhich communications of U.S. persons might be acquired, then approval of a court, created pursuant to the FISA,would be required. Information acquired inaccordance with FISA provisions is to be used for foreign intelligence purposes (even though in recent yearsCongress has expanded FISA to permit use of sometypes of information acquired under its provisions to be used for law enforcement purposes in certaincircumstances). FISA, in essence, ensures that foreignintelligence electronic surveillance operations within the United States are conducted in accordance with statutoryauthorities and with supervision by the JusticeDepartment (and with oversight by Congress). Although in the Pearl Harbor investigations, the U.S. Government officially revealed its prewar sigint efforts, ongoing sigint activities had not beenacknowledged. FISA provided authority in U.S. statutory law for electronic surveillance activities to be conductedfor foreign intelligence (rather than lawenforcement) purposes. In enacting the statute the United States Government accepted responsibility for NSA'sactivities no matter how they might be regarded inother countries. FISA does of course provide ample warning to foreign countries and foreign groups that the U.S.undertakes electronic surveillance when itperceives it necessary. While the argument was made that such activities are best undertaken without formal legalauthorization and without the Government'saccepting responsibility for them, Congress specifically rejected that argument in the belief that intelligenceactivities, including electronic surveillance, arenecessary to protect the national security and that the U.S. Intelligence Community should be subject to law and tooversight by Congress. In addition to FISA, there were also efforts to establish a "legislative charter" for the agencies of the Intelligence Community, including NSA. Testifying inFebruary 1980, the then Director of NSA, Vice Admiral Bobby R. Inman, supported charter legislation, noting that"while the Agency has been provided withsignificant Congressional guidance and protection with respect to the information and products produced by theAgency, there was little Congressional guidanceon the functions and responsibilities of the Agency and few Congressionally provided statutory tools to be used toperform those functions." (47) Charter legislationfor the entire Intelligence Community became very complex and ultimately was a victim of partisan disputes in thelate 1970s. (48) It was not until 1992 that theNational Security Act was amended to provide a functional charter for NSA. (49) The Act now gives the Secretary of Defense the responsibility to ensure: through the National Security Agency (except as otherwise directed by the President or the National SecurityCouncil), the continued operation of an effective unified organization for the conduct of signals intelligenceactivities and shall ensure that the product isdisseminated in a timely manner to authorized recipients.... Guidance for NSA's activities has been further detailed in a series of executive orders. (50) E.O. 12333, signed by President Reagan onDecember 4, 1981 afterextensive consultation with Congress, and still in effect, tasks the Secretary of Defense with responsibilities for NSAincluding: (1) Establishment and operation of an effective unified organization for signals intelligence activities, except for thedelegation of operational control over certain operations that are conducted through other elements of theIntelligence Community. No other department or agencymay engage in signals intelligence activities except pursuant to a delegation by the Secretary of Defense; (2) Control of signals intelligence collection and processing activities, including assignment of resources to anappropriate agent for such periods and tasks as required for the direct support of militarycommanders; (3) Collection of signals intelligence information for national foreign intelligence purposes in accordance withguidance from the Director of Central Intelligence; (4) Processing of signals intelligence data for national foreign intelligence purposes in accordance with guidance fromthe Director of Central Intelligence; (5) Dissemination of signals intelligence information for national foreign intelligence purposes to authorized elementsof the Government, including the military services, in accordance with guidance from the Director of CentralIntelligence; (6) Collection, processing and dissemination of signals intelligence information for counterintelligencepurposes; (7) Provision of signals intelligence support for the conduct of military operations in accordance with tasking,priorities, and standards of timeliness assigned by the Secretary of Defense. If provisions of such support requiresuse of national collection systems, thesesystems will be tasked within existing guidance from the Director of Central Intelligence. (8) Executing the responsibilities of the Secretary of Defense as executive agent for the communications security ofthe United States Government; (9) Conduct of research and development to meet the needs of the United States for signals intelligence andcommunications security; (10) Protection of the security of its installations, activities, property, information, and employees by appropriatemeans, including such investigations of applicants, employees, contractors, and other persons with similarassociations with the NSA as arenecessary; (11) Prescribing, within its field or authorized operations, security regulations covering operating practices, includingthe transmission, handling and distribution of signals intelligence and communications security material within andamong the elements under control of theDirector of NSA, and exercising the necessary supervisory control to ensure compliance with theregulations; (12) Conduct of foreign cryptologic liaison relationships, with liaison for intelligence purposes conducted inaccordance with policies formulated by the Director of Central Intelligence; and (13) Conduct of such administrative and technical support activities within and outside the United States as arenecessary to perform the functions described in sections (1) through (12) above, includingprocurement As noted above, in 1976 the Pike Committee urged civilian leadership for NSA. NSA has always been headed by military officers, but they have served under thedirection of both the civilian Secretary of Defense and the (usually) civilian Director of Central Intelligence. Inaccordance with subsequent amendments to theNational Security Act, Directors of NSA are now appointed by the President upon the recommendation of theSecretary of Defense with the concurrence of theDCI (although a recommendation can be submitted without the DCI's concurrence if the fact of non-concurrenceis stated). In recent years, few observers expressconcerns about the NSA Director being a serving officer. The amended National Security Act also provides that the DCI develops budgets for the annual National Foreign Intelligence Program which includes NSA. TheDCI also establishes the requirements and priorities that govern the collection of national intelligence. Theseprovisions provide authority for the DCI to overseeNSA's budget and operations. There are, however, multiple occasions for differences between the roles of theSecretary of Defense and the DCI. The DefenseSecretary is inevitably more focused on aligning NSA closely with the operating forces of DOD and tends toemphasize collection of direct interest to militarycommanders. The DCI, for his part, tends to see NSA as one component of an interagency effort to gatherintelligence for senior policymakers in Washington; heapproves collection and analysis priorities that reflect their requirements. These respective responsibilities are wellunderstood; defense and intelligence staffsattempt to make adjustments to accommodate differing requirements within budgetary constraints. Any majorreorganization or redirection of efforts, however,that could affect NSA's ability to support either national policymakers or military commanders would be sure togenerate criticism from one quarter or another. The Pike and Church Committees also laid the groundwork for permanent intelligence committees. Subsequent to the establishment of the committees (theSenate Select Committee on Intelligence and House Permanent Select Committee on Intelligence) in 1976-1977,Members and staff have regularly reviewed NSAprograms and adjusted budgetary priorities with almost all hearings being conducted in closed sessions. NSAspending (along with the cryptologic activities ofthe services and other agencies) is authorized in annual intelligence authorization laws with funding levels indicatedonly in classified annexes. The two armedservices committees also have oversight of most intelligence programs since they involved Defense Departmentassets. Although sigint collection and analysis are among the most sensitive activities undertaken by the U.S.Government, close cooperation in these efforts ismaintained with several other countries-principally, but not limited to, the United Kingdom, Canada, Australia, andNew Zealand. These relationships beganduring the Second World War when agreements to share signals intelligence were made between the militaryservices of the United States and Great Britain, withseparate arrangements made with other Commonwealth countries. This cooperation was widely considered by seniormilitary leaders at the time, and by historianssubsequently, with having significantly reduced the amount of time needed to defeat Nazi Germany and Japan aswell as the number of Allied casualties. Although both the United States and Great Britain tackled various communications links of the Japanese andGermans (along with those of other countries),arrangements were worked out whereby the American effort was concentrated on the Japanese and the British onthe Germans. The division of labor reflectedresource limitations-especially among skilled cryptologists-and possession of geographical sites from which enemytransmissions could be intercepted. With the end of hostilities in 1945, both British and American intelligence officials were reluctant to terminate a highly productive cooperative arrangement. There was continued military cooperation between the two countries in occupation duties in various areas and, whenthe Soviet Union began to be considered athreat to both countries, intelligence cooperation continued. Cooperation with Canada was considered essential inview of potential Soviet military activitiesoriginating in Arctic regions. Formal arrangements to cooperate in collecting and analyzing sigint were made by thetwo countries (and others) given sharedgeostrategic interests and limited resources that did not permit expansive unilateral efforts. These agreements wereconducted in great secrecy at the time andremain largely classified a half-century later. (52) The sigint relationship with the British and other Commonwealth countries has attracted criticism from anumber of sources over the years. (53) To an extenta closeintelligence relationships arguably predispose military and political leaders to coordinated policies. Some observersobject to international agreements madewithout the formal advice and consent of the U.S. Senate. The secret relationships have been criticized by observersin the U.S., Britain, Australia and elsewherewho oppose international entanglements. Some observers from European Union countries express concern thatsigint cooperation among the "Anglo-Saxons"might work against their own economic interests. Supporters of the such relationships with other countries point to the advantages in shared efforts that conserve intelligence resources. The United States, Britain,Canada, Australia, and New Zealand often have common policies on important international issues, but theexistence of close intelligence ties has not precludeddifferent policies (or even, as at Suez in 1956, opposing policies) when national leaders felt them necessary. In thepost-Cold War environment, observers believethat sigint cooperation with a number of friendly countries maximizes opportunities to obtain information regardingdisparate regional threats from terroristgroups, narcotics traffickers, and dealers in nuclear and other substances used in making weapons of massdestruction. NSA has long been the target of criticism from those who view intelligence agencies as inevitable threats to civil liberties. In general, however, the Agency's lowpublic profile and the esoteric nature of its work attracted less attention than the more dramatic covert actionsundertaken by the CIA. In the past few years,however, reports prepared under the auspices of the Directorate-General for Research of the European Parliamenthave described U.S. electronic surveillanceefforts. The studies, known as Scientific and Technological Options Assessments (STOA), are prepared bycontractors and not by European Parliament's officialstaff. A series of these reports have severely criticized NSA, charging it with working together with sigintorganizations of the United Kingdom, Canada,Australia, and New Zealand to gather commercial communications and providing the intercepts to U.S. businessinterests to give them advantages over foreignfirms. (54) The criticisms of NSA by these reports have been echoed by media commentary. One account claims that It is the new Cold War. The United States intelligence agencies, facing downsizing after the fall of the Berlin wall,have found themselves a new role spying on foreign firms to help American business in globalmarkets. Echelon is part of a British and American-run world-wide spy system that can "suck up" phone calls, faxes ande-mails sent by satellite. America's intelligence agencies have been able to intercept these vital privatecommunications, often between foreign governments andEuropean businesses, to help the US win major contracts. (55) Some media accounts state that this entire cooperative endeavor has the codename Project Echelon; others believe that Echelon refers only to the process by whichcomputers operated by cooperating sigint agencies sift through many thousands of intercepts for ones containingpre-programmed key words. (56) U.S. intelligence officials have responded to these charges by describing the statutory framework under which NSA operates and the oversight mechanisms inplace in both the Executive and Legislative Branches. There have been categorical denials that intelligence is passedto U.S. companies to provide themcommercial advantages although it is freely acknowledged that sigint is used to provide the U.S. Government withinformation about bribery and other illegalpractices of foreign firms and that this information has been used as the basis for diplomatic complaints. (57) NSA has successfully persuaded the congressional leadership that it faithfully and responsibly conducts its electronic surveillance activities in accordance withlaw and relevant executive orders. Section 309 of the Intelligence Authorization Act for FY2000 ( P.L. 106-120 )required that the Director of NSA submit a report(to be prepared jointly by the Director of NSA, the DCI, and the Attorney General) providing a detailed analysis ofthe legal standards used in conducting signalsintelligence activities, including electronic surveillance. The report was submitted in February 2000 and set forththe legal bases for NSA's activities,emphasizing its commitment to respect the privacy rights of U.S. persons. In a public hearing to discuss the report,Representative Goss, Chairman of the HouseIntelligence Committee, concluded that "our safeguards are in place and are working." (58) Most U.S. observers give credence to the official U.S. position, especially given the absence of evidence that U.S. companies are pressuring the Government forhelp in learning about foreign technologies. Observers suggest, in addition, that any U.S. intelligence assistanceto a U.S. firm in winning a foreign contract wouldprovoke strong criticism by a disadvantaged U.S. competitor. (59) Former DCI R. James Woolsey has maintained that U.S. intelligence agencies do not collectinformation about foreign technology because American technology is, in general, far superior. There is, however,he argues, a real need to seek informationabout corrupt practices by foreign competitors and activities such as transfers of dual-use technologies for use inproduction of weapons of mass destruction aswell as activities in countries subject to U.N. sanctions. (60) Some foreign observers continue to dispute U.S. claims and they will not easily be persuaded that their concerns are ill-founded. Suggestions of NSA electroniceavesdropping have clearly had resonance among members of the European Parliament which voted on July 5, 2000to undertake a lengthy investigation ofEchelon. The investigation will not include the calling of witnesses and, interestingly, an amendment calling foran investigation of eavesdropping by all EUgovernments was not adopted. (61) In part, foreignobjections stem from concern about the capabilities of NSA to monitor their communications and those ofEuropean companies. There is also, especially among some, irritation that the United States has a closer sigintrelationship with some of its allies than withothers. In part, however, observers perceive attacks on NSA's activities as instinctive hostility among politicalelements long skeptical of close U.S.-Europeanrelations and determined to forge a more independent European identity. Some objections also undoubtedly arisefrom deep-seated opposition to the work of allintelligence agencies. There is no question that the worldwide capabilities of NSA cause suspicion and resentment among some foreign elements. U.S. officials justify NSA's activitieson international law, the necessity to acquire information about threats to national security, international terrorism,and the narcotics trade. While the potential forabuse is acknowledged, the United States has a legal structure that regulates electronic surveillance. In addition,intelligence derived from sigint supports manycollective military and diplomatic efforts with European and other allies.
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The National Security Agency (NSA), one of the largest components of the U.S. Intelligence Community, has reached a major watershed in its history. Responsible for obtaining intelligence from international communications, NSA's efforts are being challenged bythe multiplicity of new types of communicationslinks, by the widespread availability of low-cost encryption systems, and by changes in the internationalenvironment in which dangerous security threats cancome from small, but well organized, terrorist groups as well as hostile nation states. NSA's efforts to adjust to the changing geopolitical and technological environment have been strongly encouraged by Congress and reflect a major shift incongressional oversight of the Agency. Although Congress has always approved funding for NSA, for decadesroutine oversight was limited to a few Membersand staff. In the 1970s, congressional investigations of intelligence agencies resulted in greater public attention toNSA and criticism of activities that infringed onthe civil liberties of U.S. persons. Subsequently, both the Senate and the House of Representatives establishedintelligence oversight committees that have closelymonitored NSA's operations. The Foreign Intelligence Surveillance Act (FISA) was enacted in 1978 to regulatecollection by foreign intelligence agencies of thecommunications of U.S. persons. The end of the Cold War, the expansion of low-cost encryption and the explosionof communications systems led Congress totake a more public profile in overseeing the large and secretive Agency. Reacting in large measure to congressional concerns, NSA launched two separate management reviews, one by outside experts, the other by longtime Agencyofficials. Both made strong criticisms of Agency personnel policies, an outmoded organizational structure, and anunwillingness to utilize civilian practices thatmore effective than those available in-house. The current NSA Director, Lt. General Michael V. Hayden, USAF,has used these analyses to launch a series ofmajor initiatives designed to improve NSA's operations, to attract and reward more qualified people from outsideindustry, and is developing a major contract foroutside support of its non-sensitive Information Technology (IT) functions. A major renewal effort is underway, but observers believe many challenges lie ahead that will require congressional oversight. Many of the reforms in personnelpolicies recommended are difficult to implement in a government organization, especially in an extremely tightmarket for technical specialists. The technicalcomplexities of dealing with widespread and sophisticated encryption as well as the proliferation of communicationsdevices remain to be resolved. NSA is,along with other intelligence agencies, not well-positioned to analyze developments among the assortment ofterrorist groups and narcotics smugglers around theworld that can seriously affect U.S. interests. NSA has also come under heated criticism in the European Parliamentfor allegedly collecting, in cooperation withthe British, commercial intelligence to benefit U.S. corporations.
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In a speech on September 24, 2001, President George W. Bush stated that "Money is thelifeblood of terrorist operations today. We're asking the world to stop payment." (1) Accordingly,during the past year the United States has mounted a wide-ranging domestic and international effortto freeze, seize, and intercept the flow of funds to terrorist groups. Since the September 11 attacks,roughly $121 million in terrorist assets has been frozen worldwide, but less than 20 percent of thistotal has been blocked in the past 11 months. (2) Fora variety of reasons that will be discussed in thisreport, traditional anti-money-laundering tools appear to be of limited use in disrupting terroristfinancing, which follows a dynamic different from that of traditional criminal organizations. Inaddition, pre-September 11 financial support for terrorism from Middle Eastern sources reportedlyhas continued. (3) Furthermore, there is an increasingconsensus that pursuit of terrorists' funds couldentail significant domestic and international political costs, e.g. infringing on civil liberties orreligious freedom, alienating large Muslim constituencies, inflicting harm on poor countries, andaggravating conflicts with Islamic states. Some observers also criticize the diversion of resourcesfrom traditional criminal investigations (such as ones focused on drug trafficking) to tracking the relatively minuscule amounts of money that find their way into terrorist cells through a host ofinformal channels. How efforts to "follow the money" should be prioritized in and integrated witha comprehensive global struggle against terrorism thus becomes an issue of considerable significancefor U.S. policymakers and for Congress. An overarching goal of U.S. counterterrorism policy since the September 11, 2001, attacks hasbeen to expose, disrupt, and incapacitate the financial networks of terrorist groups. In a speechdelivered on September 24, 2001, President George W. Bush stated: "We will direct every resourceat our command to win the war against terrorists, every avenue of diplomacy, every tool ofintelligence, every instrument of law enforcement, every financial influence. We will starve theterrorists of funding." (4) A key instrument in thiseffort was Presidential Executive Order 13224,issued on September 23, which blocked "all property and interests in property" of certain designatedterrorists and individuals and entities materially supporting them. (5) As of late November 2002, some250 individuals and groups, most of them al Qaeda-related, had been designated under the order and$36 million in terrorist-related funds in 92 separate accounts reportedly had been frozen by U.S.financial institutions. (6) The vast bulk of terrorist assets and funding sources, though, are considered to lie outside of the United States. Consequently, Washington has made considerable effort to enlist support of othernations in the campaign against terrorist financing. To some extent, international efforts havemirrored U.S. policy. For example, the United Nations Security Council (UNSCR), pursuant toUNSCR Resolution 1390 (January 16, 2002) and related preceding resolutions, maintains aconsolidated freeze list of some 300 individuals and entities linked to al Qaeda, Osama bin Laden,and the Taliban. (7) The European Union and a numberof individual states maintain their ownterrorism lists and blocking orders. As a result of these various activities, approximately $85 millionof terrorist bank funds reportedly has been frozen outside the United States in the post-September11 period. Of the total $121 million blocked worldwide, more than 75% reportedly has been linkedto the Taliban and al Qaeda and the rest to other terrorist entities. (8) The bulk of the activity hasoccurred in a few countries. Although almost 170 nations have blocking orders in force, only 4countries, including the United States, account for about two-thirds of the blocked $121 million,according to U.S. financial data. How effective the campaign to limit terrorist finance has been is a matter of controversy. U.S. officials regard the effort as a vital adjunct to the overall fight against terrorism. They claim thatasset seizures to date have constricted the funds of al Qaeda and other terrorist groups. A TreasuryDepartment fact sheet of September 2002 noted: "Our war on terror is working--both here in theUnited States and overseas. � Al Qaeda and other terrorist organizations are suffering financiallyas a result of our actions. Potential donors are being more cautious about giving money toorganizations where they fear the money might wind up in the hands of terrorists. In addition, greaterregulatory scrutiny over financial systems around the world in the future may identify those whowould support terrorist groups or activities." (9) Others have expressed skepticism about the campaign. As a recent report by a U.N. Security Council monitoring group observes, "Al Qaeda continues to have access to considerable financialand other resources." As noted above, reports indicate that less than 20 percent of the reported $121million total in blocked terrorist assets have been frozen since mid-January 2002, which suggests thatthe campaign is yielding sharply diminishing returns. "Government officials have indicated that ithas proved extremely difficult to identify these additional funds and resources," the U.N. reportconcludes. (10) The difficulty may be attributed to various factors. Some observers claim that al Qaeda is relying increasingly on non-bank mechanisms to move and store funds, such as converting assetsto untraceable commodities, including gold and diamonds, or moving funds via informal valuetransfer ("hawala") systems that leave virtually no paper trail. Alternatively, al Qaeda may haveacquired greater sophistication in laundering funds. Bin Laden himself remarked to a Pakistanijournalist shortly after the September 11 attacks that his financial backers "are as aware of the cracksinside the Western financial system as they are of the lines of their hands." (11) Additionally, the evident fragmentation of terrorist finances poses significant challenges for law enforcement. Many small terrorist cells are virtually self-sustaining, deriving income from legitimatebusinesses or from assorted small criminal scams. (12) In such cases, there is not much of a money trailto follow. Moreover, terrorist operations tend to be cheap; a U.S. government report notes "therelatively modest funds needed to undertake them elude all but the most concentrated oversight." (13) Apparently the September 11 attacks, which cost an estimated $500,000, required a strategic infusionof funding from outside (much of it reportedly from a terror support network in the United ArabEmirates). (14) Yet the highly destructive 1993World Trade Center bombing, according to its"mastermind" Ramzi Yousef, cost less than $20,000. Reportedly, the conspirators were able to fundthe operation themselves from criminal activities such as check and credit card fraud, and throughdonations raised from a local charity. (15) A related concern centers on the level of international cooperation in disrupting terror financing. Some of the wellsprings of financial support for terrorism, especially sources in Middle Easterncountries, reportedly have been little affected by the post-September 11 crackdown. A report by theCouncil on Foreign Relations released in October 2002 states, "For years, individuals and charitiesbased in Saudi Arabia have been the most important sources of funds for al Qaeda, and for yearsSaudi officials have turned a blind eye to this problem." (16) U.S. officials publicly state that they arepleased with Saudi cooperation, but it is widely believed that some Saudi donors continue to financeterror. (17) A July 2002 report by the RoyalCanadian Mounted Police states that in Saudi Arabia aloneindividuals continue to donate $1 to $2 million a month to bin Laden through mosques and otherfundraising avenues that also perform legitimate charity work. (18) Saudi performance in freezingassets seems to be improving; between late October and late November 2002 the amount of fundsblocked by the kingdom reportedly increased more than tenfold, but whether this enforcement actionhas significantly curbed the flow of funds to terrorists is uncertain. Washington can continue to tryto pressure the Saudis, but for overarching strategic reasons-U.S.-Saudi military ties and worlddependence on Saudi oil-U.S. leverage in the situation or the readiness to use it is limited. Another controversial topic concerns the scope of the U.S.-led campaign. U.S. designations under Executive Order 13224 target international terrorism broadly and include numerous terroristentities that have little or no association with al Qaeda. Yet the international community has not yetadopted a unified definition of who is a terrorist and what constitutes terrorist activity. The universaladage, "One man's terrorist is another man's freedom fighter," has particular relevance here. Forinstance, the Convention on Terrorism of the Organization of the Islamic States says that "peoples'struggles aimed at liberation and self-determination shall not be considered a terrorist crime." (19) HAMAS and Hezbollah are excluded under this definition. Moreover, the European Union has notincluded Hezbollah on its freeze list but only designated the military wing of HAMAS (HAMAS Izzal Din al Qassem) for sanctions purposes. (20) TheU.N. list is limited to entities linked to al Qaedaand the Taliban. In the view of some, differences with European and Middle Eastern states overdesignations of terrorists could detract from the international fight against al Qaeda. Most controversial of all, perhaps, have been the U.S. freezing orders against Islamic charities and other nongovernmental organizations (NGOs). Certain charities allegedly serving as conduitsfor terrorist funds also support legitimate humanitarian causes. One targeted organization--the HolyLand Foundation for Relief and Development (HLFRD)--disbursed approximately $6 million in2000, mostly to Palestinian refugee families in Jordan, Lebanon, and Israel, according to its annualreport. (21) (HLFRD is the largest Islamic charityin the United States.) The government claims theHLFRD funds flow to the civilian "Dawa" infrastructure of HAMAS, which manages broad-basedcharitable activities for needy families, but also provides support for families of suicide bombers,some with HAMAS connections. (Also, other international donors may support the same causes. One allegedly HAMAS-controlled entity that the HLFRD financed--the al Razi hospital in the WestBank--also reportedly received assistance from the U.S. Agency for International Development aswell as the UAE's Red Crescent Society. (22) ) Furthermore, the government's policy, has beendescribed as having created the impression that America is intolerant of a religious minority. Givingalms to the less fortunate is a central tenet of Islam and charities are seen as performing an importantrole in this respect. As the director of the Muslim Affairs Council notes, "The administration policyhas interfered with a basic pillar or tenet of Islam: zakat or almsgiving � In this respect therestriction on Muslim charities is an issue of religious freedom." (23) The above discussion raises a number of significant questions with respect to U.S. counterterrorism policy and efforts to combat terrorist finance. First, based on the evidence, whatconclusions are to be drawn about current patterns and objectives of terrorist financing? Second,have freezing orders and related measures significantly impacted al Qaeda's ability to raise,accumulate, and transfer funds? Third, does the current U.S. approach carry higher costs thanrewards, and are other aspects of policy--such as dismantling terror networks and tracing andundermining their leadership--likely to yield better results? Fourth, can the fight against terrorfinance be made more effective, less disruptive, and more compatible with the policies of foreignnations? These questions will be addressed in the discussion that follows. Terrorists and criminals generate and manipulate money for different ends and in somewhat different ways. Viewed in the simplest terms, terrorists' regional or global financial networks aredesigned to serve predominantly non-financial goals--for example, seeking political influence orlegitimacy, or disseminating an ideology. Criminals, by contrast, are concerned primarily withamassing vast quantities of wealth and with concealing the fruits of their crimes. The distinctionshould not be overdrawn, because both terrorists and criminals engage in activity that could be called"political"--such as bankrolling political campaigns, issuing communications through the media,and sponsoring social projects in poor neighborhoods. Criminals occasionally turn to terrortactics--the Medellin cartel's bombing campaign in Colombian cities at the end of the 1980s is acase in point--and like terrorists, they have at times sought to negotiate amnesty arrangements withgovernments. Yet what criminals seek ultimately is protection in the broadest sense--a favorableand secure environment for the conduct of illicit enterprises. Terrorists' agendas usually are broadlygauged, aiming at liberation or self-determination of a group, redistribution of material power andwealth, or (in the case of bin Laden) fulfilling a radical religious vision. (24) Admittedly, the motivesof terrorists and criminals are sometimes intertwined; some criminals may harbor exalted politicalambitions and some terrorists may behave functionally as bandits. In addition, terrorists tend to finance their operations differently than criminals. Terrorists are known to engage in criminal activity such as robbery, fraud, drug running, and counterfeiting,especially at the individual cell level; yet unlike criminals they rely on contributions for a significantportion of their overall funding. "...the most important source of al Qaeda's money is its continuingfundraising efforts," notes the above-mentioned Council on Foreign Relations report. (25) Diversionof funds from charities and other NGOs plays an important role in this process, although somedonors convey funds to al Qaeda directly. Donors to charities may or may not be aware that someof their money will go to support al Qaeda operations or those of other terrorist groups. Terroristsare said to practice "reverse" money laundering: While criminals seek to obscure the origin ofillicitly-generated cash, terrorists harness ostensibly clean funds for violent and illicit purposes. Additionally, some terrorist organizations rely on sympathetic states for infusions of money, weapons, and training. Examples in the Middle East include the Lebanese Hezbollah and Palestiniannationalist organizations such as HAMAS, although such groups also maintain their own fundraisingmechanisms. (26) Iran currently appears to be theprincipal external sponsor of these entities. Bycontrast, profit-motivated criminals do not ordinarily receive government sponsorship or recognition,although governments might unofficially tolerate their activities (perhaps seeing no reasonablealternative). (27) Terrorist and criminal financing have features in common. Both have employed a range of bank and non-bank transactions to store and transfer funds. Yet in the post-September 11 climate,terrorists may feel especially pressured to move their organizations outside the formal financialsystem. Certainly the freezing of $121 million in terrorist funds, including more than $50 millionin al Qaeda-related accounts, represents a disincentive to using banks. It is possible that trade inhigh-value commodities such as gold and diamonds and reliance on underground banking systems(to be discussed in more detail below) will play a dominant role in terror finance for the foreseeablefuture. General Principles. Al Qaeda financing can be divided into two basic categories: One is more or less centrally-directed funding which supportssystem maintenance activities (recruitment of adherents, training and logistics, proselytizing and thelike) as well as coordination of significant terror activities. These derive mainly from businesscommitments and contributions from Arab supporters, though trade in drugs and commodities mayprovide an additional funding stream. A second category relates to the decentralized day-to-dayoperations of individual cells. Many of these are self-supporting from petty crime or various oddjobs and minor businesses. (28) Al Qaeda's total annual budget is a mystery. The U.N. Monitoring Group report referred to earlier estimates that wealthy individual donors contribute up to $16 million annually. The totalcentrally managed portion is said to be under $50 million a year, but little known evidence exists toback up these figures. (29) Key Sources. Osama bin Laden, son of a Saudi construction magnate, allegedly inherited a fortune that different estimates put at from $25 to $30million to $250 to $300 million. The money reportedly has been distributed in investments and bankaccounts in countries around the globe. The U.N. Monitoring Group report similarly places the sizeof bin Laden's business portfolio at $30 million to $300 million, with income from the portfoliohelping to finance al Qaeda. (30) Among bin Laden's first business ventures was the establishment of a network of companies in the Sudan, among them a trading firm, a construction company, an agricultural production andexport company, and a furniture-making concern. According to the U.S. State Department, binLaden also invested $50 million in shares of a Sudanese bank, the al Shamal Islamic bank. Accountsdiffer regarding the profitability of these ventures. In any case, bin Laden was expelled from theSudan in 1996, under pressure from the United States and Egypt, and was forced to sell his businessinterests there. According to the U.N. Monitoring Report, bin Laden's current portfolio includesinvestments in Mauritius, Singapore, Malaysia, the Philippines, and Panama, as well as bankaccounts in Hong Kong, London, Dubai (UAE), Malaysia, and Vienna and "hundreds of millionsof dollars" secured in real estate in Europe and elsewhere. Such assets reportedly are held in thename of intermediaries and no further details are available. (31) Direct contributions from wealthy Arab benefactors and funds siphoned from Islamic charities are said to represent the mainstay of al Qaeda's global financial network. As noted, contributors mayor may not be aware that their money will be directed to al Qaeda's violent ends. "Knowing" donorsmay sympathize with terrorists' causes, but other motivations also may play a role. (32) For instance,it is widely reported that Arab businessmen paid al Qaeda operatives extortion money to forestallattacks on their business interests throughout the Middle East. Similarly, an al Qaeda-connectedgroup in the Philippines--Abu Sayyaf--is known to extort "revolutionary taxes" from localresidents, businessmen, and white collar workers. (33) The protection theme is a subject of a recent $1 trillion lawsuit brought by the families of the victims of the September 11 attacks against "financial sponsors of terror" in Saudi Arabia andelsewhere. (34) The plaintiffs allege, for example,that following the Khobar Towers bombing inDharan in June 1996 (which killed 19 U.S. military personnel and wounded 515 persons, U.S. andSaudi) that a group of prominent Saudis met in Paris where they "conspired" to pay off al Qaeda andbin Laden. The payments were "to ensure that al Qaeda would never attack inside the borders of theSaudi kingdom again." The plaintiffs also assert that a member of the Saudi royal family brokeredan agreement in Kandahar, Afghanistan, in 1998 to "provide aid and generous financial assistance"to the Taliban in return for guarantees that bin Laden and his followers would not attack the Saudigovernment. The veracity of these allegations, however, has yet to be established (the suit iscurrently before the U.S. District Court). (35) Also, various Islamic charities and related nonprofit organizations allegedly are used by the bin Laden network to finance and recruit terrorists. The United States has designated 12 terror-linkedcharities, including 3 U.S.-based ones, under Executive Order 13224; some of them also are namedin the U.N. Security Council 1390 list. (36) Mediaaccounts, congressional testimony by experts, andother sources have named other charities in addition to the ones already listed. According to oneexpert on terror finance, at least 20 NGOs have been infiltrated and coopted by bin Laden and hisfollowers. (37) Reports suggest varying patterns of involvement. Some entire charities allegedly are tainted. They do "a small amount of humanitarian work and raise a lot of money for equipment andweapons," in the words of one U.S. official. (38) TheU.S.-based Benevolence International Foundation,the leader of which was recently indicted by a U.S. court, allegedly provided organizational coverfor al Qaeda operatives and funneled money to al Qaeda-influenced relief organizations abroad. (39) Perhaps a more typical pattern is for al Qaeda to infiltrate local branches of apparently legitimateinternational charities. For example, the Peshawar (Pakistan) office of the Kuwait-based Revival ofIslamic Heritage Society allegedly "padded the number of orphans it claimed to care for by providingnames of orphans that did not exist or who had died. Funds sent for the purpose of caring fornon-existent or dead orphans was instead diverted to al Qaeda terrorists." (40) A Philippine branchoffice of a large Saudi charity, the International Islamic Relief Organization, allegedly suppliedfunding and weapons for two al Qaeda-linked groups: Abu Sayyaf and the Moro Liberation Front.Similarly, the United States and Saudi Arabia have jointly designated and frozen the assets of theSaudi and Bosnian offices of a multinational charity, al Haramain, for alleged links to al Qaeda.Some observers believe that the headquarters of al Haramain in Riyadh also has to some degreesupported al Qaeda, but the United States so far has not chosen to make that case. Other possible sources of strategic funding for the al Qaeda network can be cited. One terror financial expert says that "The al Qaeda network received millions of dollars per annum through theproduction and distribution of opium, which was smuggled through neighboring Central Asian statesor transported to distributor networks in East Africa. (41) However, some disagreement exists on thispoint. persuasive evidence exists that the Taliban benefitted from the trade; a U.N. Committee ofExperts Report estimated that the Taliban received between $15 million and $27 million per yearfrom taxes on opium production in the late 1990s, before banning such production in 2000. (42) Someexperts believe, however, that al Qaeda itself benefitted little from the traffic, which is said to behighly organized and resistant to penetration by outsiders. (43) Drugs may play a role in al Qaeda'sfinancing (as they do for many terrorist organizations) but their overall importance is uncertain. Trading in precious stones also appears to have played a role in al Qaeda's financing. For instance, the Washington Post , citing Western intelligence officials and other informed sources,claims that bin Laden's network "reaped millions of dollars in the past three years from the illicitsale of diamonds moved by rebels in Sierra Leone." (44) According to the Post , a top bin Laden advisornamed Abdullah Ahmed Abdullah, also one of the FBI's most wanted terrorists, initiated contactswith a diamond dealer representing Sierra Leone's Revolutionary United Front (RUF) in Liberia inSeptember 1998. Negotiations reportedly resulted in an agreement to buy uncut diamonds from theRUF on a regular basis; and Al Qaeda commissioned professional diamond traders to transport thestones to Europe and other destinations, where they were sold for sizable profits. (45) Another revenuesource appears to have been tanzanite, a valuable purple-brown crystal (it turns blue when heated)that is found only in northeastern Tanzania. In this cell, a key player appears to have been Wadial-Hage, reputedly a professional gem trader and former personal secretary of Osama bin Laden.(Al-Hage is now serving a life sentence for his role in the 1998 embassy bombings in Africa.)According to the Wall Street Journal , two al Qaeda companies--Tanzanite King and BlackGiant--exported quantities of uncut stones from Kenya to Hong Kong. How much al Qaeda earnedfrom these operations and whether the network is still in the tanzanite business are not known withcertainty. (46) Funds destined for the overall purposes of al Qaeda (recruitment, training, proselytizing, and the like) can be distinguished, at least conceptually, from funds generated by al Qaeda's largelycompartmentalized cells for their own financial support. Such cells, which reportedly exist in at least40 countries, engage in both legitimate small business activities and criminal ones. For instance,according to FBI documents, a Madrid al Qaeda cell ran a home repair company that providedmasonry, plastering, and electrical services, as well as an enterprise that restored and resolddilapidated vehicles. The cell's activities also included a criminal repertoire--credit card anddocument fraud, as well as street crimes such as home burglary and car theft. A Singapore-Malaysiaal Qaeda cell sold medical supplies and computer software but also engaged in bank robberies,violent assaults, and kidnappings. A few cells appear to generate significant revenues--beyond those needed for self-maintenance. These funds may revert to the organization as a whole. An Algerian al Qaeda cell detected in Britainin 1997 reportedly raised some $200,000 in 6 months. Yet the money was transferred out of Britainto banks in the Middle East and Pakistan and the cell members hardly lived in luxury. In al Qaeda'smost expensive operation, the September 11 attacks, hijackers reportedly transferred more than$25,000 in unspent funds back to unnamed terror financiers in the UAR. (47) Moving and Storing Value. Al Qaeda, like most illegal organizations, has relied on both conventional and unconventional means of moving andstoring funds. Prior to September 11, it appears, al Qaeda relied extensively on commercial banks,shell banks, front companies, NGOs, money exchange firms, and various financial service businessesto move funds for their global operations. The FBI has tracked $90,000 in wire transfers from theUAE to New York and Florida bank accounts of the September 11 hijackers. (48) Al Barakaat, afinancial and telecommunications conglomerate with offices in at least 40 countries around theworld, reportedly was channeling several million dollars a year to and from al Qaeda until thecompany's funds were frozen by the United States and the international community. (49) This pre-September 11 financial network has largely been disrupted, probably compelling al Qaeda to depend increasingly on an informal or alternative way of manipulating and transferringfunds. Several characteristic methods have come to light since the September 11 attacks andapparently predated them. One of those methods is the conversion of assets to commodities: The Washington Post reports that "al Qaeda operatives long before September 11 began shifting money out of bank accounts thatcould be traced and into untraceable gold and precious stones such as diamonds, tanzanite, andsapphires." (50) An article in the LondonObserver claims that al Qaeda struck deals in Africa fordiamonds worth more than $20 million in the months before the attacks. (51) Diamonds, it should be noted, are a particularly attractive commodity for smuggling operatives. "They don't set off alarms at airports, they can't be sniffed by dogs, they are easy to hide, and arehighly convertible to cash," notes a U.S. official. (52) Also, diamonds have a high value-to-weight ratio:a pound of average quality rough diamonds is valued at approximately $225,000. A pound of $100bills is worth in the neighborhood of $45,000, and a pound of gold, at $300 per ounce, is worth$4,800. (53) Reports also have surfaced of large gold shipments, allegedly controlled by al Qaeda and the Taliban, between Palestine and Sudan, apparently transiting Iran and the UAE. The Washington Post,citing European, Palestinian, and U.S. investigators, says that boxes of gold, usually disguised asother products, were taken from Nairobi to either Iran or Dubai and from there mixed with othergoods and flown by chartered airplanes to Khartoum. The Post refers to different reports that thegold represented stored profits from opium and heroin trafficking or remnants of Osama bin Laden'spersonal fortune liberated in the early 1990s. (54) A second alternative way of transmitting value between locations is through underground banking networks. Viewed in the most basic terms, underground banking, called by different termssuch as hawala, hundi, or black market peso exchange, is a way of sending money cheaply andanonymously across borders without physical transport or electronic transfer of funds. Thetransaction is essentially paperless. It works as follows. Money brokers (hawaladars) in one countryreceive cash from a client with no questions asked. For example, the client might be a cab driver inNew York who wants to send $5,000 to his brother in Karachi. The hawaladar alerts a correspondentbroker in Karachi by telephone, fax, or e-mail, who dispenses $5,000 (less fees and commissions)to the brother. Neither the sender nor the recipient needs to identify themselves; the latter only needsto provide a prearranged code, such as a sequence of numbers and letters, to complete thetransaction. At some other point, clients in another country may send an equivalent amount back tothe United States in the same fashion. Over time, the transactions are netted out and no currencyactually crosses national borders. (55) Thesenetworks can be used by terrorists although they wereoriginally conceived, and continue to serve, as financial exchange meechanisms largely involvingimmigrant workers. Similar principles underlie a money laundering system called the black market peso exchange (BMPE), used predominantly by Colombian drug dealers to reintegrate drug profit into their homeeconomies. In a typical BMPE transaction, a Colombian cocaine exporter sells cocaine in the UnitedStates for dollars and then sells the dollars to a Colombian black market peso broker's agent in theUnited States. The broker then deposits the agreed-on equivalent of Colombian pesos (minuscommissions) into the exporter's bank account in Colombia. In this fashion, no currency crosses theU.S. and Colombian borders. The broker may then resell the dollars to a Colombian importer whouses them to purchase U.S. goods that then are shipped or smuggled back into Colombia. (56) Tens of billions of dollars a year are said to move through such informal value transfer systems. Officials in Pakistan, for example, estimate that at least $7 billion enters that country through hawalachannels each year, substantially more than enters through banks. The black market peso exchangeis documented as the "largest known money laundering system in the Westernhemisphere"--representing up to $5 billion annually to Colombia. U.S. officials admit to havingvery little luck tracking movements of funds through these informal systems, which may explain whyefforts to break the terrorist financial chain have been decreasingly productive of late. (57) Yet another technique for laundering money used by terrorists is trade-based fraud, especially fictitious invoicing of exports or imports. Some hawaladars may balance their accounts this way. Inthe example given above, the New York broker might repay his counterpart in Karachi by sendinghim $20,000 worth of computer peripherals, but only invoicing him for $15,000. Such schemes mayhave played a role in moving funds to terrorists, although this is speculation. For instance, U.S. tradedata in 2000 suggest that there has been price manipulation of U.S. exports of honey to Persian Gulfstates. The December 9, 2002 study showed that in that year, for U.S. exports of approximately390,000 kilograms to UAE, Yemen, Saudi Arabia, and Kuwait, importers in these countries paid anaverage of 35 percent over the U.S. per kilogram export price ($1.91), yielding excess funds of$257,000. Whether these funds were channeled to U.S.-based terrorists is not publicly known;however, two U.S. honey companies--the al-Nur Honey Press Shop and the al-Shifa Honey Pressfor Industry and Commerce--appear on the list of terrorist groups and entities designated by theUnited States. (58) The United States has pursued a comprehensive strategy for combating terrorist financing in the wake of the September 11 attacks. Reduced to its essentials, the strategy comprises twointerrelated objectives: The first is to locate, isolate, and freeze terrorist assets, both in the UnitedStates and globally. As already noted, the United States and the international community havefrozen $121 million in terrorist-related accounts since the attacks. A second is to disrupt terrorists'financial infrastructures--specifically, their formal and underground methods for transferring fundsacross borders and between cells, "whether through banks, businesses, hawalas, subverted charities,and innumerable other means." (59) Freeze ordersand other enforcement activities have effectivelyshut down some banks, financial companies, trading firms, and NGOs involved in manipulating andchanneling funds for al Qaeda. A critical underlying component of this strategy has been to enlistinternational cooperation in disrupting terrorists' finances. A Treasury Department report notes,"International alliances against terrorism are crucial because the overwhelming majority of terrorists'assets, cash flow, and evidence lies outside our borders." (60) Partial success has been recorded on thisfront, although problems remain, as will be discussed. Important organizational and regulatory initiatives have accompanied the implementation of strategy. New institutional arrangements and new powers granted by the president and Congress havefacilitated U.S. enforcement actions against terrorist financing. These will be summarized brieflybelow. On the organizational front, the new inter-agency task force Operation Green Quest and the Terrorist Financing Operations Section (TFOS)--headed respectively by the U.S. Customs Serviceand the Federal Bureau of Investigation--have enforcement responsibilities vis a vis terroristfinance. TFOS investigates the financial linkages and support of known terrorist cells, while GreenQuest tries to establish terrorist connections to ongoing investigations of criminal financing. Inpractice, however, the missions and activities of these entities reportedly overlap significantly. (61) Another interagency entity, the Foreign Terrorist Asset Targeting Group, now housed in the CIA'sCounterterrorism Center, analyzes and evaluates intelligence information on terrorist financial flows. Additionally, the Treasury Department has set up a Terrorist Tracking Task Force, the diplomatic arm of Treasury's enforcement effort, which works with foreign governments in blockingterrorists' access to funds. Within the State Department, a new Counterterrorism Finance Unit, underthe Office of Counterterrorism, has been established to oversee international information-sharing andtechnical assistance programs relating to terrorist finance. Also, existing anti-crime entities haveacquired new missions. For example, much of the U.S. and international architecture designed tocombat criminal money laundering--for instance, Treasury's Financial Crimes EnforcementNetwork, DEA's Financial Intelligence Unit, INL, and the 31-nation Financial Action TaskForce--focuses increasingly on specific issues and problems relating to terrorist finance. TheInternal Revenue Service's Tax Exempt and Government Entities Operating Division, whichoversees nonprofit entities, will now investigate "suspect charities of all stripes that provide financialand material support for terrorist groups." (62) Finally, an overarching entity has been establishedwithin the National Security Council, the Policy Coordination Committee on Terrorist Financing,to provide government-wide coordination of financial aspects of the counterterrorism effort. A related priority has been to strengthen the legal-regulatory basis for combating terrorist finance. An important step was the President's Executive Order 13224 of September 24, 2001, whichexpanded the U.S. government's power to freeze terrorism-related assets. The order included in theclass of targeted groups not just terrorists themselves (previous executive orders had imposedsanctions on the Taliban and on terrorists who disrupt the Middle East peace process) (63) but also onall those who provided financial or material support or who were "associated with" designatedterrorist groups. As noted, 250 persons and entities have been designated under the order, many ofthem falling into the category of financiers of terrorism. Other significant measures were mandated by Congress in Title III of the USA PATRIOT Act of October 25, 2001, entitled "The International Money Laundering Abatement and Anti-TerroristFinancing Act of 2001." The Act both cast a wider regulatory net over U.S. financial institutions andrefocused the existing anti-money-laundering regime on the problem of terror financing. The Actmandated increased record-keeping, report filing, and internal policing requirements for a wide rangeof financial institutions--including such previously unregulated sectors as hedge funds, commoditiesbrokers, and commercial loan and finance companies. It prohibited or restricted access to the U.S.financial system by certain categories of foreign banks, including offshore banks, so-called shellbanks, and banks in unregulated jurisdictions. Much of the legislation seemed particularly relevantto criminal money laundering. Several provisions, though, seemed especially designed to disruptterrorist financial networks. For example, Section 326 of the USA PATRIOT Act stipulates that the "Secretary of the Treasury shall prescribe regulations setting forth minimum standards" for verifying the identity ofcustomers, including foreign nationals, opening accounts at U.S. financial institutions. The standardswould include checking the name of the applicant against lists of known or suspected terroristsprovided to the financial institution by a U.S. government agency. Section 328 calls on the Secretary,in consultation with the Attorney General and the Secretary of State, to encourage foreigngovernments to require that all wire transfer instructions sent to the United States include the nameof the originators. Conceivably, such a provision could help authorities track terrorist donors, suchas those who financed the September 11 attacks. Section 330 concerns "International Cooperationin Investigation of Money Laundering, Financial Crime, and Financing of Terrorist Groups." Essentially, it empowers relevant U.S. agencies to conclude agreements with foreign financialsupervisors on two points: to ensure that foreign banks maintain records of terrorists' accounts andtransactions and to "establish a mechanism" whereby those records can be made available to U.S.officials. Other sections of the Act (359 and 373) extend the financial regulatory net to encompassall persons engaged in transmission of funds, including "informal money transfer systems." Underthese provisions, hawaladars or the equivalent would be required to register, obtain licenses, and filesuspicious activity reports (SARS). Finally, a provision of the Act criminalizes bulk cash smugglinginto or out of the United States. Such smuggling, defined as an undeclared movement of more than$10,000 in monetary instruments across U.S. borders, is described as "one of the most reliablewarning signs of drug trafficking, terrorism, money laundering" and similar crimes. (64) The United States also sought to internationalize various regulatory requirements vis a vis terrorist finance, and to some degree the international community consented. On September 28, theU.N. Security Council passed Resolution (UNSCR) 1373, which required member states tocriminalize terrorist financing and to deny terrorists safe harbor. UNSCR 1390 of January 10, 2002,obliged states to "freeze without delay" funds, financial assets, and other economic resources of alQaeda and Taliban related entities. A consolidated list of such entities, mandated by UNSCR 1390and by previous UNSCR resolutions (1267 and 1333), formed the basis of freezing actions. Inaddition, regional groupings such as the European Union and even individual countries establishedtheir own lists. Also, states were encouraged to focus on specific indicators of terrorist money laundering that might be distinguishable from classic money laundering. For example, the 31-member FinancialAction Task Force (FATF), the world's preeminent multilateral anti-money laundering body, hasrefocused its activities to some extent on the terrorist threat. At its October 2001 plenum inWashington, D.C., FATF adopted a special recommendation as a "basic framework" to detect andsuppress the financing of terrorist acts. The most important of the related recommendations includedfreezing and confiscation of terrorist assets, reporting of suspicious transactions related to terrorism,registration of persons or legal entities engaged in informal value transfer systems, documentationof originators of wire transfers, and strengthened oversight of NGOs that might act as conduits forterrorist funds. Similarly, the Asia-Pacific Group issued its own recommendation on AlternativeRemittance and Underground Banking Systems, calling for enhanced regulatory oversight. As partof this effort, the United States participated in a worldwide hawala conference held in the UAE,attended by 58 countries, in May 2002; this culminated in the May 16 "Abu Dhabi Declaration onHawala," expressing concern about the lack of "transparency and accountability in the hawala systemand calling on countries to increase government supervision to prevent abuse of the system bycriminal elements." (65) The U.S.-led effort to sever terrorism's financial lifelines has received mixed reviews to date. Bush administration officials claim that the effort has disrupted at least the centrally-managedportion of al Qaeda's funding, which has been linked largely to the formal banking system. "AlQaeda's stipends to followers are drying up and people are leaving al Qaeda. Donors have been sentthe message that they will be burned if they contribute," says one administration expert on moneylaundering. Nevertheless, some experts believe that the funds seized internationally since September11, 2001, represents only a small fraction of the funds and resources believed to be still available toal Qaeda and the Taliban. (66) Some reports suggestthat al Qaeda may have converted a significantportion of its assets into commodities such as gold and diamonds some months prior to the attacks.Also, some observers point out that the financial needs of al Qaeda have been reduced with thecollapse of the Taliban government and the destruction of most of their training camps inAfghanistan, leaving funds available for other activities. According to the U.N. monitoring report,these may include "a stepped-up indoctrination and recruitment program that provides support torelated fundamentalist organizations, schools, and social organizations." (67) Furthermore, key elements of the al Qaeda organization may still be in place and capable of directing terror operations--October 2002 attacks on a French oil tanker in Yemen and a destructivenightclub blast in Bali as well as the bombing of an Israeli tourist hotel in Mombasa, Kenya havebeen linked in varying degrees to al Qaeda or local affiliates. Additionally, the network's topstrategists Osama bin Laden and Ayman al-Zawahiri apparently have successfully escaped detectionby the authorities. The future direction and odds of success of the campaign against terrorist finance also are uncertain. From a purely financial standpoint, the campaign is yielding diminishing returns, with thebulk of the freezing actions having occurred in the three-month period between September 11, 2001and mid-January 2002. Operation Green Quest reportedly seized $19 million (to October 2002) insmuggled cash and other monetary instruments, of which $11 million is "Middle Eastern related,"yet Green Quest has not determined or is not prepared to acknowledge that any of these funds arelinked to terrorist groups. (68) Certain limiting factors in the campaign already appear evident. One relates to the regulatory burden imposed on U.S. financial institutions. The sheer volume of paperwork required of U.S.financial institutions to comply with anti-money laundering provisions of the Bank Secrecy Act (PL91-508 as amended) and the USA PATRIOT Act (PL 107-56) is enormous. In FY 2001, some12,600,000 currency transaction reports (CTRs), required for transactions above $10,000, and182,000 suspicious activity reports (SARs) were filed with the Treasury Department. (69) Separatingout financial activity of serious criminals, including terrorists, from the more than 12 millionstandard reports filed annually is a task of Herculean proportions. Terrorists can enter the UnitedStates, set up bank accounts, draw on them, and consummate their operations long before theirnefarious plans come to light. One of the September 11 terrorists, Mohammed Atta, had been thesubject of a SAR filed by his bank in connection with a transfer of $69,985 wired into his accountin September 2000 from the UAE. Yet this report was just one of the 153,500 SARs filed that year,and was not distinguishable from those related to other suspected financial crimes. (70) In addition, most terrorists' financial transactions, unlike those of major criminals, tend to be small--falling below the $10,000 threshold that requires notification of the U.S. authorities. Finally,the ability of financial institutions to fully implement enhanced security and due diligenceprocedures itself may be questionable. Such procedures are costly and time-consuming, and someinstitutions may lack the required resources. For such reasons, increased financial regulations andpaperwork might not represent an effective way to stop terrorist finances and the acts that result fromthem. Al Qaeda's adaptiveness in the face of increased law enforcement pressure also is cause for concern. As noted, al Qaeda transferred a portion of its exposed assets into untraceable preciouscommodities (gold, diamonds, and precious stones) even before the September 11 attacks, possiblyas early as 1998 when the United States and some European governments initiated certain freezingactions against the Taliban. Such commodities are small and easy to store and transport. Moreover,they retain their value over time and can be introduced in small quantities in the market withoutattracting attention. (71) One area of U.S. nationalmoney laundering strategy is to investigate the linksbetween precious stones and commodity trading and the funding of terrorist groups; however, thisis an extremely complex task offering uncertain payoffs at this stage. (72) Also significant is evidence that nontraditional money movement systems such as hawala play an increasing role in the terror financial chain. As the U.S. monitoring report notes, al Qaedamembers "will likely use the hawala system to circumvent the regular banking system and possibledetection via Suspicious Transaction Reports." (73) The USA PATRIOT Act, as noted, requireshawala-type businesses to register and to file SARs, but whether those engaged in illegal moneytransactions will do so is a matter of speculation. "That's like saying the corner bookie must registerwith the FBI," says one former U.S. federal prosecutor. (74) As of mid-2002, according to one report,only about 10,000 of an estimated 250,000 money service businesses in the United States hadregistered under the new regulations. (75) Also, theU.S. enforcement record against undergroundbanking systems has been extremely modest. For instance, an intensive U.S.-Colombianinvestigation of the black market peso exchange, which reportedly represents up to $5 billion dollarsannually to Colombia, resulted in seizure of only $8 million in cash as well as some quantities ofdrugs and firearms. (76) The new legal tools under the PATRIOT Act will increase risks for illegal money remitters, but some observers contend that the most likely result could be an increase in the commission theycharge their customers. Putting them out of business or even disrupting them significantly wouldrequire refined targeting of ethnic communities where they operate and extensive undercoverinvestigations; and the results, some argue, might not justify the societal costs or forestall terroristattacks. (77) Also problematic from a law enforcement perspective is al Qaeda's relatively fragmented structure, comprising numerous supporting cells spread over many different countries. Al Qaeda may have further decentralized its operations as a defensive measure since the September 11 attacks. Thepossibility exists that the network could survive in some fashion, even if central sources of fundingare reduced or cut off. U.S. counterterrorism expert Steve Emerson stated in recent Congressionaltestimony, referring to a fishing company managed by an al Qaeda cell in Kenya in 1998: "Thisindependent business structure is a particularly troubling development, because it heralds thelikelihood of terrorist cells operating independently from any foreign financial benefactor, raisingthe lion's share of their assets from otherwise legitimate, nondescript commercial entities." (78) Therelated implication is that law enforcement agencies must spread their resources across a vast numberof low value targets in the hope of discovering a terrorist connection. This may well be happeningin the United States. An August 2001 Washington Post article reported that U.S. authorities areinvestigating more than 500 mostly Muslim and Arab small businesses to determine whether theyare dispatching money raised through commercial activity to terrorist groups overseas. Such activityincluded a potpourri of petty crimes: "skimming the profits of drug sales, stealing and reselling babyformula, illegally redeeming huge quantities of grocery coupons, collecting fraudulent welfarepayments, swiping credit card numbers, and hawking unlicenced t-shirts." (79) Finally, some observers question whether the international campaign against terrorist finance has significantly weakened al Qaeda's main fundraising structure, reportedly centered in SaudiArabia and other Persian Gulf states. Many details of U.S. cooperation with Gulf states in thecampaign are not in the public domain. (For domestic political reasons, Gulf states have beenreluctant to disclose what kinds of assistance they have provided to or accepted from the UnitedStates in this sphere.) Nevertheless, there are signs that cooperation is sometimes halting andincomplete. Major donors in the Middle East still reportedly are funneling millions of dollarsannually to al Qaeda. According to some observers, large international charities based in SaudiArabia with histories of alleged links to Islamic terrorism have not been significantly affected by thefreeze campaign. The United States and Saudi Arabia have jointly designated one such entity--thegovernment-supported al Haramain Islamic Foundation--but the designation was limited to alHaramain's Bosnian and Somali branches. (80) Atthe same time, Saudi officials have publicly rejectedcriticism that the kingdom has not done enough in the global war against terrorism, saying thatdetractors were helping Osama bin Laden by driving a wedge between the United States and SaudiArabia. (81) Al Haramain seems to illustrate the limits of U.S.-Saudi cooperation in fighting terrorist finance. In August 2002, Bosnian authorities lifted a freeze on al Haramain's bank accounts that hadbeen imposed following the joint U.S.-Saudi designation in March and also renewed theFoundation's license to operate in Bosnia. Some experts believe that pressure from Saudi sourceswas behind these moves. (82) Saudi newspapersreported in September that al Haramain was expandingits operations in both Bosnia and Somalia and that it had opened a $530,000 Islamic center inSarajevo. Additionally, there are recent news reports that the Foundation's support for terrorism mayhave extended well beyond Bosnia and Somalia to encompass combat operations by rebel groupsin Chechnya as well as activities of Indonesian militants affiliated with al Qaeda. (83) Saudi intransigence and U.S. timidity in dealing with it are widely viewed in the United States as major obstacles to progress in the war against terror, despite repeated official Saudi denials. Asone U.S. analyst notes, "The U.S. has failed to present a coherent political strategy aimed atdelegitimizing the ideology of Islamic terrorism and undermining terrorists' sources of support. Andit is becoming increasingly clear that the reason for this failure is Washington's unwillingness to riska rupture with Saudi Arabia." Yet the domestic political context constrains Saudis' freedom of actionin suppressing the funding of Islamic militants, including terrorist groups. As the above-mentionedCouncil on Foreign Relations report notes, "It may well be the case that if Saudi Arabia and othernations in the region were to move quickly to share sensitive financial information with the UnitedStates, regulate or close down Islamic banks, incarcerate prominent Saudi citizens or render themto international authorities, audit Islamic charities, and investigate the hawala system--just a fewof the steps that nation would have to take--it would be putting its current system of governance atsignificant political risk. Successors to the current regime could easily be drawn from the veryelements in their societies that the United States is seeking to suppress." (84) Information presented in this report suggests that, while the current campaign against terroristfinance reportedly has diminished al Qaeda's ability to recruit and sustain allegiances, significantfunds still appear to be available to the organization. Efforts to further regulate and introducetransparency into the global financial system are welcome steps; yet they will not necessarily reduceterrorists' striking capacity because most of the proposed measures cannot with certainty separateout terrorists from other types of lawbreakers. The plethora of reporting requirements creates a sortof "needle-in-the-haystack" problem for the authorities. Al Qaeda's evident ability--documentedeven before the September 11 attacks--to exploit non-bank mechanisms of moving and storingvalue, as well as its structure of decentralized self-supporting cells represent additional constraintson law enforcement. Finally, in the view of many observers, the amount of cooperation againstterrorist financing that can be expected from Saudi Arabia and other Gulf states, where support ofPalestinian "freedom fighters" and opposition to U.S. and Isreali policies in that region has gone onfor decades, is problematic. Investigation of terrorists' finances can be a useful tool for identifying linkages among terrorist cells and possibly major donor networks. Analyses of records confiscated by Green Quest and TFOSmight contribute more to the anti-terror fight than the actual freezing of assets, which so far has beenmodest. These collateral benefits are difficult to assess because much of the relevant information remains in the classified realm. Also the Treasury Department announced in November 2002 thatit was offering a reward of up to $5 million for information "leading to the dismantlement of anysystem used to finance a terrorist organization." (85) Much larger rewards ($25 million) have beenissued also for the capture of al Qaeda leaders Osama bin Laden and his aide Ayman al-Zawahiri,but with no result. In general, the potential of these investigative tools remains to be developed.Terrorists, like criminals, can work through labyrinths of intermediaries, create false trails, andexploit Internet money transfers and new payment technologies to disguise the source and ownershipof their illicit proceeds. Overall, although U.S. financial actions against terrorism have produced significant tangible successes, whether measured in terms of immobilization of funds or of knowledge gained aboutterrorist structures, the full impact of those actions is uncertain. The Bush administration's 2002National Money Laundering Strategy promises to "apply the lessons we have learned from thefederal government's effort against money laundering to attack the scourge of terrorism." Yet suchefforts have made limited headway against money laundering operations such as the black marketpeso exchange that recycles billions of dollars in illegal proceeds, mainly from the drug trade. Terrorists' multitudinous small transactions, often camouflaged as legitimate business or socialactivities, may prove even more difficult for financial investigators to track and shut down. Furthermore, the campaign against terrorist finance has provoked controversy on various religious, public policy, and humanitarian grounds. The new antiterror standards have been portrayedas selectively anti-Islamic. Indeed, the 12 charities designated under Executive Order 12334 allappear to be associated with Islamic causes. Some observers speculate that the U.S. image abroadhas suffered as a result of the freezing of charities' funds. One U.S. Muslim spokesperson agrees,"In an ideal setting, American Muslim charities serve a national security interest by promoting apositive image of America throughout the Muslim world. Unfortunately, the view that America'sMuslims are a harassed or persecuted minority is gaining ground overseas, partly because of theblockage of the Muslim charities." (86) A related issue concerns the Bush administration's definition of the terrorist enemy, which, as noted, clearly diverges from that of European and (especially) Middle Eastern states. The broad U.S.designation of Islamic militant groups for freezing purposes is said to have deepened the sense ofambivalence and unease in the entire Arab region. According to one account, "Countries such asSaudi Arabia, Egypt, Jordan, and Syria have urged Bush to focus narrowly on blocking off binLaden's financial network rather than simultaneously targeting other terrorist groups." (87) In this view,Washington's simultaneously broad and unilateralist approach to terrorism detracts from theinternational coalition against al Qaeda, diminishing the chances that Arab governments will crackdown on its major supporters. Other possible dysfunctions of the campaign relate to the interruption of assistance flows. For instance, the crux of the government's case for closing the Holy Land Foundation was that theFoundation's projects in the West Bank and Gaza allowed HAMAS to amass popular support "bydistributing charity to people who then associated this social outreach with HAMAS." (88) Yet thebenefits of cutting funds to HAMAS-controlled entities in this case can be weighed against thepotential human costs. The Foundation's programs and services have "directly improved the livesof more than 500,000 people," (89) according to its2000 Annual Report. (The fact that otherinternational donors, according to the U.S. Agency for International Development, supported aHAMAS-built hospital funded by Holy Land underscores the dilemma associated with charitablegiving in this war-torn region.) In sum, while charities and other financial entities may move money to terrorists, U.S. efforts to shut off this flow have caused controversy. In the view of some observers, closing down entireenterprises that fill social needs in poor countries in order to keep some funds out of terrorists'hands carries excessively high political and diplomatic costs. No simple solutions may exist to thisapparent conflict. However, various "damage control" measures have been proposed to increasetransparency of charities' operations and reduce their vulnerability to freezing actions. These includerequiring charities to list their donors, to specify exactly how their funds are used, to reveal thenames of their directors, and to disclose financial links to other charitable organizations. Anotherproposal is to treat charities under existing legislation (the 1970 Bank Secrecy Act and the 2001 USAPATRIOT Act) as financial institutions subject to money laundering risk; charities would then berequired to submit Suspicious Activity Reports, establish internal audit procedures, and submit tofederal examiners like, say, banks, insurance companies, and hedge funds. (90) More regulatory oversight might afford officials the chance to indict and prosecute individuals (or branches) within charities that are disbursing funds to terrorists, while preserving the financialsituation of the organization as a whole. The United States has proposed to other countries, includingSaudi Arabia, that they set up government bodies to better monitor and control charities, so the ideaseems to be gaining currency. Saudi Arabia itself has announced plans to set up such a governmentagency. (91) To be sure, wealthy donors who wantto support al Qaeda terror bombers need not usecharities as conduits for their funds. (92) Yetincreasing regulatory scrutiny could both diminishcharities' role in terrorist finance and allow legitimate funding of projects to proceed, which are theprincipal points at issue here. Recently, the Treasury Department issued "voluntary best practices"guidelines for charities in response to requests from American Muslim communities who reportedreductions in charitable giving and apprehensions among charitable donors as a consequence of Treasury's blocking actions; whether these guidelines will provide sufficient protection to charities,though, remains to be seen. (93) A more difficult problem is reconciling the different U.S. and Middle Eastern conceptions of what constitutes terrorist activity. The more encompassing U.S. definition, which reflects U.S.policy in the Israeli-Palestinian conflict as well as widespread domestic abhorrence of violencedirected against civilians, clearly is at odds with that of much of the Islamic world. (94) The ratheregregious fund-raising campaigns in Persian Gulf states in support of families of Palestinian"martyrs," including suicide bombers, epitomizes these conflicting perceptions. A possible U.S.strategy in this situation would be to pursue the campaign against terror finance on different levels,publicly asserting opposition to terrorism in any form while privately seeking agreement with SaudiArabia and other involved states on ways to curb flows of funds to al Qaeda. Even with a limiteddiplomatic agenda, though, obtaining meaningful cooperation against terror may prove to be anuphill battle. (95)
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The U.S.-led international campaign to deprive terrorists of funding has so far produced mixed results. Though more than $120 million in terrorists' accounts reportedly has been blocked sinceSeptember 11, 2001, less than 20 percent of this total has been frozen in the past 11 months. Theal Qaeda network increasingly is shifting to non-bank methods of moving and storing value and isrelying on a decentralized structure of largely self-financing cells; moreover, Middle Eastern donorsapparently continue to provide funds to al Qaeda and other terrorist groups. In addition, thecampaign has aroused controversy on various political, religious and humanitarian grounds and isviewed in some quarters as broadly anti-Islamic. How the crackdown on terror finance should beprioritized and integrated with a comprehensive global struggle against terrorism thus becomes anissue of considerable significance for U.S. policymakers and for Congress.
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A firm's financial statements provide investors and creditors with essential financial information to evaluate the firm's performance. Financial statements are also a primary means by which firms communicate with capital markets' stakeholders, including investors, creditors, regulators, and the public. Congress created the Securities and Exchange Commission (SEC) in 1934 to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. However, Congress retains its oversight responsibilities over the SEC. One aspect of the powers Congress gave the SEC is the statutory authority to establish accounting standards for the private sector in the United States. Since the creation of the SEC, domestic companies in the United States have used U.S. Generally Accepted Accounting Principles (U.S. GAAP) to issue financial statements. Throughout its history, the SEC has relied on the private sector to establish and evolve U.S. GAAP. Currently, the SEC recognizes the Financial Accounting Standards Board (FASB) as the designated organization for establishing U.S. GAAP in the United States for the private sector. Many foreign countries, including the European Union (EU), either require or allow International Financial Reporting Standards (IFRS) for firms in their jurisdiction. The EU also accepts U.S. GAAP as equivalent to IFRS. The SEC and FASB have been considering incorporating IFRS where compatible with U.S. GAAP since the signing of a Memorandum of Understanding (MoU) with the International Accounting Standards Board (IASB) in 2002, known as the Norwalk Agreement. The FASB and IASB committed in the MoU to developing a "high-quality compatible accounting standards for both domestic and cross-border financial reporting." They also agreed to make existing financial reporting standards fully compatible and to maintain the compatibility between both standards. Since 2002, the SEC has delayed the date of convergence and has changed direction on whether the United States will ultimately adopt or converge with IFRS or maintain and evolve U.S. GAAP independent of IASB. This report first provides a brief explanation of the different accounting standards and U.S. capital markets. U.S. capital markets are discussed in the context of how converging or remaining on U.S. GAAP may affect investors and firms. It then examines congressional interest in convergence issues, including recent statements by SEC's senior leadership on this issue. In conclusion, the report discusses a number of policy options facing Congress in the U.S. GAAP versus IFRS debate. Appendixes of key definitions for certain concepts and terminology and acronyms used in this report are provided. In simple terms, accounting standards are agreements among practitioners (i.e., accountants, auditors, and regulators) on how each line item on the financial statement should be valued and reported. The rules and guidelines in aggregate comprise U.S. GAAP or IFRS. U.S. GAAP is widely considered to be rules-based accounting that relies on specific guidance and a list of detailed rules on how accounting principles should be applied to economic events. As the name indicates, accounting standards in the United States are described as U.S. Generally Accepted Accounting Principles ; arguably, it can be asserted the rules-based accounting framework in the United States is guided by a set of accounting principles. Over the decades, however, U.S. GAAP has become more rules based as practitioners have sought clarity from regulators on how best to implement the accounting standards as prescribed by U.S. GAAP and through the judicial process. In contrast to U.S. GAAP, IFRS is considered principles based. Rules-based standards with their specificity may not address all unforeseen situations, whereas principles-based standards provide a framework for decisionmaking (the spirit of how rules should be interpreted and followed) but do not provide specific guidance or a list of detailed rules as with U.S. GAAP. If a practitioner is in doubt about how to apply the principles, IFRS directs the practitioner back to the principles. Whether IFRS will evolve into a rules-based standard, similar to U.S. GAAP, may not be known until it has weathered significant scrutiny from practitioners and the judicial system. Since its creation in 1934, the SEC has had the authority to establish financial accounting and reporting standards for private-sector firms. However, throughout its history, the SEC has relied on the private sector to establish such standards. The SEC recognizes U.S. GAAP, the accounting standards promulgated by FASB, to be the authoritative accounting standards for the private sector in the United States. The FASB is an independent entity that functions under the oversight of the private, nonprofit Financial Accounting Foundation (FAF). Both FASB and FAF are headquartered in the United States (Norwalk, CT). Since enactment of the Sarbanes-Oxley Act of 2002 (SOX), FASB has been funded by fees collected from issuers of publicly traded securities. In 2014, FASB received $24 million in accounting support fees from issuers. It also made a non-recurring contribution of $3.0 million to IASB. The support fees for FASB are subject to SEC review. In 2007, the chief accountant of the SEC reportedly refused to authorize the budget for FASB until the FASB chairman signed a MoU between the SEC and FASB. The MoU reportedly gave the SEC the power to nominate and interview FASB members and FAF trustees. U.S. GAAP consists of concepts, principles, and rules for communicating financial information for profit and nonprofit sectors within the United States. U.S. GAAP gives guidance on what should be reported on financial statements, how figures should be calculated; and what other management discussion and analyses are required for an investor to make an informed decision about a firm's performance. In many respects, U.S. GAAP is described as the "gold standard," because it has evolved since the 1930s within the U.S. institutional infrastructure through decades of due process that is uniquely sensitive to the needs of U.S. investors and capital markets. Accounting practitioners also perceive U.S. GAAP to adhere closer to the conservatism princ i ple than IFRS. Even after certain countries have adopted IFRS (e.g., EU member countries), U.S. GAAP is still accepted in those countries, arguably strengthening the credibility of U.S. GAAP. In 1973, the American Institute of Certified Public Accountants (AICPA) and its counterparts in other countries established the predecessor organization to the IASB, the International Accounting Standards Committee (IASC). The IASC (unlike FASB and IASB) was essentially a nonbinding agreement rather than a formal body. It was created to establish basic global accounting standards in response to increased economic integration and cross-border capital transactions. Only a few countries that lacked the resources to create their own accounting standards used the IASC standards until IASB began issuing IFRS in 2003. In 2005, the EU member countries switched from their local GAAP to IFRS. Since 2003, more than 100 countries at varying degrees have either adopted or converged with IFRS. The IASB is a member of the IFRS Foundation based in the United Kingdom. Unlike the designated authority granted by the SEC to FASB to set the accounting standards in the United States, the IASB is an international body tasked with the responsibility (but not the designated authority) to establish IFRS. The IASB seeks to promote unified accounting standards through IFRS by broadly defining the principles of specific accounting concepts. Individual countries have two main ways of incorporating IFRS: 1. Adoption—One approach is to accept IFRS without any modification as set by IASB (e.g., EU member countries). 2. Convergence—Another approach is to converge, where a jurisdiction would closely align some or all of its local GAAP with IFRS. Convergence can be achieved by either incorporating specific standards from IFRS or modifying the local GAAP to more closely resemble IFRS. For example, in China, IFRS is neither required nor permitted but the Chinese Accounting Standards (CAS) has substantially converged with IFRS. To a significant degree, IFRS was customized to a more easily understandable format for the Chinese markets. Similar to FASB, the AICPA, IASB, IASC, and other nongovernmental organizations create and promote accounting and auditing rules and guidelines, but they do not have authority to enforce their compliance for the private industry in the United States. Financial statements provide economy-wide benefits to firms and investors through the dissemination of accurate information. One way these benefits are realized is through the efficient allocation of capital between investors and firms. Investors rely on financial statements to make informed decisions on how best to invest their savings. This section of the report first discusses congressional interest in SEC actions on the issue of which standard, U.S. GAAP or IFRS, best serves the interest of the U.S. capital markets. Next, it discusses the implications of remaining on U.S. GAAP or adopting IFRS from investor and firm perspectives. One aspect of the powers Congress gave the SEC is the authority to establish accounting standards for the private sector in the United States. Although the SEC has the Office of the Chief Accountant, whose primary mission is to establish and enforce accounting and auditing policy to ensure that financial statements improve investment decisions, the SEC has relied on the private sector to establish accounting standards in the United States. As previously discussed, FASB and its predecessor organizations have promulgated U.S. GAAP with the SEC largely assuming an oversight role except on the issue of establishing global accounting standards. If the SEC chooses to switch from U.S. GAAP to IFRS, it might have major implications for U.S. firms and investors, which could be of interest to Congress in its oversight capacity of the SEC. Congressional interest in accounting convergence has manifested itself in several ways, including hearings, letters to the SEC, and earlier enacted legislation. Most recently, Congress expressed interest on the convergence of accounting standards at a March 2015 hearing on the SEC's FY2016 Budget Request held by the House Committee on Financial Services. In June 2014, the bipartisan joint Congressional Caucus on CPAs and Accountants wrote a letter to the SEC Chairman on the issue of convergence. In both instances, some Members of Congress voiced their concerns over "further incorporation of IFRS into the U.S. financial reporting system" and the existence of a "two-GAAP environment, enabling accounting arbitrage; investor confusion arising from differences in accounting treatments; and possible legal challenges." Some Members of Congress have also expressed similar concerns publicly. Previous congressional interest in IFRS has also manifested itself in enacted legislation that required the SEC to study the issue. For example, Section 108(d) of the Sarbanes-Oxley Act of 2002 required the SEC to "conduct a study on the adoption by the United States financial reporting system of a principles-based accounting system." The SEC concluded the study as required by SOX in 2003, recommending that U.S standards should be more principles based, although the study recognized the benefits and limitations of both rules-based and principles-based standards. Section 509 of the National Securities Markets Improvement Act of 1996 required the SEC to report to Congress on the development of international accounting standards. The study stated in 1997 that the international accounting standards, developed by the International Accounting Standards Committee (IASC), needed to be improved before acceptance could be considered in the United States. The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act addressed many reforms to the financial industry, but did not specifically address accounting convergence issues. While SEC reports to Congress in 2003 and 1997 stated the pursuit of a unified global accounting standard might be in the interest of the United States, a later report by the SEC in 2012 did not make any specific policy recommendations on incorporating IFRS. The future direction of how accounting standards evolve in the United States could be decided by Congress, the SEC, or FASB. To date, Congress has not enacted legislation on incorporating IFRS. However, if Congress chooses to directly address the issue, it could pass legislation. Alternatively, it can continue to defer to the regulators as it has since the creation of IFRS in 2003. Although the SEC has the statutory authority for establishing accounting standards in the United States, it has delegated the responsibility to FASB to continue to find common ground with IASB on specific standards. At this point, Congress is seen as unlikely to act unless the SEC were to change the status quo. To date, current senior leadership within the SEC has proposed three different approaches to incorporating IFRS within the United States without achieving consensus. The first approach, according to SEC Chairman Mary Jo White at the aforementioned March 2015 hearing, is the establishment of a single set of high-quality global accounting standards. A second approach was proposed by SEC Commissioner Kara M. Stein in a March 2015 speech. In her speech, she stated that a single set of globally recognized, high-quality accounting standards is a "wonderful vision," but with a myriad of shortcomings, and the "debate between dueling standards needs to move on." She also stated that she was not convinced of a need to abandon U.S. GAAP in favor of IFRS. She proposed an alternate approach of developing accounting standards that are responsive to the interconnected digital world, which can minimize the differences and maximize global investment and access to capital. A third approach was proposed by SEC Chief Accountant James Schnurr, who proposed that financial statements based on IFRS should be allowed as supplementary information to U.S. GAAP statements. In December 2014, he stated that international regulatory and accounting constituents continue to want clarity on what action, if any, the SEC will take regarding incorporating IFRS into U.S. GAAP. The text box below highlights the key events toward convergence between 2002 and 2015. A high-quality uniform global accounting standard, IFRS or another internationally accepted standard, might provide economy-wide benefits for the United States. Firms might benefit from easier access to global capital markets, because a uniform accounting standard may make it easier for investors to compare firms' performance under one standard than under different standards. The easier access to global capital markets could potentially benefit U.S. firms in three main ways: 1. Improved capital allocation—Adoption of IFRS could potentially provide overseas investors with comparable and familiar financial statements that might be similar to the ones they use in their own countries. This, in turn, could result in increased investments in U.S. firms. 2. Lower cost of capital—Increased foreign demand for debt or stocks issued by U.S. firms could lower the costs for U.S. firms to issue debt or raise equity. A lower cost of capital would, all else equal, lead firms to increase physical investment, thereby stimulating economic growth in the United States. 3. Greater market liquidity—A uniform global accounting standard might increase cross-border investor interest, which could result in assets that can be easily purchased or sold without significant change in the asset's price. Despite the potential benefits of adopting IFRS or a similar uniform global accounting standard, U.S. GAAP might already provide the aforementioned benefits, and it is not certain that IFRS would be able to achieve these benefits. FASB has been responsive to customize and evolve the U.S. GAAP to address the needs of the growing economy in the United States. Further, the benefits of adoption should not be overstated, because even under a single set of high-quality financial standards, financial reporting may vary among firms, industries, and jurisdictions. Institutional infrastructure plays a significant role in how accounting standards are interpreted and implemented in each jurisdiction. In addition, a single set of global accounting standards that must address the needs of both the less sophisticated smaller economies and the more sophisticated larger economies may not serve the best interests of U.S. investors and firms. U.S. GAAP has evolved over the past 80 years and is customized to meet the needs of U.S. investors and firms. Any changes to existing accounting standards must be considered in a broader context of how U.S. GAAP has evolved within the U.S. institutional infrastructure. The rest of this section of the report provides contextual background on how the different accounting standards might affect U.S. investors and firms, including certain concerns that have been raised regarding IASB. It also discusses potential effects on U.S. equity. A more detailed analysis of challenges U.S. investors and firms might face under various policy options is discussed later in the report. U.S. investors have become familiar with financial statements and disclosures issued under U.S. GAAP, which has evolved within the institutional infrastructure of the United States since the 1930s. Investors who have been using financial statements under U.S. GAAP for more than 80 years may find adapting to IFRS a significant challenge. A 2012 SEC study on the incorporation of IFRS found that U.S. investor knowledge of IFRS ranged considerably, with many unfamiliar with IFRS. If insufficient time were allowed for further incorporation of IFRS into the U.S. capital markets, individual investors may lack the resources to become familiar with IFRS at the same speed as institutional investors. Individual and institutional investors would also need to have sufficient financial resources to weather any uncertainties that may arise as part of either adoption or convergence with IFRS. In addition, recent events have led some to view IFRS critically. During the recent financial crisis, there were allegations that IASB sidestepped due process. Reportedly, IASB did not give sufficient notice and time for comment and review of the draft proposal on the interpretation of fair value standards. The interpretation was quickly issued, which allowed financial institutions to reclassify some loans as a way to avoid revaluing those loans at lower market prices. These accounting changes allowed firms to value these assets at a price higher than otherwise might have been allowed, which did not require these firms to recognize the losses immediately. If a firm does not recognize losses when assets are not performing, it has the potential to harm investors. In the short run, investors may perceive the firm as being healthy, although in the end, unless the asset value recovers, investors may suffer substantial losses. In 2013, a group of British investors reportedly had similar concerns that led them to write to former EU Internal Markets Commissioner Michel Barnier that IFRS accounting rules were harming shareholders and destabilizing the economy. They reportedly raised concerns that IFRS rules adopted by the United Kingdom in 2005 had allowed companies and banks to hide the increased risks on their balance sheets. FASB's and IASB's response to fair-value accounting standards during the recent financial crisis might have slowed further erosion of asset values that could have led to a more significant systemic crisis. Another perspective to consider is that investors may have greater confidence under rules-based U.S. GAAP if equity valuations are consistently more predictable than under principles-based IFRS. A firm's management, arguably, could have greater influence on the firm's earnings under IFRS. Two studies that examined net income under the two different standards found that higher net income was reported under IFRS than under U.S. GAAP. The principles-based approach, arguably, allows for more management discretion when determining net income under IFRS. An analysis of foreign private issuers (FPIs) that filed Form 20-F with the SEC in 2006 found that 75% of the FPIs reported higher net income and 43% reported higher stockholders' equity under IFRS than under U.S. GAAP. Another study analyzed 73 of the largest European companies that reported under both U.S. GAAP and IFRS and found that 60 (82%) of them reported higher net income under IFRS than under U.S. GAAP. The accounting standards developed by IASB might not only be influenced by the needs of the capital markets but also by how IASB is funded and governed. In 2014, the IFRS Foundation received more than 25% of its annual contributions from international accounting firms. One of the firms not only contributes to the IFRS Foundation, but also audits its financial statements, raising concerns over conflict of interest. In addition, Members of the European Parliament (MEPs) criticized the IFRS Foundation for poor governance structures, a lack of transparency, and close links to the accounting industry. The former MEP and Chairman of the European Economic and Monetary Affairs Committee, Sharon Bowles, reportedly stated, "Questions have been raised by the European Parliament about the governance structures and the lack of transparency of these bodies, as well as their close links to the accounting industry." U.S. firms rely heavily on publicly traded equity and debt financing to raise funds. The financing provided through capital markets is usually from a large pool of investors at arm's length (i.e., parties to a transaction that are independent and on equal footing without any special relationship or having another agreement on the side). Consequently, U.S. firms' financial statements and disclosures face scrutiny by investors who rely on publicly available information to make informed decisions. U.S. GAAP has evolved over the past 80 years in conjunction with the U.S. institutional infrastructure and its capital market participants, including investors, creditors, accountants, auditors, and regulators. In contrast to how U.S. GAAP has evolved to serve the specific interests of the U.S. capital markets, IFRS was created to serve the interest of more than 100 jurisdictions with gross domestic products (GDPs) of varying sizes and differing levels of economic development. On the one hand, not adopting or converging with IFRS could potentially put U.S. firms at a competitive disadvantage in raising funds in overseas markets and therefore increase their capital costs. On the other hand, delegating authority to an international body to set accounting standards in the United States might not serve the best interest of U.S. firms. Based on the expectation that the United States will eventually either adopt or converge with IFRS, the SEC in 2007 changed the requirement for FPIs to file Form 20-F and allowed FPIs to file under IFRS. This ruling eased concerns that some foreign corporations might delist from the U.S. exchanges due to additional costs they would incur either reconciling or converting from IFRS to U.S. GAAP. In 2014, more than 5,000 companies were listed on the major U.S. exchanges. The SEC estimates that there were nearly 1,000 FPIs in 2014; of which, approximately 50% of foreign private issuers filed under IFRS without reconciling to U.S. GAAP. Perspectives on a unified global accounting standard have evolved in the United States since the signing of the Norwalk Agreement in 2002. Many in the global community prefer that the United States adopt or closely converge with IFRS, but perspectives vary among domestic stakeholders on what best serves the interest of U.S. capital markets. Congress, in its oversight capacity of the SEC and FASB, has several policy options. In choosing between U.S. GAAP and IFRS accounting standards, arguably, the policy goals of protecting investors and facilitating capital formation would need to be weighed. This section of the report examines the benefits and challenges of three of those policy options: 1. Maintain U.S. GAAP, while continuing to work with IASB on convergence (issuing joint standards) when it serves in the best interest of U.S. capital markets. Another aspect to consider within the scope of maintaining U.S. GAAP is to create and promote International U.S. GAAP (I-GAAP). The new I-GAAP would incorporate the best aspects of U.S. GAAP, yet it could be responsive to the needs of the world's capital markets that are similar to the United States. 2. Adopt IFRS as the U.S. accounting standard, which would require some timeline for implementation that considers the interests of various stakeholders. 3. A hybrid policy option would give U.S. firms the choice of issuing financial statements under either U.S. GAAP or IFRS, or include IFRS financial statements as supplemental information to U.S. GAAP. One policy option is to maintain U.S. GAAP. Because accounting standards are continuously evolving, maintaining the status quo raises the question of whether FASB and IASB should coordinate when responding to emerging issues. FASB, in its capacity as the accounting standard setter in the United States for private firms, has jointly worked with IASB to develop certain accounting standards, but coordination has fallen short of working toward convergence. The rest of this section of the report discusses various aspects of why maintaining U.S. GAAP might be in the best interest of the U.S. capital markets. The discussion begins by providing two different examples of how U.S. GAAP financial statements are integrated into the institutional infrastructure of the United States and why changing to a different accounting standard would need careful consideration. It then discusses, based on current events, reasons why maintaining a responsive and independent U.S. accounting standards setter is important to U.S. investors and firms. The next section discusses why the SEC might want to change a 2007 ruling that allowed foreign firms listed in the United States to file under IFRS. In 2007, the SEC changed its ruling that required foreign-listed firms to reconcile their financial statements to U.S. GAAP and allowed them to file under IFRS. Lastly, it presents a discussion on creating a new alternative international accounting standard based on U.S. GAAP. Switching to IFRS would have consequences beyond financial reporting. Two different examples of how U.S. GAAP is closely linked with other aspects of the U.S. institutional infrastructure—tax laws and statutory reporting—might illustrate this interplay. Tax laws require that taxable income be computed under the method of accounting that a taxpayer maintains for computing their income (i.e., normal business income). The change from U.S. GAAP to IFRS might not only affect financial reporting but how the tax liability is determined for U.S firms that carry inventory. The U.S. tax code allows Last In First Out (LIFO) valuation of inventory as a consequence of GAAP accounting when determining tax liability, whereas IFRS does not allow LIFO (see text box). The issue surrounding LIFO has been one of the most frequently discussed issues over IFRS adoption. The issue was discussed at a March 24 SEC budget hearing held by the House Financial Services Committee. Similar to how financial reporting is closely linked with requirements in tax laws, statutory reporting (i.e., regulatory filings) is closely linked to financial reporting. Although statutory reports often leverage some of the GAAP financial information, they communicate a different set of information that is not readily communicated by GAAP financial statements. For example, in the insurance industry, statutory reports focus on the insurance firm's ability to pay the claims of the insured, whereas GAAP statements focus on the revenue and profit generated by the insurance firm. Likewise, the banking industry requires banks to file call reports with the bank regulators. Call reports communicate additional information about the bank's capital and liquidity among other information about the health of the bank. Both GAAP and statutory filings are useful for investors and regulators. Regulators frequently use statutory reports to gather information about the health of a specific industry, which is often useful for policymakers. An example of FASB's ability to maintain its independence and be responsive to the needs of U.S. capital markets is how it has addressed the concerns of U.S. firms over the implementation of the new revenue recognition standard. On May 28, 2014, the FASB and IASB issued a joint revenue recognition standard for revenue from contracts with customers. The new standard was to go into effect for reporting periods beginning after December 15, 2016. However, in response to firms' concerns, on April 1, 2015, FASB sought comments on delaying the implementation of the new revenue recognition standard by one year to December 15, 2017, without IASB consent. Reportedly, when FASB was initially considering postponing the implementation date, IASB was not. Nearly a month later, when FASB voted to delay implementation, IASB voted to publish an exposure draft proposing a one-year delay in implementation "to keep the effective date of the IASB's and the FASB's revenue standards aligned." FASB's ability to respond to the concerns of U.S. capital market participants at a faster rate than IASB might provide policymakers with a significant reason to maintain the institutional structure of U.S. accounting regulators and U.S. GAAP. As FASB and IASB try to create converged standards, some of the underlying differences in accounting standards are becoming more apparent, leading to divergence between U.S. GAAP and IFRS. The degree of convergence or divergence might become more evident as the accounting standards are updated over time. For example, FASB and IASB have had differing approaches in response to constituents' concerns about accounting for "Financial Instruments" that began as a joint project in 2005. In 2014, based on the feedback it received on the exposure draft, "Accounting for Financial Instruments and Revisions to the Accounting for Derivative Instruments and Hedging Activities," FASB revised its original proposal and chose a deliberative approach in three phases, while IFRS issued the new standard, IFRS 9, to be effective January 1, 2015. Much of the recent U.S. debate among stakeholders and Congress has focused on how much convergence is desirable. The differences in accounting standards could benefit capital markets if the competition and evolution of different approaches between accounting standards lead to better standards over time. Differing approaches could lead to FASB and IASB learning best practices from each other, which could result in improved financial reporting and disclosures, but it could also lead to continued divergence from creating one common global accounting standard. In 2007, the SEC changed the requirement for foreign private issuers to file Form 20-F and allowed FPIs to file under IFRS. Congress and the SEC may want to consider requiring all listed firms in the United States, including foreign private issuers, to report under U.S. GAAP or reconcile IFRS financial statements with U.S. GAAP standards. The SEC could change its 2007 ruling that allowed FPIs to file under IFRS and require them to reconcile (Form 20-F) to U.S. GAAP or file under U.S. GAAP. As previously discussed, requiring all U.S.-listed companies to file under one accounting standard might eliminate any investor confusion, but foreign firms might respond to this change by delisting. If the United States continues to maintain U.S. GAAP, an option to consider is to create and promote an international version of U.S. GAAP (I-GAAP), as proposed in a FASB-commissioned report in 2009. For countries that have similar characteristics to the U.S. economy and institutional infrastructure, adoption of I-GAAP might promote greater confidence in their capital markets. Continued divergence between GAAP and IFRS might provide more of a reason to create I-GAAP, which would adhere to the fundamentals of the rules-based approach of U.S. GAAP but would have greater input from other jurisdictions. As previously discussed, competing standards (I-GAAP and IFRS) might lead to better standards that benefit capital markets. An ongoing criticism of IFRS is the ability of each jurisdiction to effectively implement and enforce the newly adopted IFRS standards within its jurisdiction. To counter some of the criticisms faced by IFRS adoptees and maintain I-GAAP's credibility, I-GAAP adoptees could be required to adhere to specific expectations on implementation, enforcement, and auditing requirements. Each jurisdiction must initially qualify to adopt and implement I-GAAP. An international FASB (I-FASB) could be established as the governing body to develop I-GAAP and to determine which countries qualify to adopt I-GAAP. Acceptance into I-GAAP after meeting certain standards might function in a similar fashion to how member countries are admitted to the EU. Thereafter, each jurisdiction could be periodically certified by I-FASB on their compliance with I-GAAP. Certifying only select countries to implement I-GAAP and monitoring their ongoing adherence could help maintain the credibility of I-GAAP. Although there might be many benefits to dual international accounting standards, dual standards may prevent eventual global convergence to a single set of standards. A second policy option for Congress and the SEC to consider is the complete adoption of IFRS as the U.S. accounting standard. This section of the report discusses different ways (options) of adopting IFRS and specific issues related to those options; transitional issues common to the ways of adopting IFRS; and the role of U.S. institutions. The first way is for the SEC to choose a specific date that all public companies must begin reporting under IFRS. This approach might be the least confusing and most straightforward for firms and investors, but it presents a particular set of challenges. Not all firms may be able to adhere to a specific date, because a significant amount of basic resources (e.g., human, technology, and financial) necessary for IFRS implementation might not be available at the same time. If the conversion date was set far into the future with sufficient planning, then the resource constraint might not be as significant. The second way to implement IFRS is in multiple phases. In the United States, the last significant changes to accounting standards as required by the Sarbanes-Oxley Act were phased in over a number of years. Implementing IFRS over several years based on firm-revenue size or by industrial segment might allow stakeholders sufficient time to adapt to the new standards without significant disruption to individual firms or the economy. Phasing in IFRS based on firm-revenue size with larger firms adopting first could be justified on the grounds that firms with higher revenues are able to absorb the costs more readily than smaller firms. Further, because there are significantly more smaller firms than larger firms, it will allow more time for the supporting companies to scale up their resources to support the transition. This approach might enable smaller firms to learn from the successes and failures of larger firms and identify ways to reduce costs of conversion. The potential for investor confusion exists, however, during the period of transition as firms within the same industry could be reporting under two different standards. Another option would be to implement IFRS by specific industries over time. Industry-specific implementation would be easier for investors and other stakeholders trying to evaluate the performance of a company among its peers. However, specialization that auditors, financial analysts, and consultants develop in one industry might not readily translate to another specific industry. For example, consider an individual who is specialized in auditing banks. Arguably, the knowledge of the banking industry is not so readily transferable to the natural resources industry. This approach might present challenges to smaller firms, because they may not have the knowhow or financial resources to convert simultaneously with their peers that have higher revenues within the same industry. Compared with the normal business operating cycle for individual firms and the economy, converting to a new standard arguably will require greater resources. U.S. GAAP and IFRS differ on what should be included on financial statements and how the information is presented. To accommodate the transition to a new accounting standard, existing computer systems that maintain the accounting records must be upgraded or new systems purchased. Companies would likely need to maintain the new systems and legacy systems until the usefulness of the information from legacy systems expires. In addition to the one-time cost of converting to IFRS, there would be ongoing costs similar to remaining on U.S. GAAP. If firms choose to issue financial statements under both standards during the period of transition, there would be costs to reconcile both sets of financial statements and provide sufficient disclosures for investors to understand the potential differences in net income (loss) and asset valuation under each standard. Firms must also decide if the benefits outweigh the costs of having both sets of financial statements audited or just having one set of financial statements audited. Another transitional issue of adopting IFRS is that the financial statements at first might be misrepresented either intentionally or unintentionally. For example, a firm's management might have incentives (e.g., stock options or stock grants) to take advantage of the principle-based approach to engage in earnings management. In addition, the learning curve for the firm's staff and auditors could lead to unintentional mistakes. If the financial statements' errors are significant, then the business must reissue the financial statements. A significant financial misstatement could lead to a decline in a firm's stock price and make it difficult to raise capital. If several companies have to restate their financial statements, investors may lose confidence in the overall U.S. capital markets, at least temporarily. In turn, loss of confidence by the investment community could increase the cost of capital or limit the availability of credit for U.S. firms. The investment community might discount the value of firms' equity or demand higher premiums for the debt issued by firms. To mitigate some of the transitional challenges, U.S. firms might be able to leverage the knowledge gained from overseas firms that have adopted IFRS. Leveraging the knowledge from overseas firms could potentially result in lower costs of conversion for U.S. firms than the costs incurred by overseas firms. Similarly, U.S. regulators may also be able to learn best practices from their overseas counterparts and help implement a smoother transition. The role of the SEC and FASB as accounting standard setters must be reconsidered if IFRS is adopted in the United States. FASB's role is limited to setting standards, whereas the SEC has a broad regulatory role in the capital markets, therefore the SEC's role in U.S. capital markets might not be significantly diminished. If the United States chooses to adopt IFRS without customization, then FASB's role could be diminished or possibly redefined. FASB could evolve to become an advisory body to the SEC. Another issue to consider is that IFRS has not weathered the U.S. judicial process and remains a principles-based standard. If IFRS is adopted in the United States, over the ensuing years firms may interpret and apply standards differently. Similar to FASB's current role, a national standard setter could mitigate differences and issue uniform guidance. Further, without a standards body to provide guidance in the context of the U.S. institutional infrastructure, multinational firms may be influenced by how standards are interpreted in other jurisdictions. There are a few ways to incorporate IFRS into the U.S. financial reporting requirements. One option is to allow a choice between IFRS and U.S. GAAP or require firms to file under both standards. A second option, proposed by SEC's chief accountant, is to allow supplemental IFRS reporting. These different options are discussed in detail below. Congress and the SEC could allow firms to choose either U.S. GAAP or IFRS. Allowing firms the choice of accounting standards would give firms the flexibility to be more responsive to the desires of the investing community; in other words, let market demand determine which standard becomes pervasive in the United States. However, this option would make it challenging for investors to compare firms within the same industry, and there are other possible implications. The choice of standards might become segmented by industry. Given their relative importance to investors, larger firms might have disproportionate influence over which standard their specific industry follows. If a specific standard becomes firmly entrenched by a specific industry, it would be easier for investors to compare firms within the same industry, but it would be more difficult to compare firms across industries. Further, firms might periodically "venue shop" between both standards for best results. Similar to provisions in tax laws, Congress and the regulators could consider limiting how often firms change accounting standards. Tax law allows a business to change the method of accounting it uses for determining taxable income only with the consent of the Secretary of the Treasury. Similar provisions could be made for switching financial reporting by firms with the consent of the SEC or FASB. Another approach is to require all U.S. firms to file under both standards, which could be more expensive for firms but might help ease the transition to IFRS for investors. Policymakers could choose to require firms to report under both standards indefinitely or for a specific period of time. For example, policymakers could choose a five-year transition period in which firms are required to file under both standards and then require firms to report only under IFRS. The choice of different accounting standards or requiring both accounting standards would make it more difficult for accountants, auditors, and regulators, because they must understand the nuances of each accounting and auditing standard. In the United States, private-firm auditors follow Generally Accepted Auditing Standards (GAAS) in conjunction with U.S. GAAP. Jurisdictions that have adopted IFRS generally use the International Standards in Auditing developed by International Auditing and Assurance Standards Board (IAASB). The adoption of IFRS does not necessarily mean the IAASB standard would be the default standard. The SEC and Public Company Accounting Oversight Board could determine which auditing standards would be used in the United States. Similar to accounting standards, auditing standards have also evolved with the institutional infrastructure of the United States. Implementation of IAASB must be considered in the context of specific legislation passed by Congress to protect investors (i.e., SOX). This hybrid option would require a decision to be made about which of these auditing standards firms would be required to follow. Similar to GAAS, a U.S. version of International GAAS (I-GAAS) could be created if IFRS were adopted in the United States. Another option to consider, as proposed by the SEC's Chief Accountant, James Schnurr, in December 2014, would allow voluntary disclosure of IFRS financial information as a supplement to U.S. GAAP financial statements. Schnurr's proposal did not specify if full IFRS financial statements or selected financial data would be reported as supplemental information under IFRS. Further, Schnurr's proposal did not specify if the supplemental IFRS information should be audited or unaudited. Currently, investors expect financial statements filed with the SEC to have been audited. Inclusion of IFRS financial statements with SEC filings has the potential to attract additional overseas investors, but unaudited statements might mislead investors, as they may assume that IFRS financial statements are audited in similar fashion to U.S. GAAP statements. Alternatively, the SEC and PCAOB could consider requiring filers to disclose in their financial statements which statements are audited and unaudited. To alleviate investors' concerns, the SEC and PCAOB could mandate that all financial information filed with the SEC must be audited. It would increase costs for companies to have both sets of financial statements audited, but inclusion of IFRS statements under this option would be voluntary, and not a requirement. Alternatively, as currently permitted, the SEC could allow only U.S. GAAP financial statements to be filed with the SEC. Any firms desiring to attract additional investors could issue audited IFRS financial statements independent of SEC filings. For example, the advantage of this proposal is that firms would only undergo the additional expense of supplemental filing if it were beneficial to them. The introduction of IFRS financial information could benefit U.S. firms interested in attracting more overseas investors. However, inclusion of two sets of financial statements might also confuse both domestic and international investors, especially if revenue, expense, net profit, asset, and liability values differ in each set of financial statements. Appendix A. Key Definitions The following definitions are described in the context of how they are discussed in this report; they are not meant to be precise legal or finance definitions. Adoption —The acceptance of IFRS as the accounting standard for publicly listed firms. Arm ' s Length —Parties to a transaction that are independent and on equal footing without any special relationship or having another agreement on the side. Capital Allocation —The process of allocating investments across borders, business units, or departments to maximize returns on the investments. Convergence —Convergence might be described as a process by which a jurisdiction incorporates specific standards from International Financial Reporting Standard (IFRS) or modifies some or all of its Generally Accepted Accounting Principles (GAAP) to more closely resemble IFRS. Conservatism P rinciple —In accounting, under the conservatism principle, if the probability of loss in value of an asset is high, then the loss should be recognized. Conversely, if the likelihood of a gain is low, then the gain should not be recognized. Similar application is required for recognizing estimates and profit (loss). Due Process —Due process could be described as a principle of fairness in all legal matters that aspires to safeguard both private and public rights against unfairness. From this basic principle of fairness, many decisions including procedural and substantive rights and process are determined. Cost of Capital —One of many possibilities is that increased interest from investors can lower a firm's cost of raising capital either in debt or equity. In simple terms, a firm could pay a lower interest rate when issuing debt or issue fewer shares of stock at a higher price due to increased demand. Listed Firms —Firms that are listed on a stock exchange (e.g., New York Stock Exchange [NYSE], National Association of Securities Dealers Automated Quotations [NASDAQ]). Market Liquidity —Market liquidity is defined as assets that can be easily purchased or sold without significant change in the assets' price. Principles - Based Accounting Standards —They provide a framework for decisionmaking but do not provide specific guidance or a list of detailed rules to follow, and they are widely used to describe IFRS. Rules - Based Accounting Standards —They rely on specific guidance and a list of detailed rules on how accounting principles should be applied to economic events. They are widely used to describe U.S. GAAP. Venue Shopping —Choosing an accounting standard that reflects the firm's performance in the best light possible to investors and regulators. Appendix B. Acronyms
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Capital markets function most efficiently when investors and creditors have a high degree of trust in the quality of information communicated by firms. Financial reports and disclosures are the primary means by which firms communicate about their performance with investors, creditors, regulators, and the public. Since the creation of the Securities and Exchange Commission (SEC) in 1930s, domestic companies in the United States have used U.S. Generally Accepted Accounting Principles (U.S. GAAP) to issue financial reports. In 2002, the International Accounting Standards Board (IASB) was established by select countries, including the United States, to develop International Financial Reporting Standards (IFRS), a new global accounting standard. Since the creation of IFRS, more than 100 countries have either fully adopted IFRS or have converged their local accounting standards in varying degrees to more closely resemble IFRS. In addition, there has been an ongoing debate in the United States as to which accounting standard best suits the needs of U.S. capital markets. IFRS by design is a principles-based accounting standard that is subject to each jurisdiction's interpretation and institutional infrastructure. In contrast to IFRS, U.S. GAAP is generally understood to be a rules-based accounting standard that is less subject to interpretation. U.S. GAAP has evolved over 80 years within the U.S. institutional infrastructure to address the specific needs of the world's largest capital market—the United States. Principles-based accounting standards provide broad flexible guidelines that can be applied to a range of situations, but they can lead to inconsistent interpretation and application. In contrast, rules-based accounting standards require specific guidelines to be followed, but they may not address unforeseen issues that arise in the normal course of business. At issue is whether the United States should adopt or converge with IFRS or remain on U.S. GAAP. Congress has asked the SEC to consult Congress as the SEC contemplates future actions on the issue of convergence. The SEC was created under the Securities Exchange Act of 1934 (P.L. 73-291) to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. Congress also gave the SEC authority to establish accounting standards for the private sector in the United States; Congress retains its oversight responsibilities over the SEC. The SEC has historically delegated its responsibility for establishing accounting standards to a private entity, the Financial Accounting Standards Board (FASB). To date, the SEC has not given a clear indication as to whether the United States should remain on U.S. GAAP or adopt or converge with IFRS; neither has the SEC taken any concrete steps to adopt or converge with IFRS. In its desire to ensure that capital markets function efficiently, Congress has continued to maintain interest in the IFRS issue through legislation, hearings, and a letter issued to the SEC Chairman. At a March 2015 budget hearing for SEC's FY2016 budget, some Members of Congress voiced concerns over converging with IFRS. Similarly, in 2014, the Congressional Caucus on CPAs and Accountants also raised concerns over issues surrounding convergence with IFRS. This report briefly explains the different accounting standards and U.S. capital markets. It examines several IFRS policy options Congress might consider and the benefits and challenges of each of those options. One option is to maintain the independence of U.S. GAAP but continue to seek common ground (limited convergence) with IASB. Within the scope of this option, the SEC and FASB could consider developing an international version of U.S. GAAP (I-GAAP). Another option is to adopt IFRS. The last option discussed in this report examines various hybrid methods of allowing U.S. GAAP and IFRS to coexist in the United States.
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Passage of the Unlawful Internet Gambling Enforcement Act (UIGEA) in 2006 as Title VIII of the SAFE Port Act represented the culmination of legislative consideration that began with the recommendations of the National Gambling Commission published in a 1999 report. The legislative history of UIGEA indicates that Congress wanted the law, in part, to address the perceived problem of foreign Internet gambling operations that made their services available to U.S. customers. UIGEA prohibits anyone "engaged in the business of betting or wagering" from knowingly accepting checks, credit card charges, electronic transfers, and similar payments in connection with unlawful Internet gambling. UIGEA expressly excludes from the definition of the term "business of betting or wagering" the services of financial institutions as well as communications and Internet service providers that may be used in connection with the unlawful bet; however, such entities may nonetheless incur liability under UIGEA if they are directly engaged in the operation of an Internet gambling site. A violation of UIGEA is subject to a criminal fine of up to $250,000 (or $500,000 if the defendant is an organization), imprisonment of up to five years, or both. In addition, upon conviction of the defendant, the court may enter a permanent injunction enjoining the defendant from making bets or wagers "or sending, receiving, or inviting information assisting in the placing of bets or wagers." Any person or entity that violates UIGEA and its implementing regulations may also be subject to civil and regulatory enforcement actions. For example, the Attorney General of the United States or a state attorney general may bring civil proceedings to enjoin a transaction that is prohibited under UIGEA. However, UIGEA expressly limits the instances when the attorneys general may bring a civil suit against financial institutions and Internet service providers, as follows: they may only bring a civil proceeding against financial institutions to block transactions involving unlawful Internet gambling (unless the institution is directly involved in an unlawful Internet gambling business, in which case criminal prosecution is available). The attorneys general may also initiate civil proceedings against Internet service providers under UIGEA only to block access to unlawful Internet gambling sites or to hyperlinks to such sites under limited circumstances. UIGEA's definition of "unlawful Internet gambling" does not specify what gambling activity is illegal; rather, the statute relies on underlying federal or state gambling laws to make that determination—that is, UIGEA applies to an Internet bet or wager that is illegal in the place where it is placed, received, or transmitted: The term "unlawful Internet gambling" means to place, receive, or otherwise knowingly transmit a bet or wager by any means which involves the use, at least in part, of the Internet where such bet or wager is unlawful under any applicable Federal or State law in the State or Tribal lands in which the bet or wager is initiated, received, or otherwise made. However, this statutory definition expressly exempts certain intrastate and intratribal Internet gambling operations, including state lotteries and Indian casinos that operate under state regulations or compacts. To qualify for the intrastate exception under UIGEA, a bet must (1) be made and received in the same state; (2) comply with applicable state law that authorizes the gambling and the method of transmission including any age and location verification and security requirements; and (3) not violate various federal gambling laws. The intratribal exception is similar, but slightly different. Compliance with the various federal gambling laws remains a condition and there are also similar security, age, and location verification requirements. Intratribal gambling, however, may involve transmissions between the lands of two or more tribes and need not be within the same state. UIGEA further defines the term "bet or wager" to mean "the staking or risking by any person of something of value upon the outcome of a contest of others, a sporting event, or a game subject to chance, upon an agreement or understanding that the person or another person will receive something of value in the event of a certain outcome." The statutory definition includes lottery participation, gambling on athletic events, and information relating to financing a gambling account, but a "bet or wager" does not include the following: securities transactions; commodities transactions; over-the-counter derivative instruments; indemnity or guarantee contracts; insurance contracts; bank transactions (transactions with insured depository institutions); games or contests in which the participants do not risk anything but their efforts; or certain fantasy or simulation sports contests. UIGEA leaves in place questions as to the extent to which the Interstate Horseracing Act curtails the reach of other federal laws, an issue that was at the center of World Trade Organization (WTO) litigation. The statute instructs the Secretary of the Treasury and the Board of Governors of the Federal Reserve, in consultation with the Attorney General, to issue implementing regulations within 270 days of passage. On September 1, 2009, a federal appeals court ruled that UIGEA is not unconstitutionally vague. The Interactive Media Entertainment & Gaming Association had filed a lawsuit alleging that UIGEA was facially unconstitutional, and sought to enjoin the enforcement of the act and its regulations. The U.S. Court of Appeals for the Third Circuit disagreed with Interactive's assertion that UIGEA was void for vagueness because of the lack of an "ascertainable and workable definition" of the statutory phrase "unlawful Internet gambling": The Supreme Court has explained that a statute is unconstitutionally vague if it "fails to provide a person of ordinary intelligence fair notice of what is prohibited, or is so standardless that it authorizes or encourages seriously discriminatory enforcement." United States v. Williams, 128 S. Ct. 1830, 1845, 170 L. Ed. 2d 650 (2008).... We reject Interactive's vagueness claim. The Act prohibits a gambling business from knowingly accepting certain financial instruments from an individual who places a bet over the Internet if such gambling is illegal at the location in which the business is located or from which the individual initiates the bet. 31 U.S.C. §§ 5362(10)(A), 5363. Thus, the Act clearly provides a person of ordinary intelligence with adequate notice of the conduct that it prohibits. The appellate court noted that UIGEA "itself does not make any gambling activity illegal," but rather, the definition of "unlawful Internet gambling" references federal and state laws related to gambling. Therefore, the court suggested that "to the extent that [there is] a vagueness problem, it is not with the Act, but rather with the underlying state law." UIGEA calls for regulations that require "each designated payment system, and all participants therein, to identify and block or otherwise prevent or prohibit restricted transactions through the establishment of policies and procedures" reasonably calculated to have that result. On October 4, 2007, the Board of Governors of the Federal Reserve System and the Treasury Department (the Agencies) issued proposed regulations implementing UIGEA. The proposal invited commentators to suggest alternatives and critiques before the close of the comment period on December 12, 2007. The proposal offered to exempt substantial activities in those payment systems in which tracking is not possible now and in which it may ultimately not be feasible. It also noted that the two Agencies felt that they have no authority to compel payment system participants to serve lawful Internet gambling operators. After taking into consideration the public comments on the proposed rule and consulting with the Department of Justice (as required by the UIGEA), the Agencies adopted a final rule implementing the provisions of the UIGEA; the rule was effective January 19, 2009, with a compliance date of June 1, 2010 (originally December 1, 2009). The final rule identifies five relevant payment systems that could be used in connection with, or to facilitate, the "restricted transactions" used for Internet gambling: Automated Clearing House System (ACH), card systems, check collection systems, money transmitting business, and wire transfer systems. The rule defines a "restricted transaction" to mean any transactions or transmittals involving any credit, funds, instrument, or proceeds that the UIGEA prohibits any person engaged in the business of betting or wagering from knowingly accepting, in connection with the participation of another person in unlawful Internet gambling. However, the rule does not provide a more specific definition of the term "unlawful Internet gambling;" instead, it restates the UIGEA's definition. While the Agencies expect that card systems will find that using a merchant and transaction coding system is "the method of choice" to identify and block restricted transactions, the Agencies felt that the most efficient way for other designated payment systems to comply with the UIGEA is through "adequate due diligence by participants when opening accounts for commercial customers to reduce the risk that a commercial customer will introduce restricted transactions into the payment system in the first place." The rule directs participants in the designated systems, unless exempted, to "establish and implement written policies and procedures reasonably designed to identify and block or otherwise prevent or prohibit restricted transactions," and then provides non-exclusive examples of reasonably compliant policies and procedures for each system. Participants may comply by adopting the policies and procedures of their payments system or by adopting their own. Participants that establish and implement procedures for due diligence of their commercial customer accounts or commercial customer relationships will be considered in compliance with the regulation if the procedures include the following steps: 1. At the establishment of the account or relationship, the participant conducts due diligence of a commercial customer and its activities commensurate with the participant's judgment of the risk of restricted transactions presented by the customer's business. 2. Based on its due diligence, the participant makes a determination regarding the risk the commercial customer presents of engaging in an Internet gambling business. Such a determination may take one of the two courses set forth below: a. The participant determines that the commercial customer presents a minimal risk of engaging in an Internet gambling business (such as commercial customers that are directly supervised by a federal functional regulator, or an agency, department, or division of the federal government or a state government), or b. The participant cannot determine that the commercial customer presents a minimal risk of engaging in an Internet gambling business, in which case it must obtain a certification from the commercial customer that it does not engage in an Internet gambling business. If the commercial customer does engage in an Internet gambling business, the participant must obtain: (1) documentation that provides evidence of the customer's legal authority to engage in the Internet gambling business and a written commitment by the commercial customer to notify the participant of any changes in its legal authority to engage in its Internet gambling business, and (2) a third-party certification that the commercial customer's systems for engaging in the Internet gambling business are reasonably designed to ensure that the commercial customer's Internet gambling business will remain within the licensed or otherwise lawful limits, including with respect to age and location verification. 3. The participant notifies all of its commercial customers that restricted transactions are prohibited from being processed through the account or relationship, "through a term in the commercial customer agreement, a simple notice sent to the customer, or through some other method." Of the five payment systems, a "card system" as understood by the regulations is one that settles transactions involving credit card, debit card, pre-paid card, or stored value product and in which the cards "are issued or authorized by the operator of the system and used to purchase goods or services or to obtain a cash advance." Merchant codes are a standard feature of the system which permits the system to identify particular types of businesses. There are no card system exemptions from the regulations' requirements. Examples of reasonably compliant policies and procedures feature due diligence and prophylactic procedural components. The standards involve screening merchants to determine the nature of their business, a clause prohibiting restricted transactions within the merchant agreement, as well as maintaining and monitoring a business coding system to identify and block restricted transactions. "Money transmitting businesses" are entities such as Western Union and PayPal that are in the business of transmitting funds. They too are without exemption from the UIGEA implementing regulations. Examples of acceptable policies and procedures for money transmitting businesses feature procedures to identify the nature of a subscriber's business, subscriber agreements to avoid restricted transactions, procedures to check for suspicious payment patterns, and an outline of remedial actions (access denial, account termination) to be taken when restricted transactions are found. The regulations contain exemptions in varying degrees for the other payment systems. In essence, because of the difficulties of identifying tainted transactions, they limit requirements to those who may deal directly with the unlawful Internet gambling businesses. In the case of "check collection systems," the coded information available to the system with respect to a particular check is limited to information identifying the bank and account upon which the check is drawn, and the number and amount of the check. Information identifying the payee is not coded and a "requirement to analyze each check with respect to the payee would substantially ... reduce the efficiency of the check collection system." Consequently, the final rule exempts all participants in a particular check collection through a check collection system except for "the first U.S. institution to which a check is transferred, in this case the institution receiving the check deposit from the gambling business" —namely, the depository bank. Banks in which a payee deposits a check are covered by the regulations as are banks which receive a check for collection from a foreign bank. The rule offers examples for both circumstances. In the case of a check received from a foreign bank, examples of a depositary bank's reasonably compliant policies and procedures are procedures to inform the foreign banking office after the depositary bank has actual knowledge that the checks are restricted transactions (such actual knowledge being obtained through notification by a government entity such as law enforcement or a regulatory agency). In the purely domestic cases, examples of reasonably compliant policies and procedures would include (1) due diligence in establishing and maintaining customer relations sufficient to identify the nature of a customer's business, and to provide for a prohibition on tainted transactions in the customer agreement, and (2) remedial action (refuse to deposit a check; close an account) should a tainted transaction be unearthed. "Wire transfer systems" come in two forms. One involves large volume transactions between banks; the second, customer-initiated transfers from one bank to another. Like the check collection systems, under current practices only the recipient bank is in a realistic position to determine the nature of the payee's business. The Agencies sought public comments on whether additional safeguards should be required of the initiating bank in such cases but ultimately decided to exempt all but the bank receiving the transfer. Banks that receive a wire transfer (the beneficiary's bank) are covered by the regulations, and examples of reasonably compliant policies and practices resemble those provided for check collection system participants: know your customer, have a no-tainted transaction customer agreement clause, and have a remedial procedure (transfer denied; account closed) when tainted transactions surface. The "Automated Clearing House System" (ACH) is a system for settling batched electronic entries for financial institutions. The entries may be recurring credit transfers such as payroll direct deposit payments or recurring debit transfers such as mortgage payments. The entries may also include one time individual credit or debit transfers. Banks periodically package credit and debit transfers and send them to a ACH system operator who sorts them out and assigns them to the banks in which the accounts to be credited or debited are found. Participants are identified not according to whether they are transferring credits or debits but according to which institution initiated the transfer, i.e., originating depository financial institutions (ODFI) and receiving depository financial institutions (RDFI). The final rule exempts all participants processing a particular transaction through an ACH system, except for the RFDI in an ACH credit transaction, the ODFI in an ACH debit transaction, and the receiving gateway operator that receives instructions for an ACH debit transaction directly from a foreign sender. These entities are not exempt under the theory that in any tainted transaction they will be in the best position to assess the nature of the business of the beneficiary of the transfer and to identify and block transfers to unlawful Internet gambling operators. The ACH system operator, ODFIs in a credit transaction and RDFIs in a debit transaction are exempt from the regulations, however. The examples of ACH system reasonably compliant policies and procedures are comparable to those for check collection and wire transfer systems: in purely domestic cases, know your customer, have a no-tainted transaction customer agreement clause, have a remedial procedure (disallow origination of ACH debit transactions; account closed) when tainted transactions surface; in the case of receiving transfers from overseas, know your foreign gateway operator, have a no-tainted transaction agreement, have a remedial procedure (ACH services denied; termination of cross-border relationship) when tainted transactions surface. The Agencies explained that U.S. participants processing outboun d cross-border credit transactions (ACH credits and wire transfers) are exempted "because there are no reasonably practical steps that a U.S. participant could take to prevent their consumer customers from sending restricted transactions cross-border." The Agencies explained that there is insufficient information to allow U.S. participants to identify and block restricted transactions in cross-border ACH credit transactions and sending wire transfers abroad. Good faith compliance with UIGEA and its regulations insulates U.S. financial firms that participate in designated payment systems from both regulatory and civil liability. Regulatory enforcement is the responsibility of the Federal Trade Commission and the "federal functional regulators" within their areas of jurisdiction, that is, the Governors of the Federal Reserve, the Comptroller of the Currency, the Federal Deposit Insurance Commission, the Office of Thrift Supervision, the National Credit Union Administration, and the Securities and Exchange Commission. The enactment of UIGEA had an immediate impact on Internet gambling activities. For example, NETeller, a payment processing company based in the Isle of Man that reportedly processed more than $10 billion in gambling proceeds between U.S. customers and offshore Internet gambling business from 1999 to 2007, entered into a deferred prosecution agreement with the U.S. Department of Justice under which it agreed to discontinue U.S. operations, cooperate with investigators, and to pay the U.S. $136 million in sanctions and to return an additional $96 million to U.S. customers. Several offshore Internet gambling companies sought similar agreements after the enactment of UIGEA. A number of large banking institutions, which underwrote the initial public offers for offshore Internet gambling companies on the London stock exchange, were the targets of grand jury subpoenas as well. Some Internet gambling companies, however, were undeterred by the new federal law and attempted to rely on fraudulent methods to circumvent UIGEA's prohibitions. Yet despite their efforts to evade UIGEA, several of these companies have faced prosecution and been forced to shut down their operations. For example, on April 15, 2011, the U.S. Attorney for the Southern District of New York announced the unsealing of an indictment of 11 defendants, including the founders of the three largest Internet poker websites (Poker Stars, Full Tilt Poker, and Absolute Poker), that charged them with a variety of federal offenses including bank fraud, conspiracy, violating UIGEA, money laundering, and operating an illegal gambling business. For example, the offshore Internet poker companies allegedly "arranged for the money received from U.S. gamblers to be disguised as payments to hundreds of non-existent online merchants purporting to sell merchandise such as jewelry and golf balls," thereby tricking U.S. banks and credit card issuers to process their payments. In addition, the indictment also accused the Internet poker companies of "persuad[ing] the principals of a few small, local banks facing financial difficulties to engage in [payment] processing in return for multi-million dollar investments in the banks." As part of this enforcement action, the Federal Bureau of Investigation seized five Internet domain names that were used by the poker companies to host their illegal poker games; such domain name seizure "effectively shuttered their doors." Since passage of UIGEA in 2006, there have been several attempts to repeal the law or loosen its restrictions, although no such legislation has been enacted. Several bills have been introduced in the 112 th Congress that would allow for lawful, government-regulated Internet gambling activities. Such legislative proposals have been supported by Members of Congress who have criticized the current Internet gambling restrictions for being, in their view, ineffective at stopping Internet gambling by millions of Americans, an infringement on individual liberty, and a lost opportunity to collect billions of dollars in tax revenue, among other things. Some interest groups also endorse legislation that would regulate, rather than prohibit, Internet gambling because they believe it would help protect American consumers (adults and minors) from the risks of fraud and other financial and societal costs associated with online gambling. What follows is a brief description of the bills in the 112 th Congress that would authorize and regulate some forms of Internet gambling. The Internet Gambling Regulation, Consumer Protection, and Enforcement Act ( H.R. 1174 ) is a bill introduced by Representative John Campbell. H.R. 1174 would establish a licensing regime under which Internet gambling operators may lawfully accept bets or wagers from individuals located in the United States. Under the bill, the Secretary of the Treasury would have full regulatory authority over the Internet gambling licensing program, including the power to approve, deny, renew, or revoke licenses to operate an Internet gambling facility. In addition, the Secretary of the Treasury would have the power to delegate his authority to "qualified State and tribal regulatory bodies" for the purposes of regulating the operation of Internet gambling facilities by licensees and determining the suitability of applicants to obtain a license. Qualified state or tribal authorities would also be allowed to enforce any requirement of the act that is within their jurisdiction. In addition, H.R. 1174 would establish specific standards and requirements for Internet gambling licensees to satisfy, including the following: 1. Establishing safeguards to verify that the customer placing a bet or wager is of legal age as defined by the law of the state or tribal area in which the individual is located at the time the bet or wager is placed. 2. Requiring mechanisms that verify that the customer placing a bet or wager is physically located in a jurisdiction that permits Internet gambling. 3. Ensuring the collection of all taxes relating to Internet gambling from customers and from any licensee. 4. Maintaining safeguards to combat fraud, money laundering, and the financing of terrorism. 5. Maintaining safeguards to protect the customer's privacy and security. 6. Establishing safeguards to combat compulsive Internet gambling. 7. Maintaining facilities within the United States for processing of bets or wagers made or placed from the United States. 8. Certifying that they have not committed an intentional felony in violation federal or state gambling laws. 9. Verifying that their customers are not delinquent on their child support. Indian tribes and states may opt out of the Internet gambling regime if they provide notice to the Secretary of the Treasury; Indian tribes must give notice within 90 days after enactment of the Internet Gambling Regulation, Consumer Protection, and Enforcement Act, while each state has a longer period of time to decide whether to opt-out—a period starting from the enactment of H.R. 1174 and ending on the date on which the state's legislation has conducted one full general legislative session. Therefore, customers located within Indian tribes and states that elected to opt out would be prohibited from engaging in Internet gambling activities, and licensees would be responsible for blocking access to those customers. The Director of the Financial Crimes Enforcement Network, within 120 days after the bill's enactment, would be required to submit to the Treasury Secretary a list of "unlawful Internet gambling enterprises" that identifies any person who has violated UIGEA more than 10 days after the date of the bill's enactment; such a list is to be posted on the Department of the Treasury website for public access and also distributed to "all persons who are required to comply with" the regulations promulgated by the Federal Reserve and the Treasury Department. Another provision of H.R. 1174 provides safe harbor from liability for financial institutions that process transactions for licensees, unless they had knowledge that the specific financial activities or transactions are conducted in violation of federal or state laws. H.R. 1174 prohibits licensees from accepting credit cards as a form of payment with respect to Internet gambling. The bill also expressly states that no licensee may accept bets or wagers on sporting events, with the exception of pari-mutuel racing as permitted by law (such as horse racing and greyhound racing). In addition, the bill would exempt from the new regulatory regime Internet gambling conducted by any state or tribal lottery authority. Representative Jim McDermott introduced a companion bill to Representative Campbell's licensing legislation, the Internet Gambling Regulation and Tax Enforcement Act of 2011 ( H.R. 2230 ). This bill would establish a licensing fee regime within the Internal Revenue Code for Internet gambling operators; it essentially creates a tax on online gambling deposits. H.R. 2230 would require each licensee to pay a monthly Internet gambling license fee in an amount equal to 2% of all funds deposited by customers during that month. According to Representative McDermott, this fee "would never be imposed on a land-based casino. It would level the playing field between online operators and brick-and-mortar gambling operations which are more expensive to run." In addition, the bill provides revenue incentives for states and Native American tribes, as states and tribal authorities have the option of accepting from licensees, on a monthly basis, an online gambling fee "equal to 6 percent of all deposited funds deposited by customers residing in each State or area subject to the jurisdiction of an Indian tribal government." Acceptance of this fee by the state or tribal government relieves the licensee from any obligation to pay any other fee or tax to the state or tribal government relating to online gambling services. Introduced by Representative Joe Barton, the Internet Gambling Prohibition, Poker Consumer Protection, and Strengthening UIGEA Act of 2011 ( H.R. 2366 ) would legalize and regulate interstate Internet poker only, as opposed to other forms of Internet gambling that would be permitted under Representative Campbell's bill. Under H.R. 2366 , anyone wishing to operate an online poker website would need to obtain a license from "qualified" state or tribal gambling oversight commissions. Such state or tribal agencies would need to be approved by a new Office of Internet Poker Oversight that the bill establishes within the U.S. Department of Commerce. The new federal Office of Internet Poker Oversight would be responsible for ensuring that qualified state or tribal agencies comply with the requirements under the act and would have the power to investigate and take appropriate remedial action against them. H.R. 2366 specifies a range of minimum standards for state and tribal agencies to satisfy in order for them to be permitted to participate in the licensing program. The bill also sets forth several standards that qualified state and tribal agencies must apply in determining whether a party should be issued an Internet poker facility license. Like Representative Campbell's bill, H.R. 2366 allows states and Indian tribes to "opt out" of the license regime; in order to do so, the state's governor or the principal chief of the Indian tribe would need to inform the Secretary of Commerce of the "nature and extent" of the limitation on bets or wagers with respect to Internet poker that would apply to any person who resides in that state or who is located in the particular tribal land, respectively. H.R. 2366 also would require an Internet poker facility, in order to obtain a license, to demonstrate to the qualified state or tribal agency that it maintains certain safeguards and mechanisms that, among other things, (1) ensure that the person placing the bet or wager is at least 21 years of age or older; (2) ensure that the person is physically located in a jurisdiction that allows such bets or wagers; and (3) prevent fraud, money laundering, and terrorist financing. The federal Wire Act, 18 U.S.C. 1084, prohibits the use of interstate telephone facilities by those in the gambling business to transmit bets or gambling-related information. Early federal prosecutions of Internet gambling generally charged violations of the Wire Act. However, one federal appeals court concluded that the Wire Act applies only to sports gambling, while a subsequent district court concluded that it applies to non-sports gambling as well. The U.S. Department of Justice's Criminal Division has consistently maintained that the Wire Act applies not only to sports wagering but can also be applied to other forms of interstate gambling, including non-sports Internet gambling. Such an expansive view of the Wire Act by the Justice Department dissuaded state governments from expressly authorizing and implementing Internet gambling within their jurisdictions. However, in late 2011, in response to a request by the states of Illinois and New York for an opinion regarding whether their proposed use of the Internet to sell lottery tickets to in-state adults would violate the Wire Act, the Justice Department's Office of Legal Counsel (OLC) reversed its interpretation of the Wire Act, opining that "interstate transmissions of wire communications that do not relate to a 'sporting event or contest,' 18 U.S.C. §1084(a), fall outside the reach of the Wire Act." Some observers predict that this change in position will cause "an explosion of poker, instant lotteries and casino games on the Internet, run or licensed by the states." In addition, because of the OLC's opinion, states may be able to enter into compacts with one another to operate online gambling across state lines. Most states prohibit any gambling that they do not expressly permit. All states except Hawaii and Utah authorize some form of gambling by their residents, such as lotteries, bingo, card games, slot machines, or casinos. Seven states (Illinois, Indiana, Louisiana, Montana, Oregon, South Dakota, and Washington) expressly outlaw Internet gambling. However, in light of growing state budget deficits and state legislators' desire to find ways of raising revenue without increasing taxes, several states are considering measures that would legalize, license, and tax Internet gambling within their borders. Such legalization would take advantage of UIGEA's "intrastate exemption" provision; states also no longer need to be concerned about prosecution under the Wire Act for enacting such laws due to the recent Department of Justice OLC opinion. In April 2011, the District of Columbia authorized the District's lottery commission to offer games of skill or chance including poker via the Internet in the District of Columbia, becoming the first jurisdiction in the nation to legalize intrastate Internet gambling. However, after some D.C. lawmakers criticized the apparently covert manner in which online gambling was approved (it was a late-night amendment to a budget law that received no public debate or hearings before passage), the Council of the District of Columbia voted to repeal the law in February 2012. In June 2011, Nevada amended its state law to allow certain gaming licensees to conduct Internet gambling operations, effective upon passage of federal authorizing legislation or United States Justice Department notification that federal law permits such activity. In late December 2011, the Nevada Gaming Control Board approved regulations to allow Internet poker within its borders, becoming the first state to do so. On March 4, 2011, the governor of New Jersey vetoed a bill that would have permitted intrastate Internet gambling, based in part on concerns that the New Jersey constitution limits casino gambling to within the boundaries of Atlantic City and also the uncertainty regarding the applicability of the federal Wire Act. A bill is currently progressing through the New Jersey legislature to permit Atlantic City casinos to take bets from gamblers via the Internet. The Utah legislature passed a bill, signed by the Utah governor on March 19, 2012, that specifically prohibits Internet gambling within its borders and also provides for the state to opt-out of the federal licensing regime that would be created by H.R. 1174 , the Internet Gambling Regulation, Consumer Protection, and Enforcement Act, should Congress pass the law. Iowa directed its state racing commission to study and report on "the creation of a framework for the state regulation of intrastate Internet poker." The report, issued in December 2011, concluded that intrastate online poker could be conducted safely and would raise revenue of $3 million to $13 million per year. The Iowa senate in March 2012 approved a measure that allows the state's casinos and racetracks to offer Internet poker.
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The Unlawful Internet Gambling Enforcement Act (UIGEA) seeks to cut off the flow of revenue to unlawful Internet gambling businesses. It outlaws receipt of checks, credit card charges, electronic funds transfers, and the like by such businesses. It also enlists the assistance of banks, credit card issuers and other payment system participants to help stem the flow of funds to unlawful Internet gambling businesses. To that end, it authorizes the Treasury Department and the Federal Reserve System (the Agencies), in consultation with the Justice Department, to promulgate implementing regulations. The Agencies adopted a final rule implementing the provisions of the UIGEA, 73 Federal Register 69382 (November 18, 2008); the rule was effective January 19, 2009, with a compliance date of June 1, 2010. The final rule addresses the feasibility of identifying and interdicting the flow of illicit Internet gambling proceeds in five payment systems: card systems, money transmission systems, wire transfer systems, check collection systems, and the Automated Clearing House (ACH) system. It suggests that, except for financial institutions that deal directly with illegal Internet gambling operators, tracking the flow of revenue within the wire transfer, check collection, and ACH systems is not feasible at this point. It therefore exempts them from the regulations' requirements. It charges those with whom illegal Internet gambling operators may deal directly within those three systems, and participants in the card and money transmission systems, to adopt policies and procedures to enable them to identify the nature of their customers' business, to employ customer agreements barring tainted transactions, and to establish and maintain remedial steps to deal with tainted transactions when they are identified. The final rule provides non-exclusive examples of reasonably designed policies and procedures to prevent restricted transactions. The Agencies argued that flexible, risk-based due diligence procedures conducted by participants in the payment systems, in establishing and maintaining commercial customer relationships, is the most effective method to prevent or prohibit the restricted transactions. Some Members of Congress have criticized the current Internet gambling restrictions for being, in their view, ineffective at stopping Internet gambling, an infringement on individual liberty, and a lost opportunity to collect tax revenue, among other things. The 112th Congress has held several hearings concerning Internet gambling and related issues, and several bills have been introduced that would allow for lawful, government-regulated Internet gambling activities. The legislation includes H.R. 1174 (Internet Gambling Regulation, Consumer Protection, and Enforcement Act), which would establish a licensing program administered by the U.S. Treasury Secretary under which Internet gambling companies may legitimately operate and accept bets or wagers from individuals located in the United States; H.R. 2230 (Internet Gambling Regulation and Tax Enforcement Act of 2011), which would establish a licensing fee regime within the Internal Revenue Code for Internet gambling operators; and H.R. 2366 (Internet Gambling Prohibition, Poker Consumer Protection, and Strengthening UIGEA Act of 2011), which would create an office within the U.S. Department of Commerce responsible for overseeing qualified state agencies that issue licenses to persons seeking to operate an Internet poker facility. Several state legislatures are also considering measures that would legalize, license, and tax Internet gambling within their borders, taking advantage of a UIGEA provision that exempts intrastate Internet gambling from its applicable scope. A recent change in the U.S. Department of Justice's position regarding the federal Wire Act that now interprets that statute as prohibiting sports betting only (and not interstate transmission of other types of gambling) has also helped encourage state initiatives to legalize intrastate, and possibly even interstate, online gambling.
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On November 20, 2014, President Obama delivered a televised address wherein he broadly described the steps that his administration is taking to "fix" what he has repeatedly described as a "broken immigration system." Following the President's address, executive agencies made available intra-agency memoranda and fact sheets detailing specific actions that have already been taken, or will be taken in the future. These actions generally involve either border security, the current unlawfully present population, or future legal immigration. The announced executive actionsâparticularly the granting of deferred action and employment authorization to some unlawfully present aliens, discussed below (see " Unlawfully Present Population ")âhave revived debate about the executive's discretionary authority over immigration like that which followed the Administration's June 2012 announcement of the Deferred Action for Childhood Arrivals (DACA) initiative. DACA has permitted some unlawfully present aliens who were brought to the United States as children and raised here to obtain temporary relief from removal and, in many cases, employment authorization. Some have argued that DACA constitutes an abdication of the executive's duty to enforce the laws and runs afoul of specific requirements found in the Immigration and Nationality Act (INA) , among other things. Others, however, have maintained that the DACA initiative is a lawful exercise of the discretionary authority conferred on the executive by the Constitution and federal statute. Similar arguments will likely be made as to the November 2014 actions, which affect a significantly larger number of aliens than DACA. This report provides the answers to key legal questions related to the various immigration-related actions announced by the Obama Administration on November 20, 2014. Because the various documents outlining these actions have been available for a limited period of time, and additional information is expected to be released in the future, these answers are necessarily preliminary. It is anticipated that the report will be updated to reflect further developments. Other reports discuss related issues, including CRS Report R43782, Executive Discretion as to Immigration: Legal Overview , by [author name scrubbed] and [author name scrubbed]; CRS Report R42924, Prosecutorial Discretion in Immigration Enforcement: Legal Issues , by [author name scrubbed] and [author name scrubbed]; CRS Report R43708, The Take Care Clause and Executive Discretion in the Enforcement of Law , by [author name scrubbed]; and CRS Report R43747, Deferred Action for Childhood Arrivals (DACA): Frequently Asked Questions , by [author name scrubbed]. Following the President's televised speech, executive branch agencies and, in two cases, the White House announced dozens of specific actions as to immigration. These actions can be broadly divided into the same three categories noted by the President in his speech: (1) border security, (2) the current unlawfully present population, and (3) future legal immigration. Among the Administration's actions is "implement[ing] a Southern Border and Approaches Campaign Strategy to fundamentally alter the way in which we marshal resources to the border." This will involve the Department of Homeland Security (DHS) commissioning three task forces made up of various law enforcement agencies. These task forces will focus on the southern maritime border, the southern land border and West Coast, and investigations to support the other two task forces. Among the objectives of the new strategy are increasing the perceived risk of engaging in or facilitating "illegal transnational or cross-border activity" (a term which could include the migration of persons); interdicting people who attempt to enter illegally between ports of entry; and preventing the "illegal exploitation of legal flows" (which could include things such as alien smuggling at ports of entry). The Administration also proposes several actions affecting the current population of unlawfully present aliens, which is widely estimated to include some 11 million persons. Arguably the most notable of these actions are the initiatives to grant deferred actionâone type of relief from removalâto some unlawfully present aliens who were brought to the United States as children and raised here, or who have children who are U.S. citizens or lawfully permanent resident (LPR) aliens. Previously, in June 2012, then-Secretary of Homeland Security Janet Napolitano announced a programâcommonly known as Deferred Action for Childhood Arrivals (DACA)âwhereby unlawfully present aliens who had been brought to the United States as children and met other criteria could receive deferred action and, in many cases, employment authorization. The eligibility criteria for DACA expressly excluded unlawfully present aliens who were over 31 years of age, or who had entered the United States on or after June 15, 2007. However, aliens who are over 31 years of age, or entered the United States between June 15, 2007, and January 1, 2010, could receive deferred action as part of the November 2014 initiative. The 2014 initiative would also extend the duration of grants of deferred action (and work authorization) received by DACA beneficiaries from the current two years, to three years. In addition, unlawfully present aliens who have children who are U.S. citizens or LPRs will also be eligible for deferred action (and employment authorization) pursuant to the November 2014 initiatives, provided they meet specified criteria. These criteria include (1) "continuous residence" in the United States since before January 1, 2010; (2) physical presence in the United States both on the date the initiative was announced (i.e., November 20, 2014) and when they request deferred action; (3) not being an enforcement priority under the Administration's newly announced priorities, discussed below; and (4) "present[ing] no other factors that, in the exercise of discretion, makes the grant of deferred action inappropriate." Aliens granted deferred action pursuant to these initiativesâor otherwise âare eligible for employment authorization upon showing "an economic necessity for employment." Other notable actions as to the current population of unlawfully present aliens include revising DHS's priorities for civil immigration enforcement by, among other things, narrowing the scope of aliens who are considered "highest priority" for removal. Under the revised priorities, aliens without legal immigration status who have been in the United States since 2013, and who have not engaged in specified criminal activity or violated a prior order of removal, seem unlikely to be considered a removal priority. ending the Secure Communities program and replacing it with another program, known as the Priority Enforcement Program (PEP). PEP will resemble Secure Communities in that Secure Communities also utilized information sharing between various levels and agencies of government to identify potentially removable aliens. However, unlike Secure Communities, PEP will focus on aliens who have been convicted of felonies or "significant" misdemeanors, and generally will not entail states and localities holding aliens after they would have otherwise been released for the state or local offense that prompted their initial arrest so that DHS can take custody of them. ensuring uniform recognition of grants of "advance parole" by immigration agencies, so that aliens without legal status who depart the United States for another country pursuant to a grant of advance parole are not excluded from the United States upon their return on the grounds that they "departed" the United States and, thus, triggered the 3- and 10-year bars upon the admission of aliens who have accrued more than 180 days of unlawful presence in the United States, discussed below. (Parole is a device which permits an alien to enter the United States without satisfying the criteria for admissibility set forth in INA §212(a). With advance parole, an alien without legal status who is present in the United States is effectively granted a limited assurance, prior to departing the United States for another country, that s/he will be permitted to re-enter the United States upon his/her return.) granting "parole in place" or deferred action to some immediate relatives of U.S. citizens and LPRs who "seek to enlist in the Armed Forces," instead of just to qualifying relatives of active Armed Service personnel, the standing Reserves, or veterans of the Armed Services or standing Reserves. (While parole is typically granted to aliens outside the United States who are ineligible for admission under INA §212(a), parole in place entails granting parole to unlawfully present aliens within the United States.) In addition, the Obama Administration announced several actions which it characterizes as "support[ing] our county's high-skilled businesses and workers." Included among these actions are as yet-to-be-determined steps to ensure that all immigrant visas authorized by Congress for issuance in a particular year are issued (assuming demand). Previously, delays in processing applications for immigrant visas resulted in some visas going unused (less than 5% of all available immigrant visas in recent years). This, in turn, prompted calls for Congress or the executive to "recapture" unused visas (i.e., to identify unused visa numbers from earlier years and make them available for current use). The Obama Administration's November 20, 2014, action does not purport to recapture previously unused visas. However, it can be seen as an attempt to avoid the perceived need for visa recapture in the future by ensuring that all immigrant visas available for issuance in a year are used. Relatedly, the Administration proposes as-yet-unspecified steps to "improve the system for determining when immigrant visas are available to applicants during the fiscal year," as well as consideration of "other regulatory or policy changes" to "better assist and provide stability" to be beneficiaries of employment-based immigrant visa petitions, including by ensuring that visa petitions remain valid when the alien beneficiary of the petition seeks to change employers or jobs. Another action involves expanding the duration of any "optional practical training" (OPT) engaged in by foreign nationals studying science, technology, engineering, and mathematics (STEM) fields at institutions of higher education in the United States on non-immigrant F-1 student visas, as well as "expand[ing] the degree programs" eligible for OPT. Foreign nationals studying in the United States on F-1 visas have long been able to request an additional 12 months of F-1 visa status for temporary employmentâknown as OPTâin their field of study. Regulations promulgated in 2008 permitted students in STEM fields to request an additional 17 months of OPT, for a total of 29 months of OPT. However, only students in STEM fields are eligible for this 17 month extension, and these students can participate in OPT for no more than 29 months. Because any expansion of OPT can be seen, at least by some, as affecting employment opportunities for U.S. persons, the Administration also proposes to "improve" the OPT program by requiring "stronger ties" to degree-granting institutions, and "tak[ing] steps" to ensure that OPT employment is consistent with U.S. labor market protections. Other actions announced by the Obama Administration include making greater use of provisions in INA §203(b)(2)(B), which permit aliens with advanced degrees or "exceptional ability" to obtain an immigrant visa without a sponsoring employerâas is generally required for immigrants who are not sponsored by family membersâif their admission is in the "national interest." using the authority granted to the Executive in INA §212(d)(5)(A) to "parole" aliens into the United States when there is a "significant public benefit" to permit some inventors, researchers, and founders of start-up enterprises to enter and lawfully remain in the United States without a visa (or counting against the visa caps). clarifying and standardizing the meaning of "specialized knowledge" for purposes of the L-1B visa program, which allows companies to transfer certain employees who are executives or managers, or have "specialized knowledge" of the company or its processes, to the United States from the company's foreign operations. clarifying what is meant by the "same or similar job" for purposes of INA §204(j), which provides that employment-based immigrant visa petitions remain valid when the alien employee changes jobs or employers so long as the new job is in the "same or similar occupational classification" as the job for which the petition was filed. reviewing the so-called PERM program, whereby the Department of Labor (DOL) certifies that the issuance of an employment-based immigrant visa will not displace U.S. workers, or adversely affect the wages or working conditions of similarly employed U.S. workers, to identify methods for aligning domestic worker recruitment requirements with demonstrated occupational shortages and surpluses. DOL "certifying" applications for nonimmigrant T visas for aliens who have been victims of human trafficking, as well as certifying applications for nonimmigrant U visas for eligible victims of extortion, forced labor, and fraud in foreign labor contracting that DOL detects in the course of its workplace investigations. establishing an interagency working group to "streamline" the immigrant visa system, in part, by improving services and reducing employers' burdens. Other announced actions do not neatly fall into any of the foregoing categories or, in one case, could be said to involve multiple categories. Arguably key among these is the expansion of a preexisting Obama Administration program that provides for "provisional waivers" of the 3- and 10-year bars on the admission of aliens who have accrued more than 180 days of unlawful presence in the United States. Initially, this program reached only spouses, sons, or daughters of U.S. citizens. It will now be expanded to include qualifying relatives of LPRs. As a general matter, unlawfully present aliens whose spouses or parents are U.S. citizens or LPRs may be eligible for an immigrant visa and adjustment to legal status. Obtaining such an immigrant visa typically requires the alien to leave the United States so that his/her visa application can be processed by U.S. consular officers overseas. However, leaving the country generally triggers the application of the 3- and 10-year bars if the alien has been unlawfully present in the United States for more than 180 days (as most unlawfully present aliens have been). These bars can be waived if denial of the alien's admission would result in "extreme hardship" to the alien's spouse or parents. However, the time required to obtain a waiver after leaving the country and triggering the bar has historically kept many unlawfully present aliens who could "legalize their status" under current law (see " Does granting deferred action to unlawfully present aliens legalize their status? ") from doing so. In 2013, the Obama Administration began allowing spouses or children of U.S. citizens to request and obtain provisional waivers of the 3- and 10-year bars to their admission while they are in the United States (they generally still must travel outside the United States for processing). However, the spouses and children of LPRs were ineligible for such provisional waivers until the 2014 actions. Other actions announced in November 2014 include certain personnel reforms involving immigration and customs officers; promoting naturalization by eligible LPRs; establishing an interagency task force on "New Americans" to "increase meaningful engagement" between immigrants and the communities where they settle; and establishing an interagency working group to address the interplay of immigration and employment law. As of November 24, 2014, the President has not issued an executive order regarding these immigration-related actions; nor has he given any indication that he will issue such an order. With the exception of several specific actions announced in two presidential memoranda, all other actions to dateâincluding the granting of deferred action to some unlawfully present aliensâhave been announced in intra-agency memoranda or fact sheets made available by executive agencies after the President's televised address. This is arguably consistent with prior actions in the field of immigration and, particularly, prior exercises of discretion in enforcing federal immigration law. For example, the 1990 "Family Fairness" program, discussed belowâwhich gave certain unlawfully present aliens temporary relief from deportation (later known as removal)âwas announced in a memorandum from the head of the Immigration and Naturalization Service (INS) to regional officials. Similarly, President Clinton relied on a memorandum to the Attorney General when authorizing deferred enforced departure (DED)âanother type of temporary relief from removalâfor some unlawfully present aliens from Liberia. The fact that these actions were announced by means other than an executive order generally would not affect their permissibility. In other words, whether the deferred action initiatives, for example, are permissible depends upon whether the executive has the legal authority to grant this relief, not whether the initiatives were announced by means of an executive order or a memorandum from the Secretary of Homeland Security. Although each specific Administration action involves somewhat different legal authorities, three broad types of legal authority can be said to underlie all these actions: (1) prosecutorial or enforcement discretion; (2) express delegations of authority to the executive by Congress; and (3) the executive's discretion in interpreting and applying immigration law when congressional enactments are "silent or ambiguous" on specific issues. The judicial and executive branches have repeatedly recognized that the determination as to whether to grant deferred action to an individual alien is a matter of prosecutorial or enforcement discretion. Such discretion has generally been seen as an independent attribute of the executive branch, and does not arise fromâor requireâan express delegation of authority by Congress. Thus, the fact that Congress has not authorized the executive to grant deferred action to aliens in the circumstances contemplated here (i.e., unlawfully present aliens brought to the United States as children or whose children are U.S. citizens or LPRs) does not, in itself, make such a grant impermissible. Prosecutorial discretion is generally seen as affording the executive wide latitude in determining when, against whom, how, and even whether to prosecute apparent violations of federal law. However, the Constitution or federal statutes could potentially impose certain constraints upon this discretion, as discussed below (see " Are there constitutional or related constraints upon the executive's discretionary authority over immigration enforcement? " and " What other legal issues might be raised by the Administration's actions? "). In other cases, Congress has expressly granted certain authority to the executive that the Obama Administration would appear to rely upon for specific actions. For example, the definition of unauthorized alien in INA §274A(h)(3) has historically been seen to give the executive the authority to grant employment authorization documents (EADs) to aliens who are not expressly authorized to work by the INA. Section 274A(h)(3)'s definition describes an unauthorized alien as an alien who is not "authorized to be ... employed ... by the Attorney General [currently, the Secretary of Homeland Security]." The immigration agencies have relied upon this definition in promulgating regulations that permit aliens granted deferred action to receive EADs upon showing "an economic necessity for employment." Other actions that would appear to involve express delegations of statutory authority include (but are not limited to) (1) paroling into the United States some inventors, researchers, and founders of start-up enterprises on public interest grounds (INA §212(d)(5)); (2) granting provisional waivers of the 3- and 10-year bars upon the admissibility of aliens who have accrued more than 180 days of unlawful presence in the United States (INA §212(a)(9)(B)(v)); and (3) permitting aliens with advanced degrees or "exceptional ability" to obtain an immigrant visa without a sponsoring employer if their admission is in the "national interest" (INA §203(b)(2)(B)). Any exercise of delegated authority must be consistent with the terms of the delegation, as discussed below (see " What other legal issues might be raised by the Administration's actions? "). Questions could also be raised about whether particular exercises of authority are consistent with historical practice, other provisions of the INA, or congressional intent. In yet other cases, the Obama Administration would appear to be relying upon the deference generally given to the executive in interpreting and applying statutes in taking certain actions. As the Supreme Court articulated in its 1984 decision in Chevron U.S.A. v. Natural Resources Defense Council , when "Congress has directly spoken to the issue, ... that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress." However, where a statute is "silent or ambiguous with respect to a specific issue," courts will generally defer to an agency interpretation that is based on a "permissible construction of the statute," on the grounds that the executive branch must fill any "gaps" explicitly or implicitly left by Congress in the course of administering congressional programs. Among the gaps that Congress could be said to have left in the INA for the executive to fill are (1) what constitutes "extreme hardship" for purposes of the 3- and 10-year bars upon the admission of aliens who have accrued more than 180 days of unlawful presence in the United States; (2) the duration of any OPT for F-1 student visas holders; (3) what steps are to be taken to ensure that all immigrant visas available for issuance in a given year are used; and (4) what constitutes "specialized knowledge" for purposes of the L-1B visa program. The Obama Administration's November 20, 2014, actions can be seen to address all of these "gaps," as well as others not specifically noted here. Any construction advanced by the executive must, however, constitute a "permissible" and "reasonable" interpretation of the underlying statute in order to be afforded deference by the courts, as previously noted. Also, the executive has no discretion in interpreting or applying the law where Congress has spoken to the precise question at issue. The Constitution confers upon the President the responsibility and obligation to "take Care that the Law is faithfully executed." Some of the Obama Administration's immigration actionsâincluding the identification of particular categories of aliens as priorities for removal, and the expanded use of deferred action to afford certain unlawfully present aliens with temporary relief from removalâare primarily premised upon executive assertions of independent constitutional authority. As previously noted, the executive branch is understood to have substantial discretionary authority to determine when and whether to pursue sanctions against apparent violators of federal law, an authority generally referred to as prosecutorial or enforcement discretion. Prosecutorial discretion is most closely associated with executive enforcement of federal criminal law. But the concept of prosecutorial or enforcement discretion is often applicable in civil contexts as well, including with respect to immigration officers' decisions regarding whether to seek the removal of aliens who have entered or remained in the United States in violation of federal immigration law. A decision not to pursue sanctions against a particular individual is generally understood to be largely shielded from judicial review. Nonetheless, there are recognized limitations to the scope of this discretionary authority. As an initial matter, a general enforcement policy that is promulgated by an agency may not enjoy the same degree of immunity from judicial review as individual determinations not to pursue sanctions in a particular case. Moreover, courts have recognized that agency action must be consistent with congressional objectives underlying the statutory scheme it administers. When adopting a general enforcement policy, an agency may not rely on factors "which Congress has not intended it to consider" and substitute its own policy judgment for that which has been made by Congress. In particular, a general policy of non-enforcement by an agency could potentially be reviewable by a court and found to be an impermissible "abdication" of the agency's statutory responsibilities. Whether the Obama Administration's November deferred action initiatives constitute a permissible exercise of enforcement discretion will be the subject of heated debate. This debate will likely center upon the Administration's identification of large numbers of unlawfully present aliens as non-priorities for removal, as well as the expansion of its earlier deferred action initiative to additional aliens. On one hand, it could be argued that aspects of these initiatives functionally constitute a blanket policy of non-enforcement of federal immigration statutes, and that this non-enforcement policy represents an abdication of DHS's statutory responsibilities to enforce federal immigration law. The INA contains several grounds of removal which are potentially applicable to aliens who may receive deferred action under the Administration's initiative. Moreover, while federal statute grants immigration authorities the power to provide some unlawfully present aliens with relief from removal, these statute-based forms of relief are limited in scope. It could be argued that the Administration's decision to focus enforcement resources almost exclusively on certain categories of removable aliens, while declining to pursue the removal of a substantial portion of the unauthorized population which does not fall within those categories, constitutes an abdication of its responsibilities under the INA. It might also be argued that, by enabling a sizeable portion of the unlawfully present population to request deferred action (a form of relief that is not expressly authorized by federal statute, except in narrow circumstances ) and work authorization, the executive branch is impermissibly substituting its own judgment as to whom should be legally allowed to remain in the United States for that of Congress. On the other hand, it could be argued that resource constraints preclude DHS from pursuing the removal of all unlawfully present aliens in the United States, and that the decision to focus resources primarily upon the removal of those who have engaged in criminal activity, pose a threat to public safety, or recently entered the United States is consistent with applicable statutory enactments. Additionally, while the Administration's initiative would grant some unlawfully present aliens legal permission to remain in the United States for a specified period, it would not provide them with legal immigration status, or enable them to acquire benefits they are statutorily barred from receiving. The executive might further dispute arguments that the initiative constitutes a blanket policy of non-enforcement, and note that immigration officers retain ultimate discretion to grant deferred action on a case-by case basis, and that they are not barred from seeking the removal of unlawfully present aliens who have not been identified by DHS as enforcement priorities. It might also be argued that, particularly in light of the long-standing executive practice of granting deferred action and other forms of relief from removal, that Congress has implicitly signaled its approval or acquiescence to the executive's use of these forms of administrative relief, and the INA should not be interpreted to preclude the executive from granting such relief in certain instances. Accordingly, it could be argued that the executive branch's action, while affecting a substantial number of unlawfully present aliens, does not constitute a legally impermissible abdication of its statutory duties. In some cases, specific actions taken by the Obama Administration could potentially be seen to run afoul of the provisions of the INA, in which case the executive action could be found to be impermissible (provided a plaintiff with standing to challenge the executive action were found (see " Who has standing to challenge the Administration's initiatives? ")). For example, one federal district court recently found that DACA is contrary to three purportedly "interlocking provisions" in INA §235 which some assert require that unlawfully present aliens be placed in removal proceedings. These provisions state that 1. any alien present in the United States who has not been admitted shall be deemed an applicant for admission; 2. applicants for admission shall be inspected by immigration officers; and 3. in the case of an alien who is an applicant for admission, if the examining immigration officer determines that an alien seeking admission is not clearly and beyond a doubt entitled to be admitted, the alien shall be detained for removal proceedings. Thus, the district court concluded that DACA runs afoul of the INA because many of the aliens granted deferred action through DACA had never been placed in removal proceedings as required, in the court's view, by INA §235. (This same court, however, later ruled that it lacked jurisdiction over the case. That decision has been appealed, and it is presently unclear whether and how the court's earlier decision construing INA §235 could be seen to restrain any future grants of deferred action. ) Similar statutory constraints could potentially be also be implicated in other Obama Administration actions, particularly as executive agencies take action to clarify the meaning and application of certain statutory language. For example, INA §212(a)(9)(B)(v) would appear to preclude DHSâin issuing guidance regarding waivers of the 3- and 10-year bars upon the admission of aliens who have been unlawfully present in the United States for more than 180 daysâfrom granting waivers based on mere "hardship," as opposed to "extreme hardship," or from considering hardship to U.S. citizen or LPR children, as opposed to U.S. citizen or LPR spouses or parents. This is because INA §212(a)(9)(B)(v) expressly refers to waivers in the case of an immigrant who is the spouse or son or daughter of a United States citizen or of an alien lawfully admitted for permanent residence , if it is established ... that the refusal of admission to such [an] alien would result in extreme hardship to the citizen or lawfully resident spouse or parent of such alien. A grant of deferred action does not constitute "legalization," as that term is generally understood. In the immigration context, the term legalization is widely used to describe a process whereby persons who are unlawfully present are able to acquire legal status, typically as LPRs. LPRs may generally acquire U.S. citizenship after a period of time if certain conditions are met. Aliens granted deferred action are generally seen as "lawfully present" for purposes of federal law. This means that they do not acquire additional unlawful presence for application of the 3- and 10-year bars on the admissibility of aliens who have been unlawfully present in the United States for more than 180 days. Aliens granted deferred action may also be eligible for certain thingsâlike the issuance of driver's licensesâthat are made available, pursuant to federal, state, or local law, to persons who are "lawfully present" (or "legally residing") in the United States. (See " Will aliens granted deferred action be eligible for public benefits? "). However, lawful presence is not the same as lawful status, and aliens granted deferred action lack lawful status. As such, a grant of deferred action, in itself, will not result in an alien obtaining LPR status, a "green card," or citizenship, or the ability to sponsor family members for immigration benefits. Aliens granted deferred action could potentially have their status legalized by Congress in the future, though, as happened with earlier "groups" of aliens granted temporary relief from removal. As a general matter, aliens granted deferred action are not eligible for federal, state, or local public benefits because of the provisions of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996, as amended. PRWORA established a definition of qualified alien that does not include aliens granted deferred action, and generally barred aliens who are not qualified aliens from receiving federal, state, and local public benefits. Nonetheless, aliens granted deferred action could potentially be eligible for certain benefitsâor things sometimes perceived as benefitsâbecause aliens granted deferred action are seen as "lawfully present" (or "legally residing") in the United States. This is, in part, because one Congress cannot bind future Congresses. Thus, despite PRWORA's restrictions upon the receipt of public benefits by aliens who are not included within its definition of "qualified aliens," subsequent Congresses have enacted legislation that provides for aliens' receipt of public benefits that is inconsistent withâand does not use the language ofâPRWORA. For example, Section 214 of the Children's Health Insurance Program Reauthorization Act of 2009 (CHIPRA) gives states the option to provide Medicaid and Children's Health Insurance Program (CHIP) coverage to otherwise eligible children and pregnant women "who are lawfully residing in the United States," a phrase which has been taken to include aliens granted deferred action. The Patient Protection and Affordable Care Act (ACA) of 2010 similarly permits persons who are "lawfully present" to participate in certain health care programs established under the act. However, while lawfully present for purposes of ACA has generally been construed in the same way as lawfully residing for purposes of CHIPRA, those granted deferred action through DACA have been deemed ineligible for certain benefits under ACA. (As of the date of this report, the Administration does not appear to have formally addressed how aliens granted deferred action through the November initiatives will be treated for purposes of ACA.) Another reason why aliens granted deferred action may be eligible for state and local benefits, in particular, is that PRWORA expressly contemplates states enacting legislation, subsequent to PRWORA's enactment, that "affirmatively provides" for "unlawfully present aliens" to receive state and local public benefits. Numerous states have exercised this authority to enact legislation that makes at least some state or local public benefits available to either unlawfully present aliens or aliens who are not qualified aliens for purposes of PRWORA. In addition, it is important to note that PRWORA's definition of public benefit is limited to (A) any grant, contract, loan, professional license, or commercial license provided by [a government] agency ... or by appropriated funds ...; and (B) any retirement, welfare, health, disability, public or assisted housing, postsecondary education, food assistance, unemployment benefit, or any other similar benefit for which payments or assistance are provided to an individual, household, or family eligibility unit by [a government] agency ... or by appropriated funds. Given this definition, PRWORA has not been seen as barring the provision of certain benefits or services that some might characterize as public benefitsâsuch as driver's licenses or admission to public institutions of higher education âbut that are generally not seen as included within the definition of "public benefits" given by PRWORA. The feasibility of legal challenges to the Obama Administration's actions will depend, in part, upon which specific actions are challenged and the legal bases for the challenge. However, regardless of the specifics of individual cases, standing requirements seem likely to pose a significant barrier for any legal challenge. Standing requirements are concerned with who is a proper party to seek judicial relief from a federal court. They derive from Article III of the Constitution, which confines the jurisdiction of federal courts to actual "Cases" and "Controversies." The case-or-controversy requirement has long been construed to restrict Article III courts to the adjudication of real, live disputes involving parties who have "a personal stake in the outcome of the controversy." Parties seeking judicial relief from an Article III court must generally show three things in order to demonstrate standing: (1) they have suffered an "injury in fact" that is (a) concrete and particularized and (b) actual or imminent; (2) the injury is fairly traceable to the challenged action of the defendant; and (3) the injury is likely to be redressed by a favorable decision. Those whose sole injury is the government's alleged failure to follow the law are generally found to lack standing because this injury is not personal and particularized. This is so regardless of whether the plaintiff alleges that his/her "tax dollars" can be seen as helping to fund the government's allegedly improper action or inaction. Government officers and employees, who have taken an oath to uphold the law, are generally found to lack standing so long as their only asserted injury is being forced to violate their oaths by implementing an allegedly unlawful policy or practice. Instead, they must allege some separate and concrete adverse consequence that would flow from violating their oath, and courts have reached differing conclusions as to whether the possibility of being disciplined for obeyingâor refusing to obeyâallegedly unlawful orders suffices for purposes of standing, or whether such injury is "entirely speculative" and, therefore, lacking imminence. In the case of the ICE officers who challenged DACA, the reviewing district court found that the plaintiffs had standing because of the possibility of such discipline. However, because such discipline constitutes an adverse employment action, the same court subsequently found that the plaintiffs' case is within the jurisdiction of the Merit Systems Protection Board (MSPB), not the court's. (This decision has been appealed to the U.S. Court of Appeals for the Fifth Circuit, and it remains to be seen whether the district court's view as to jurisdiction is upheld.) Individual Members of Congress are generally seen to lack standing to challenge executive actions. In Raines v. Byrd , the Supreme Court held that, in order to obtain standing, an individual Member must assert either a personal injury, like the loss of his/her congressional seat, or an "institutional injury" that cannot be addressed by an extant legislative remedy. It is presently unclear what might constitute the requisite "institutional injury," as discussed in CRS Report R43712, Article III Standing and Congressional Suits Against the Executive Branch , by [author name scrubbed]. In several prior cases, states sought to challenge the federal government's alleged failure to enforce immigration law on the grounds that this "failure" imposes costs upon the states, which must provide public benefits and services to aliens who, under this argument, would not have been present within the state had the federal government enforced the INA. Some of these challenges have been rejected on standing grounds. In other cases, the court either "presumed" or did not address the standing requirements, but found that states' challenges presented a nonjusticiable political question. (The political question doctrine embodies the notion that courts should refrain from deciding questions that the Constitution has entrusted to other branches of government. ) An argument has recently been advanced that U.S. workers whose wages or working conditions are adversely affected by increased competition from aliens permitted to work in the United States could show "competitor standing" and, thus, challenge the Obama Administration's actions. This argument is, in part, based on a June 2014 decision wherein the U.S. Court of Appeals for the District of Columbia Circuit found that U.S. persons working as herders had standing to challenge the DOL's decision to issue certain guidance as to the wages and hours of foreign herders without notice-and-comment rulemaking because DOL's action caused "increased competition for jobs in their industry." However, this case could potentially be distinguished from a challenge to the Obama Administration's deferred actions, in particular, because the INA expressly requires the executive branch to take certain steps to protect U.S. workers from foreign competition when issuing certain types of nonimmigrant visas, like those at issue in the June decision. There do not appear to be any such requirements as to the executive's determination to issue employment authorization documents to aliens who do not hold employment-based visas. Competing arguments have been made as to whether there is historical precedent for the Obama Administration's actions, particularly in granting deferred action to certain aliens brought to the United States as children and to the parents of U.S. citizen or LPR children. Such arguments are shaped, in part, by which historical actions are viewed as analogous to the current ones. The executive has historically exercised its prosecutorial or enforcement discretion, delegated discretion, and/or discretion in interpreting and applying statutes to provide certain relief from removal to individual aliens who share certain characteristics and could, thus, be said to form a group or category. At different times, such relief has been made available under the rubric of parole (or refugee parole), extended voluntary departure (EVD), indefinite voluntary departure (IVD), deferred enforced departure (DED), temporary protected status (TPS), and deferred action. However, the shared name given to such actions can mask important differences in the legal basis for particular grants of discretion, among other things. For example, not all grants of parole to aliens in the 1960s should be seen as exercises of prosecutorial or enforcement discretion since Congress enacted legislation in 1960 that temporarily provided the executive with express statutory authority to parole "refugees" into the United States. Likewise, in some cases, Congress has expressly adopted legislation encouraging the executive to exercise particular forms of prosecutorial or enforcement discretion in certain cases, which could potentially be said to indicate congressional "approval" of the executive's exercise of this authority. The temporary relief from removal granted to unlawfully present aliens that some have asserted most closely resembles the Obama Administration's deferred action initiatives âparticularly in terms of the percentage of the unauthorized alien population affectedâare the so-called "Family Fairness" initiatives of 1987 and 1990. In those cases, the Reagan and George H.W. Bush Administrations, respectively, granted indefinite voluntary departure (IVD) and employment authorization to certain immediate relatives of aliens who had legalized their status pursuant to IRCA. (These relatives were themselves ineligible for legalization under IRCA for various reasons.) The Obama Administration's 2014 deferred action initiatives can be likened to the Family Fairness initiatives in that they involve the granting of temporary relief from removal and work authorization to certain unlawfully present aliens based, in part, on humanitarian factors. However, certain differences could also be noted between the current and earlier initiatives, including that (1) the Reagan and Bush Administrations did not establish a centralized process whereby aliens could apply for relief from removal, instead permitting regional officials to grant relief; (2) some aliens who were denied relief through the Family Fairness initiatives were reportedly placed in removal proceedings, something that has not been reported with DACA; and (3) the Family Fairness initiatives were preceded (and followed) by the enactment of legislation legalizing certain unlawfully present aliens, whereas Congress has enacted no such legislation here. How much weight is given to these similarities or dissimilarities may ultimately depend upon one's views as to the permissibility and/or desirability of the current initiatives.
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On November 20, 2014, President Obama delivered a televised address wherein he broadly described the steps that his administration is taking to "fix" what he has repeatedly described as a "broken immigration system." Following the President's address, executive agencies made available intra-agency memoranda and fact sheets detailing specific actions that have already been taken, or will be taken in the future. These actions generally involve either border security, the current unlawfully present population, or future legal immigration. The most notable of these actions, for many commentators, are the initiatives to grant "deferred action"âone type of relief from removalâto some unlawfully present aliens who were brought to the United States as children and raised here, or who have children who are U.S. citizens or lawfully permanent resident (LPR) aliens. Previously, in June 2012, then Secretary of Homeland Security Janet Napolitano announced a programâcommonly known as Deferred Action for Childhood Arrivals (DACA)âwhereby unlawfully present aliens who had been brought to the United States as children and met other criteria could receive deferred action and, in many cases, employment authorization. The eligibility criteria for DACA expressly excluded unlawfully present aliens who were over 31 years of age, or who had entered the United States on or after June 15, 2007. However, aliens who are over 31 years of age, or entered between June 15, 2007, and January 1, 2010, could receive deferred action as part of the 2014 initiative. Similarly, unlawfully present aliens who have children who are U.S. citizens or LPRs could also receive deferred action and employment authorization pursuant to the November 2014 initiatives, provided they meet specified criteria. These criteria include "continuous residence" in the United States since before January 1, 2010; physical presence in the United States both on the date the initiative was announced and on the date when they request deferred action; and not being an enforcement priority (e.g., not a threat to national or border security). The announced executive actionsâparticularly the granting of deferred action and employment authorization to unlawfully present aliensâhave revived debate about the President's discretionary authority over immigration like that which followed the announcement of DACA in 2012. In the case of DACA, some argued that the initiative violates the Take Care Clause of the U.S. Constitution, runs afoul of specific requirements found in the Immigration and Nationality Act (INA), or is inconsistent with historical precedents. Others, however, asserted that DACA involves a valid exercise of the executive's prosecutorial or enforcement discretion, is consistent with the INA, and has ample historical precedent. Similar arguments will likely be made as to the November 2014 actions, which affect a significantly larger number of aliens than DACA. Legal challenges to DACA have generally failed on standing grounds, because the plaintiffs bringing these challenges were not seen as the proper parties to seek judicial relief from a federal court. The one exception to thisâthe litigation in Crane v. Napolitano âresulted in the reviewing federal district court finding that DACA runs afoul of provisions in Section 235 of the INA which some assert require the executive to place unlawfully present aliens in removal proceedings. However, this same federal district court subsequently found that it lacked jurisdiction because the plaintiff immigration officers alleged that they faced discipline by their employer, DHS, if they refused to implement DACA, and such claims are within the jurisdiction of the Merit Systems Protection Board (MSPB), not the court. The 113 th Congress has also considered legislation to defund DACA (e.g., H.R. 5272 , H.R. 5316 ).
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The subject matter covered within this report is European Union (EU) renewable electricity generation—specifically onshore wind and solar photovoltaic (PV) electricity—and does not include discussion about the broader renewable energy sector (i.e., alternative transportation fuels, heating/cooling, and energy efficiency). Onshore wind and solar PV were selected as they have experienced the largest amounts of deployment in the EU to date. European Union energy policy is complex and multi-dimensional. Furthermore, each of the 28 member countries has a unique set of policies and incentives that add further complexity to the policy structure. It is beyond the scope of this report to provide a comprehensive overview and analysis of all energy polices at the EU and member-country level. Rather, the scope of this report is designed to focus on certain aspects of energy policy at the EU-level and for three specific countries—Germany, Spain, and Italy. However, other EU members have implemented renewable electricity support policies with various designs and objectives. Finally, renewable electricity policies for three specific EU member countries provide a country-level comparison of the unique policy types, implementation strategies, and financial mechanics used by different EU members. Germany, Spain, and Italy were selected for further review based on the amount of onshore wind and solar PV deployment in these countries. Although the scope of this report has been narrowed, material contained in this report is naturally complex and technical with many caveats and nuances. Where possible, information contained in the report has been generalized. For additional information and detail about specific policies, please contact the author directly. The European Union has a multi-decade history of supporting and promoting renewable energy as a means of addressing two primary energy-related concerns: (1) energy import dependency, and (2) greenhouse gas emissions. EU net imports of natural gas, solid fuels, and oil/petroleum products represented 54% of total primary energy consumption in 2010. Starting as early as 1986, EU communications and directives have been aimed at reducing fossil fuel consumption, diversifying the EU energy mix, reducing greenhouse gas emissions, and encouraging the use of renewable energy for electricity, heating/cooling, and transportation. In 1997, in preparation for the upcoming "Third Council of Parties to the United Nations Framework Convention on Climate Change" held in Kyoto, Japan, the European Commission published a white paper that, among other things, called for the EU community to obtain 12% of its energy needs from renewable sources by 2010. Subsequently, EU members became Kyoto Protocol signatories and eventually ratified commitments to reduce greenhouse gas emissions. In 2001 the European Parliament and the EU Council published Directive 2001/77/EC, which set out non-binding national indicative targets for EU members that would result in the EU, as a whole, sourcing 12% of total energy, including 22.1% of electricity, from renewable sources by 2010. However, the non-binding nature of renewable energy targets in the 2001 directive did not provide the degree of certainty needed to motivate the development and investment necessary to achieve the targets. Not until the passage of the 2009 climate and energy package did the EU and its members have binding renewable energy targets. In 2007, the European Commission published a renewable energy roadmap that set energy and emissions targets with the goal of transforming Europe into an energy-efficient and low carbon economy. These targets were included in EU legislation, known as the climate and energy package. The EU targets are commonly referred to as the "20-20-20" targets as they focus on three key objectives to be met by the year 2020: (1) binding target to reduce greenhouse gas emissions by 20% compared to 1990 levels, (2) binding target to increase to 20% the portion of final EU energy consumption that is produced from renewable energy sources, and (3) non-binding target to improve energy efficiency in the EU by 20% compared to 2020 projections. In 2009 the EU adopted Directive 2009/28/EC to promote and encourage the use of renewable energy resources in member countries. The directive codified the EU goal that 20% of total final EU energy consumption be produced from renewable energy sources by 2020. To achieve the 2020 goal, the directive established binding renewable energy targets for each EU member country. Each national renewable energy target is different, with some national targets higher than 20% and some lower. Country-specific renewable energy targets were established based on a number of factors, including the quality of renewable energy resources, country economies, energy resource mix, and others (for a list of all EU member country 2020 targets, see the Appendix ). In order to comply with the 2020 goal, countries can use renewable energy sources for heating/cooling, electricity, and transport, although each member country is required to source a minimum of 10% of transport energy from renewable sources by 2020. Each EU member country has discretion to decide what policies and incentives are offered that might motivate renewable energy development in order to achieve the binding EU renewable energy targets. The EU directive also allows for the transfer of renewable energy between member countries, joint projects among member countries, and projects with developing countries outside the EU, as long as they meet certain qualifying criteria. Extending climate and energy targets past 2020 is being debated in the EU and the European Commission published a March 2013 concept paper regarding a 2030 policy framework that would increase EU renewable energy targets. For renewable electricity generation, EU countries have used several different types of incentive mechanisms to stimulate the development and investment required to meet EU 2020 targets. Generally, each country uses a unique mix of policy incentives. The application of those policy tools is customized to suit the objectives of each EU member. Also, each EU country has discretion with regard to the types of financial incentives offered to renewable electricity projects. The most commonly cited and referenced EU financial incentive is the feed-in tariff, described below, which has been used in several EU countries to encourage deployment of renewable electricity generation projects. However, there are other incentive mechanisms used to support renewable power in the EU. Some member countries have started to transition from feed-in tariffs to other incentive types as a way to control costs, manage capacity installations, and integrate renewable electricity with power markets. The following sections provide a brief overview of four primary types of financial incentive mechanisms used by EU member countries to stimulate renewable electricity generation. A feed-in tariff (FiT) is a renewable electricity incentive mechanism that generally serves two primary functions. First, it guarantees that all electricity generated from a renewable project will be purchased and will have access to the electric power grid (the "feed-in" portion of the FiT). Second, it guarantees the renewable project a long-term price for electricity produced, generally 15 to 30 years or even for the lifetime of a project, (the "tariff" portion of the FiT). The tariff, or rate, paid for renewable electricity is generally set higher than the prevailing wholesale electric power price. Thus, FiT incentives eliminate two key investment risks: (1) purchase risk, and (2) price risk. As a result, the FiT mechanism can create an attractive finance and investment opportunity that could stimulate development and installation of renewable power generation capacity. FiT incentive designs vary by country and the costs associated with FiT incentives can be paid for in different ways. Some countries distribute FiT costs to certain electricity rate-payers by adding a surcharge to consumer electricity bills. Other countries guarantee FiT compensation to power system operators, thus resulting in a national government budget commitment. FiT mechanisms can also include other design elements such as caps, which set a maximum amount of renewable electricity capacity that may be supported by the FiT, and "degression," which provides for a periodic reduction of the FiT rate based on defined criteria. Additionally, some countries require regular reviews of FiT incentives in order to make rate adjustments that reflect changes to electric power, technology, and capital markets. One key challenge for a FiT incentive is for the national government to set a tariff rate that is high enough to incentivize development and investment in the renewable electricity sector, but not so high as to create windfall profits or stimulate capacity installations that result in power system operational issues and/or cost concerns. Despite these challenges, several EU countries have supported renewable electricity development through the use of FiT incentives. A market premium is a financial incentive that provides renewable power producers additional revenue above the market price for electricity. The market premium can either be fixed or variable. A fixed market premium provides a constant value for electricity generated from renewable energy sources in addition to the revenue received from wholesale power market sales. The value of the premium never changes regardless of the underlying wholesale power price, which can fluctuate up or down depending on the season and time-of-day. A variable market premium provides a renewable power producer with an electricity price premium, above the wholesale market price that results in the power producer receiving a pre-determined value for each unit of electricity generated and sold. For example, a market premium policy may be designed to provide solar power projects total compensation of $0.30 for each kilowatt-hour (kWh) of electricity sold. The solar project would first sell power into the wholesale market and, for this example, the project received $0.18 per kWh. The market premium incentive mechanism would then provide an additional $0.12 per kWh to the solar project in order to reach the $0.30 per kWh pre-determined value. In essence, the variable market premium is equal to the pre-determined compensation value minus the wholesale power price. A variable market premium policy may also require the renewable power project to return some of its revenue should the wholesale market price exceed the pre-determined value. Initially, market premium incentives were designed to provide a fixed payment above the wholesale electricity price. Now, many market premium incentive policies provide a variable premium that places a cap on total compensation received for renewable electricity. The variable market premium provides a greater degree of revenue certainty to the project; however, it also limits the potential for investment returns. The market premium incentive can function much like a FiT in that a pre-determined value for electricity is received by the renewable power project owner. This is especially true for a variable premium. However, one key difference between the two incentives is that the market premium may just focus on price risk. Depending on how it is designed, the market premium may not eliminate purchase risk by guaranteeing access to the electricity grid. As a result, a renewable power project owner may be required to secure a purchase agreement with a third party for its electricity generation, consume the renewable electricity generated on site, or participate in wholesale market activities in order to sell its power. Green certificate incentive programs provide additional revenue, above that received from power sales, to renewable electricity generators through accumulation and sale of certificates to entities required to comply with annual renewable electricity quotas. The value of green certificates is generally determined through a market mechanism and typically fluctuates based on supply and demand. Green certificate programs can include various design elements (i.e., multipliers for different technologies, validity lifetimes for certificates). Certificates can be granted based on different metrics. For example, some countries might grant green certificates for each megawatt-hour (MWh) of electricity generated from a renewable power project, while other countries might award green certificates based on calculated carbon dioxide emission reductions. Power production at a renewable electricity generation facility is monitored and measured so green certificates can be issued based on the metric (i.e., electricity generation, carbon emission reduction) used. Generally, each certificate is assigned an identification number and is recorded in a central registry. A green certificate program results in the creation of a saleable commodity that is separate from the actual electricity generated by the renewable power project. Once granted, green certificates can be sold to entities that are required by law to comply with a defined renewable electricity quota obligation. Green certificate programs instituted in Europe have characteristics similar to renewable portfolio standards (RPS) and tradable renewable energy certificates (RECs) used in certain U.S. states. Whereas state RPS requirements set the renewable electricity obligations, RECs can be bought, sold, and traded among renewable power generators and obligated entities as a means of complying with annual renewable electricity requirements. Tenders are programs typically used to encourage development and installation of a defined amount of new renewable electricity capacity. Tenders function much like solicitations and procurements, whereby a government-authorized entity releases a tender document with the intent of entering into contracts with renewable electricity generators in order to meet a pre-determined renewable power quota. Qualified respondents generally submit an application, and sometimes a financial deposit, in response to the tender announcement. Successful projects are selected based on offers received by respondents that comply with the tender criteria. Reverse auctions, sometimes included as part of the tender process, are policy mechanisms that encourage project developers to offer renewable electricity at the lowest cost. Since the reverse auction mechanism awards renewable power capacity based on the lowest renewable electricity bids, this approach can limit government financial commitments associated with renewable electric power incentives. When using reverse auctions, governments can set both minimum and maximum tariffs that will be paid for each unit (kilowatt-hour) of renewable electricity generated. Ideally, respondents are able to calculate the minimum tariff value needed in order for the project to obtain financing and be economically viable—this tariff level is typically the price per kWh included in the respondent's application. When evaluating respondent offers, government agencies generally give preference to projects that offer the lowest tariffs they are willing to receive, assuming that respondents meet other qualification criteria included in the tender. The overall goal of reverse auctions is to stimulate deployment of a certain amount of renewable electricity capacity at the lowest possible cost. Renewable electricity policy history, evolution, incentives, financial mechanics, and market impacts are dependent on a particular country's situation. Germany, Spain, and Italy are EU member countries that have been quite active in terms of renewable electricity policy, development, and technology deployment. As of the end of 2012, Germany and Italy were the top two countries in the world in terms of cumulative installed solar PV capacity, with 32,000 Megawatts (MW) and 17,000 MW, respectively. As recently as 2008, Spain was one of the most active renewable electricity markets in the world. Nearly 3,000 MW of solar PV was installed in Spain that year, more than in any other country. Each of these countries has employed different policy frameworks and incentive mechanisms to encourage investment in, and deployment of, renewable electricity generation. In some cases, renewable electricity policies were designed to be reviewed periodically in order to adjust incentives based on changes to economic and market conditions. In other cases, governments made unscheduled policy adjustments in order to respond to fiscal, economic, market, and political demands. Over the last decade Germany, Spain, and Italy have modified their policies on multiple occasions. An examination of their respective renewable electricity policies provides some perspective regarding how different countries implement and adjust policies based on changing market, economic, and political conditions. The following sections provide a policy overview for each country. Germany's binding EU 2020 renewable energy target requires that 18% of total energy be provided by renewable sources by 2020. As required by the EU directive, Germany has published a National Renewable Energy Action Plan (NREAP) that outlines the country's plan to achieve the renewable energy target. Germany's NREAP, published in June 2010, indicates that Germany plans to generate 38.6% of electricity from renewable energy sources by 2020. Since then, Germany developed its Energy Concept, which aims to have 35% of electricity sourced from renewables by 2020, rising to 80% by 2050. This portion of the Energy Concept was included in Germany's 2012 renewable electricity policy amendments. Government support for renewable energy in Germany dates back to as early as 1985 with the introduction of various forms of policy support and financial incentives within certain German states. The German federal government's Electricity Feed-In Law of 1991 provided grid access for renewable power generators and required utilities to pay premium prices, equal to 90% of retail electricity rates, for renewable electricity. By some accounts, this was the first application of FiTs as a means of supporting deployment of renewable power generation assets. However, while the 1991 law did stimulate development of some wind and other renewable electricity generation projects, it only provided a single FiT value that was not high enough to motivate deployment of solar PV and other technologies at that time. In 2000, the German government replaced the 1991 Feed-In Law by passing the Erneuerbare-Energien-Gesetz (EEG), also known as the Renewable Energy Sources Act. The EEG shifted electricity purchase requirements to grid operators and set specific tariffs for individual technologies based on their respective power generation cost. The objective of technology-specific tariff levels in the EEG was to provide renewable electricity projects a guaranteed investment return that would stimulate development of renewable power capacity. The German Bundestag (Parliament) passes binding EEG legislation, while the Federal Ministry of the Environment (BMU) and the Federal Grid Agency are responsible for implementing the EEG. Additionally, when making EEG policy decisions, the Environment Ministry consults with the Ministry of Economics, which has responsibility for overall energy policy in Germany. Between 2000 and 2012, the EEG was modified and amended multiple times to change and eliminate quotas on certain technologies, modify feed-in tariff values, and make other policy adjustments. Finally the EEG is generally credited with the expansion and growth of renewable power capacity in Germany, especially solar PV capacity. However, the German government has indicated its desire to shift renewable electricity incentives from FiTs to market premiums. The goal of this shift is to better integrate—economically and operationally—renewable electricity into the German power market. To date, Germany's primary incentive mechanism for renewable electricity has been the FiT. However, in 2012 Germany introduced a market premium option for renewable power projects and has indicated that the FiT support structure will likely shift to a market premium or some other market-integration incentive over time. One of the reasons for this policy change is to encourage renewable power projects to participate in the electric power market, thereby integrating renewable power with power market operations. Additionally, Germany's FiT/market premium incentives are designed to decline over time based on both pre-determined and market-responsive schedules. Feed-in tariffs, market premiums, and degression as applied in Germany are discussed further in the sections that follow. Feed-in tariffs in Germany are provided for the first 20 calendar years of project operations, plus a partial year, based on the start-of-operations date, in which the project was commissioned. Germany's FiT incentive design has several unique aspects. For example, the German EEG specifies FiT payment levels for a wide range of renewable power technologies as well as for electricity generated from mine gas. Each technology receives a specific tariff level based on its estimated power generation cost. Additionally, onshore wind and solar PV FiT levels, provisions for project size and location, and degression schedules are fundamentally different. Wind power in Germany is currently incentivized through a two-tiered tariff structure. All wind projects receive an initial tariff level for the first five years of project operations. At the end of five years the actual amount of electricity production from each project is compared against a reference yield, and the initial tariff can either be extended for a certain period of time or the project may receive a lower tariff level for the remainder of the 20-year FiT availability period. Additionally, the EEG provides a system services—typically referred to as ancillary services in the United States—bonus for projects that comply with requirements for wind projects to provide services such as frequency and voltage control. These services are currently provided by conventional power generators. The systems service bonus aims to incentivize wind power generators to install technical solutions that can provide system services, which will be needed as Germany's wind project portfolio grows. Table 1 provides FiT levels for onshore wind generation out to 2021 per the 2012 EEG amendment. FiT incentives for solar PV electricity provide a different level of compensation. Also, compensation varies with the size of solar projects. Different degression methods are used for wind (1.5% annually) and solar PV (dependent on the amount of capacity installed). Table 2 provides FiT levels, as of January 2012, for electricity generated from solar PV. The discussion below about degression provides detailed information about how solar PV FiT incentives are designed to be reduced over time. Originally, the 2012 EEG did not set any limits or quotas on the amount of wind or solar capacity that could be installed, either in a given year or on a cumulative basis. The EEG was subsequently modified to include a cumulative solar PV capacity limit of 52,000 MW, at which time FiT incentives will no longer be available for new projects. Capacity limits are one policy option that can help Germany manage the amount of renewable electricity installations as well as the costs associated with supporting renewable power deployment. To date, Germany has generally elected to use annual FiT incentive reductions, periodic FiT policy adjustments, and a federal project registry to monitor and manage renewable electricity capacity additions. Generally, the purpose of the federal project registry is to provide the government with solar PV market transparency in order to quickly assess capacity installations levels over a certain period of time. This transparency allows the government to respond to changing market conditions quickly and make periodic policy decisions based on actual market information. Significant and frequent reductions of solar PV feed-in tariffs have occurred since the January 2012 release of Germany's EEG. Key changes include 20% to 29% tariff cuts in April 2012 and monthly FiT reductions that use a degression approach based on capacity installations—also referred to as "corridor" degression. Additionally, starting January 1, 2014, all solar PV projects commissioned after March 9, 2012, will receive FiTs for only 90% of solar electricity generated; this policy change encourages self-consumption of solar electricity and selling electricity in the wholesale power market. Monthly FiT degressions, a policy change since 2012, can be difficult for project developers to navigate since development times for large projects can take months or longer to develop. With FiT rates constantly changing, obtaining project finance for some new projects may be difficult due to the complexities of accurately estimating project revenue, cash flow, and profitability. These changes to Germany's incentive structure are contributing to expectations that annual solar PV installations in 2013 and beyond may drop to approximately 2,500 MW, less than half of the more than 7,000 MW installed in 2012. In January 2012, revisions to Germany's EEG included the option for renewable electricity projects to receive adjustable market premiums instead of FiT incentives. One goal of introducing market premiums is to encourage renewable electricity projects to participate in wholesale power markets, thereby integrating renewables with the broader power sector. The value of the market premium is equal to the difference between technology-specific feed-in tariffs and the average monthly wholesale market price of electricity. In addition to the market premium, renewable project operators are also eligible to receive a management fee to compensate for administrative costs associated with participating in German power markets. While the market premium approach may appear to serve the same function as a FiT incentive, there are several distinct differences. The primary difference is that the market premium incentive requires renewable electricity projects to participate in the wholesale power market, and project owners must sell their electricity either to the electricity exchange or to a willing buyer through a power purchase agreement. Since the introduction in 2012, the market premium option has been popular with many wind and solar PV projects due to the additional revenue provided by the management fee. In fact, cost concerns with the market premium option caused the German government to reduce the management fee starting in January 2013. However, in an effort to incentivize market integration of renewable electricity, higher management fees are available to wind and solar PV projects that can be controlled remotely. This may result in wind and solar electricity production and distribution to be based more directly on demand, power prices, and other economic market conditions. A February 2013 joint proposal by the Federal Environment Ministry and the Federal Economics Ministry suggested eliminating FiT incentives for projects larger than 150 kW and requiring such projects to receive financial support via the market premium incentive. Implementation of this proposal could signal a shift from FiTs to market premiums, a possible indication that integrating renewables into power markets is becoming more important than encouraging deployment. One fundamental policy design aspect of German feed-in tariff incentives for renewable electricity is degression: the reduction of FiT incentives over time. Generally, the objective of degression is to set feed-in tariffs at a level that stimulates investment in project development and expands the market for renewable electricity generation, while at the same time avoiding windfall profits for project owners and the potential for over-deployment of renewable electricity projects. Ideally, the incentives for new projects are gradually reduced in order to motivate innovation and economies of scale that could result in renewable power becoming more economically competitive in the absence of subsidies or incentives. Germany's EEG includes FiT reductions for all renewable power technologies. However, the rate at which FiT levels decline for specific technologies is modified from time to time. FiTs for all renewable electricity technologies, with the exception of solar, are reduced annually by a certain percentage. For example, the 2012 EEG requires that onshore wind FiTs be reduced by 1.5% annually. Solar power FiTs are subject to a unique degression approach that is designed to respond to solar PV market dynamics. Solar FiT degression was designed as a way to limit and control the amount of solar power installed each year, without having to institute quotas or caps. For example, Germany's 2012 EEG indicates that the country is targeting annual solar PV installations between 2,500 MW and 3,500 MW, levels consistent with Germany's National Renewable Energy Action Plan. However, this target is neither a ceiling nor a binding limit. When annual solar installations reach base case levels between 2,500 MW to 3,500 MW, FiTs are reduced by 9%. However, the degression rate is adjusted either up or down based on the actual amount of annual solar PV installations. Table 3 illustrates how the solar PV degression rate is adjusted depending on the amount of annual solar PV installations. This market-based and responsive degression policy design was instituted in order to respond to rapidly changing solar power markets, which were experiencing rapid equipment cost declines due to over-capacity in the global solar module manufacturing marketplace. As a result, German FiTs were staying relatively high while the cost of solar electricity was falling. This situation motivated large amounts of solar power installations—more than 7,000 MW in each of years 2011 and 2012 —that far exceeded the implied 2,500 to 3,500 MW annual target. Electricity surcharges have emerged as a political issue ahead of September 2013 national elections. Germany's approach to pay for renewable electricity incentives is to spread the costs over a large electricity consumer base. Therefore, Germany does not use federal tax revenues to fund the EEG. In practice the EEG financial mechanics, known as the Equalization Scheme, includes several nuances and complexities. Generally, however, grid system operators pay feed-in tariffs to renewable power projects, and the above-market costs of the FiT incentives are passed along to certain domestic retail electricity customers through an EEG surcharge that is added to customer electricity bills. A more detailed description of the equalization scheme is provided in the text box below. The EEG surcharge applied to some consumer—residential, commercial, and industrial—electricity bills has increased since 2000 and annual increases have emerged as an important public policy issue. Figure 1 illustrates the cost components of residential electricity prices in Germany from 2000 to 2011. For reference, the 2013 EEG surcharge was set at approximately 5.3 €cent per kWh, an estimated 47% increase over 2012. While the EEG surcharge has increased, wholesale market prices for conventional sources of electric power (coal, nuclear, natural gas) have either stabilized or decreased due, in part, to what is known as the merit-order effect. This effect results from the priority access to the grid enjoyed by renewables. The merit-order effect is based on the general assumption that electricity is supplied from power generators starting with the lowest cost sources first. As power demand increases, so does the marginal cost of electricity. Renewable electricity in Germany has priority grid access. Therefore, as more renewables are added to the system the less demand for higher marginal cost power. As reflected in the retail electricity generation cost component, the merit-order effect observed to date is generally less than the EEG surcharge applied to retail electricity bills (see Figure 1 ). The rising EEG surcharge is a result of the costs associated with financial support provided to renewable electricity generation. As more renewables are added, the cumulative costs, and therefore the surcharges needed to cover those costs, go up as well. However, the rising surcharge is also influenced by two other factors: (1) EEG surcharge reductions for certain industries and (2) the method used to calculate the required surcharge. First, industrial operations and rail companies with high electricity consumption can apply for a reduced EEG surcharge of 0.05 €cent per kWh that is applied to a certain percentage of electricity purchases. Industrial operations that qualify for reduced EEG surcharges pay lower surcharges on a percentage of their total electricity purchases. The percentage varies depending on the volume of electricity consumed by industrial operations and rail companies. For example, industrial operations that consume more than 10 gigawatt-hours of electricity are eligible to pay the reduced surcharge on 90% of their electricity consumption; industrial operations that use more than 100 gigawatt-hours are eligible to pay the reduced surcharge on 100% of their electricity consumption. Other electricity customers, such as residential and small businesses, pay 5.3 €cent per kWh in 2013. The number of companies allowed to qualify for EEG surcharge reductions has been increasing; this increases the EEG surcharge since the costs are being distributed over a smaller customer group. The surcharge exemptions for certain industrial companies are in place in order to maintain global competitiveness for German manufacturers. However, the European Commission has conducted a preliminary investigation of the legality of Germany's EEG surcharge exemption policy. The legal issue being investigated is that of "state aid," for which there are rules about EU member states intervening in competitive markets by using public resources to promote certain economic activities. Findings and action by the European Commission could have ripple effects throughout Europe and stakeholders will be observing the outcome of this investigation. Second, the method by which EEG costs are calculated is also contributing to the escalating surcharge. For example, EEG costs are the difference between FiTs paid for renewable electricity and the value received for that electricity on the power exchange. As more renewable electricity with priority grid access is fed into the electric power system, the lower the exchange price of electricity due to the merit-order effect. The lower the exchange price, the higher the calculated EEG costs. The EEG surcharge applied to retail electricity bills has become an important political topic as Germany approaches national elections in September 2013. As discussed above, the EEG surcharge has increased over time and is approximately 5.3 €cent/kWh in 2013. As a result, policy makers have put forward proposals to control the rate of increase of the surcharge. Several options for controlling EEG surcharge amounts have been proposed, including (1) increasing the minimum EEG surcharge paid by electricity intensive industries, (2) not allowing certain industries to receive EEG surcharge exemptions, (3) reduced compensation to projects that curtail power production, (4) new projects receive a market premium instead of a FiT, (5) financial support not available during the first six months of operation, and (6) a retroactive feed-in tariff reduction of 1.5% for one year. However, as of the date of this report, these proposals had been blocked by the governors of German states and have not been implemented. EEG policy changes are not expected until after national elections in September 2013. Feed-in tariff incentives are generally credited with the rapid deployment of renewable electricity generation in Germany, especially the deployment of solar photovoltaic (PV) systems. At the end of 2012 more than 32,000 MW of solar capacity and nearly 31,000 MW of wind capacity had been installed. Total installed solar PV capacity was larger than any other country in the world, as of the end of 2012. As discussed above, financial incentives for wind and solar electricity have evolved over time. Initially, incentives were set at a single rate and provided enough revenue certainty to support some wind power development. A policy overhaul in 2000, along with subsequent modifications, created technology-specific tariffs with tiers based on project size and location. Each policy change affected the economics and market demand for wind and solar power generation. Figure 2 shows annual wind and solar PV capacity in Germany since 1991 and illustrates how changes and modifications to renewable electricity policies impacted wind and solar PV deployment. Wind power in Germany experienced modest growth in the 1990's and relatively steady growth between 2000 and 2012, with annual installation amounts ranging from 1,500 to 3,200 MW during that period. Solar PV did not experience market penetration until the 2000 EEG was enacted, which created technology-specific FiTs based on electricity production costs. As FiTs for solar PV were adjusted over time in order to encourage deployment, the solar equipment market became very competitive and solar equipment prices began to rapidly decline in the late 2000's. The combination of these factors resulted in attractive economic returns for German solar PV projects. Annual installations quickly rose to 7,000 MW per year by 2011. Since this level of capacity additions was twice the targeted amount, and costs associated with FiT incentives were rising rapidly, the German government has since made several modifications to solar PV incentives in order to control and manage future installation rates. The level of renewable electricity deployment in Germany has also had an effect on the grid system operators. While the system operators are able to recover costs associated with FiT incentives, they also must manage the integration and economics of variable sources of renewable power. For example, large amounts of solar power generation can reduce the value of electric power during peak demand/price periods. As a result, conventional power generation assets—coal, nuclear, and natural gas—might not be able to generate enough revenue needed to pay for capital, operating, maintenance, and finance costs of certain power plants. While this may result in the retirement of less efficient fossil energy plants, it may also result in the electricity market not providing enough economic incentive to justify building and operating flexible power generation units that are likely needed to complement variable renewable electricity output. This is a critical issue that Germany is grappling with and it is one of the primary reasons why incentives are shifting from production-based to integration-based. The term Energiewende —translated as "energy transition"—dates back to the 1970s and was the subject of a study, and subsequent book, authored by Germany's Institute for Applied Ecology. Energiewende supporters were opposed to nuclear power and argued that economic growth could coincide with reduced energy consumption and sourcing energy from renewable resources. Germany's Energiewende has evolved over time. Various federal policies (e.g., the Renewable Energy Sources Act) have been approved that support the goals and objectives of the energy transition. Germany's Energy Concept, adopted in September 2010, outlined targets and objectives in two primary areas that support the Energiewende : (1) renewable energy, and (2) energy efficiency. In the power sector, the Energy Concept aims to increase the share of renewable energy in electricity consumption to 80% by 2050—this target was included in the 2012 EEG amendment. Also in 2010, the German government resolved to extend the operating life of 17 nuclear power facilities in Germany. Initially, Energy Concept targets included renewables, energy efficiency, and nuclear power as options to achieve renewable electricity and carbon emission goals. Following the 2011 tsunami and resulting Fukushima nuclear incident in Japan, the German government altered plans for nuclear power and decided to completely phase out nuclear power by 2022—similar to a nuclear phase-out plan created in 2000. Now that renewable electricity targets and nuclear phase-out plans are in place, Germany is tasked with sorting out how to transition its power sector to one dominated by renewables. Challenges such as grid system expansion, power market design, energy storage, and managing variable electric power generation will all need to be addressed in order to transition to renewables. Germany's technology and policy approach to address these Energiewende challenges may be of interest to other countries. Spain's binding EU 2020 renewable energy target requires that 20% of total energy be provided by renewable sources by 2020. In 2011, approximately 13.4% of Spain's total energy consumption was provided by renewable sources; 34% of electricity generation was supplied by renewables. As required by the EU Directive, Spain has published a National Renewable Energy Action Plan that describes how the country plans to achieve its renewable energy target, which includes a plan for renewables to supply 40% of electric power generation by 2020. Support for renewable energy technologies in Spain dates back to as early as 1980 with the passage of the Law for Energy Conservation. Since then, Spain has implemented a variety of policies that encourage renewable electricity generation through grid access, specified tariffs for renewable electricity, and market premium options for certain renewable power generators. In addition to its NREAP, Spain published renewable energy plans in 2005 and in 2010 that articulate how the country plans to achieve its overall renewable energy goals and objectives. Spain's Ministry of Industry, Tourism, and Trade is the lead government organization for implementing and monitoring renewable electricity policies. As is the case with many European countries, Spanish law provides priority grid access for renewable electricity. However, Spanish law also states that priority access may be limited, if conditions (i.e., system reliability) warrant the temporary suspension of renewable electricity access. Feed-in tariff and market premium incentives for solar PV were established during the mid-2000s. Those incentives were some of the most generous in the world at that time. As a result, Spain became the largest global market for solar power installations in 2008. However, in response to fiscal and economic difficulties, the government decided to reduce financial incentives available for renewable electricity generation. In January 2012, Spain became the first European country to completely suspend FiT and market premium incentives for new renewable electricity generation. Furthermore, Spain has made retroactive cuts to FiT and market premiums. These actions have introduced a potentially significant degree of policy risk that will likely impact future renewable electricity investments. In 1997, Spain's General Electricity Law (GEL), Law 54/1997, established the foundation for renewable electricity deployment in Spain. The GEL created a "special regime" for certain power generators to receive specified tariffs and guaranteed grid access for qualified electricity production. Under this policy, power producers are compensated based on their size, fuel source, and other characteristics, through one of two distinct "regimes" or categories: (1) ordinary regime, or (2) special regime. The term "regime" simply refers to the characteristics of power generators and how the generators might be grouped into either the "ordinary" or "special" category. Under the ordinary regime, electric power facilities use market-based price discovery mechanisms—wholesale markets, bilateral contracts, and auctions—to determine the value of electricity for a particular period of time. Generally, large power plants (greater than 50 MW) that use fossil energy resources are included in the ordinary regime category. Most of Spain's electric power is generated, marketed, and sold under the ordinary regime. Spain's special regime provides specific compensation (i.e., tariffs or market premiums) for eligible power generators, which include facilities that use renewable sources of energy as the primary fuel source or that employ cogeneration (combined heat and power) technology. Aspects of the special regime (e.g., qualification criteria, tariff/premium levels) are modified from time to time through the passage of Royal Decrees. Spain has allowed renewable electricity generation projects with a capacity of 100 MW or less to choose either a feed-in tariff incentive with a purchase obligation or a market premium incentive without a purchase obligation. Some renewable electricity projects in Spain (except for solar projects) with a power generation capacity of up to 50MW could choose either the FiT or market premium incentive and could alter their choice annually, depending on market conditions and the potential profitability from either option. Financial incentives for wind power included the choice of either a fixed FiT or a market premium. Wind FiT incentives were equal to 90% of a reference power production price. In 2004 fixed wind FiTs were approximately €0.06 per kWh. Market premiums were initially set at €0.03 per kWh and wind power producers could receive the premium payment in addition to the average hourly price of electricity sold to the power market. Depending on market prices and trends, the market premium option could potentially result in higher revenues and profits for wind projects, when compared to the fixed FiT option. FiTs and market premiums are paid to wind generators for the entire life of a project; however, tariff levels for wind power are reduced after the first 20 years of operations. Financial support for solar PV was in the form of a fixed feed-in tariff that was available for the entire life of a solar generating facility. FiTs were set at a certain rate for the first 25 years of a project's lifetime and then reduced thereafter. In 2004 solar PV tariffs were based on a reference power price, with projects less than 100 kW receiving a fixed tariff equal to 575% of the reference price and projects greater than 100 kW receiving a fixed tariff equal to 300% of the reference price. In 2004 the fixed tariffs were €0.40/kWh and €0.21/kWh respectively. The FiT policy was amended in September 2008 and fixed tariffs adjusted and restructured to include incentives for ground-mounted solar PV projects (€0.32/kWh) and for rooftop PV systems (€0.34/kWh). The Spanish government has made multiple modifications to financial incentives available for wind and solar power projects. As of January 2012 renewable electricity incentives for new projects had been suspended. These changes are a result of government actions to manage and control the electric power market tariff deficit, which is discussed in more detail below. Tariffs and market premiums paid for renewable electricity are defined in Royal Decrees. Electric utility companies, by law, pay the tariff and premium rates for qualified renewable electric power. Further, the method by which the utility companies are then compensated to make up the difference between the tariffs/premiums paid to special regime generators and the revenue received from the sale of renewable electricity in the wholesale market is somewhat complicated and requires a brief discussion about the broader electric power market in Spain. Regulation of the Spanish electric power system has undergone a number of changes since 1997. One aspect of the power system that continues to gradually change is the rates end-use consumers pay for electricity. Prior to electricity market liberalization efforts, consumer electricity rates were set and regulated by the federal government and these rates typically did not cover the total cost of electricity services. While some steps have been taken to adjust electricity rates to better reflect the all-in cost of electricity (i.e., generation, transmission, and distribution), many consumers continue to pay rates that are less than all-in electricity costs. As a result of selling electric power at a loss, Spanish utility companies have been accumulating a tariff deficit. Renewable electricity generation has also contributed to the tariff deficit, since qualified projects receive above-market tariffs and market premiums for electricity from renewable energy sources. The accumulated tariff deficit has been increasing over the last several years (see Figure 3 ). The cumulative deficit at the end of 2012 was estimated to be €35 billion. Tariff deficits are currently carried on utility company balance sheets as a receivable to be paid by the Spanish government. Up until 2009, the tariff deficit was a claim against future electric power system revenues. Utility companies could securitize these receivable assets and sell them to third party investors. However, to address the tariff deficit and to improve the financial position of Spanish utilities, the Spanish government created the Electricity Deficit Amortization Fund (FADE), which purchases the deficit receivables from utility companies, provides a Spanish government guarantee for payment, and then securitizes and sells the receivables to investors in the form of bonds. This approach creates a liability for the Spanish government. Spain's tariff deficit is not solely a result of the costs associated with financial incentives that support renewable electricity generation. Rather, it exists due to multiple factors such as below-cost retail electricity rates, support for renewable electricity, and the cost elements of the tariff deficit equation. The Spanish government is looking to resolve the tariff deficit by addressing these multiple factors. One action taken to date has been the modification of incentives for renewable electricity generation. In response to the growing tariff deficit, along with the fiscal and economic challenges faced by the country, the Spanish government passed several laws that affect wind and solar financial incentives for both new and existing projects. In January 2012, Spain indefinitely suspended FiT and market premium incentives for new renewable electricity generation projects. The Spanish government has also implemented retroactive policies that affect existing projects, which were developed and financed based on prior policies. Some of the retroactive policies instituted by the Spanish government include the following: Limitations on the number of operating hours eligible for FiT or market premium incentives. This essentially reduces the amount of revenue that can be generated by certain projects. Grid access fee of 0.5 €cent per kWh for all generators (conventional and renewable). A 7% tax on the production value of electricity produced from all fuel sources, effective January 1, 2013. This measure effectively reduces revenue and cash flow for power projects. Change of the inflation adjustment for FiT and market premiums to lower levels; inflation adjustment now excludes food and energy prices. As of February 2013, certain renewable electricity projects (i.e., wind) are no longer eligible for the market premium option. Projects can choose either a fixed tariff or the market price. No project lifetime incentive support for existing renewable electricity projects. Support for each technology is limited to a certain number of years. In July 2013 the government approved Royal Decree RDL 9/2013, which indicates that investment returns for renewable projects will be set at around 7.5%. For some projects, this return level is much lower than the returns on which finance and investment decisions were based. Indeed, these policy actions by the Spanish government may have been necessary when considering the electric power system tariff deficit along with economic and fiscal challenges encountered by the country. However, over the long term these retroactive measures will likely introduce an element of policy risk into the financing equation for future renewable electricity generation projects and could deter future deployment. As a result, all other things being equal, financing costs for, and the production cost of electricity from, renewable sources will increase. Renewable electricity policy decisions in Spain have contributed to extremely volatile solar PV annual capacity additions and modestly volatile wind power capacity additions. Wind and solar power installations in Spain have been neither smooth nor have they followed a steady growth trajectory. For example, nearly 2,800 MW of solar PV was installed in 2008, but 2009 capacity additions declined to 69 MW and annual additions have not exceeded 400 MW since then due to capacity limits, controls, and policy modifications imposed by the Spanish government (see Figure 4 ). In fact, the 2005-2010 Spanish Renewable Energy Plan called for 400MW of cumulative solar PV to be installed by 2010. Actual cumulative PV installations in 2010 exceeded 4,000 MW, 10 times the government's original target. In 2007, solar installations in Spain had already exceeded the country's planned capacity limit. Additionally, project developers were working diligently to maximize project revenues based on the Spanish tariff structure. As discussed earlier, Spain initially established a two-tier FiT system for projects 100 kW or less (€0.40/kWh) and projects larger than 100 kW (€0.21/kWh). Solar PV project developers for large multi-megawatt projects registered as multiple 100 kW projects in order to receive the higher FiT rate. While this required much more administration on the part of the developers, the additional administrative costs were worth incurring in order to effectively double the value of electricity produced. In 2008, Spain corrected this provision by replacing the two size categories with tiered tariffs for rooftop and ground-mounted PV systems. The rapid expansion of solar PV deployment in 2008 was caused by several factors, the main one being that tariff levels for solar PV were high enough to provide substantial financial returns to project developers and investors. According to one analysis, equity investors in Spanish solar PV projects were realizing returns of more than 26%. Also, while capacity limits were instituted for solar installations, the government provided a one-year grace period (2008) for projects in the development pipeline to be completed, after which the Spanish government would rigorously enforce capacity limits. The industry responded by installing as much capacity as possible in 2008, with nearly zero installed in 2009. Subsequently, the Spanish government took action to limit further solar PV deployment. Since 2008, several Royal Decrees have been enacted that reduce the financial incentives for solar PV, place annual limits on new installations, and require new projects to pre-register for the FiT incentive. The registry process serves as a means of monitoring and controlling annual solar PV installations and allows the national government to preemptively react if needed. These policy actions, along with other retroactive measures, reduced the financial attractiveness of solar PV projects. As a result, the Spanish PV market has declined significantly since 2008. While financial incentives for solar PV are no longer available to new projects, expectations are that some solar PV will continue to be installed in the future. High quality solar resources in Spain, along with recent solar equipment price declines, are creating opportunities for some solar PV projects to economically compete without financial support. Additionally, a proposed net metering law might also provide additional incentive for new solar projects, by allowing some projects to sell excess solar power to the electricity grid. The price to be paid for this excess electricity—either wholesale or retail market rates—will determine the financial attractiveness of the new metering policy. However, installation levels are not expected to return to 2008 levels in the near future. Furthermore, due to the economic slowdown in Spain, energy demand has declined and the power system is projected to be oversupplied in the near future. As a result, there is very little economic justification to add any new electricity generation capacity until the oversupply situation is resolved. In order to comply with the EU renewable energy directive, Italy is required to source 17% of its final energy consumption from renewable energy sources by 2020. To meet this requirement, Italy has implemented various policy measures to stimulate investment in renewable electricity generation, renewable heating/cooling, and transportation. According to Italy's National Renewable Energy Action Plan, the country is targeting 26.4% of electricity from renewable sources by 2020. According to the Italian government Italy had nearly met its renewable electricity production goal at the end of 2011, nearly eight years ahead of schedule. To encourage deployment of renewable electricity generation, Italy has used a variety of incentive policies such as green certificates, feed-in tariffs, market premiums, and reverse auctions. As a result of generous solar PV FiTs, declining solar PV equipment prices, and high quality solar resources, approximately 7,900 MW of solar PV capacity was installed in 2011. Italy was the largest solar market in the world that year. As of the end of 2012, Italy was ranked second in the world in terms of total installed solar PV capacity, with nearly 17,000 MW; second only to Germany. However, in an effort to reduce the cost of financial incentive programs to electricity consumers—and since the country is very close to achieving its 2020 renewable electricity target—Italy has imposed annual FiT support limits for renewable electricity generation. In June 2013, the solar PV annual support limit of €6.7 billion was reached and FiTs for new solar PV projects will no longer be available after July 2013. While residential solar PV continues to be incentivized through tax rebates and net metering laws, Italy's solar PV market might not return to 2011 levels in the foreseeable future. Multiple government organizations are involved in Italy's renewable electricity policies. The Ministry of Economic Development issues ministerial decrees that define support policies for renewables. Italian energy service provider Gestore dei Servizi Energetici (GSE) is responsible for managing the implementation of renewable electricity incentive programs. GSE issues and qualifies green certificates and manages the feed-in tariff/premium schemes in Italy. Gestore dei Mercati Energetici (GME), the electric market administration, manages trading of green certificates. Finally, Autorita per l'Energia Electrica e il Gas (AEEG), the electricity regulator, defines certain procedures and can impose penalties for non-compliance with renewable electricity laws. Italy introduced its quota and green certificate (GC) program in 1999 as a way to promote electricity generation from renewable sources. However, solar electricity generation is supported only by a solar-specific feed-in tariff mechanism known as the Conto Energia (discussed in detail below) and does not currently receive GC's for electric power production. Essentially, the GC program obligates certain producers and importers of electricity to derive a percentage of electricity supplied each year from renewable sources. Producers and importers can comply with this requirement by generating and feeding renewable power into the grid, purchasing green certificates directly from renewable power producers, and/or by purchasing green certificates through a market exchange. Only certain renewable power plants commissioned after March 31, 1999, are eligible to receive GC's for electricity produced. Table 4 shows the renewable electricity quota for obligated power producers and importers from 2001 to 2012. By requiring that a certain percentage of electricity generation be derived from renewable sources, the quota system was designed to stimulate demand for renewable power. Generally, for each unit of electricity produced—typically measured in megawatt-hours (MWh)—by qualified renewable energy sources, one green certificate is issued. However, the certificates are subject to multipliers that range from 0.8 (landfill gas) to 1.8 (agriculture waste and biogas). Qualified renewable power plants may generate green certificates for eight to 15 years, depending on the year each respective project began operation and each certificate is valid for three years. According to Italy's NREAP, 16.3% of Italy's electricity was generated from renewable sources in 2005, much higher than the quota of 2.7%. While not all of Italy's renewable power generation would qualify under the quota obligation, one analysis indicates that the quota obligation reached more than 100% compliance in 2005 and has remained over-supplied since that time. As a result, Italian transmission system operator GSE now purchases excess green certificates from renewable projects as a way to maintain a GC price floor so renewable projects can remain economically viable. Additionally, due to the oversupply situation the Italian government has decided to phase out the GC program by 2015 and replace it with feed-in tariffs/premiums and reverse auction incentive mechanisms. In July 2012, Italy issued a ministerial decree that described a new feed-in tariff/premium program for renewable electricity generation from sources other than solar PV. The program aims to replace the quota and green certificate program. It has an annual expenditure limit of €5.8 billion of total annual costs. Once this limit is reached, financial support for new non-solar renewable power will no longer be available. Italy's non-solar FiT/premium incentive policy includes several provisions for projects based on the size of the project and the renewable resource used to generate electricity. Some projects of certain sizes can receive tariffs, while others are only eligible for market premiums. For example, five market premium levels are available for wind projects that range in size from less than 20 kW to more than 5 MW. Premiums are added to the electricity market price received. Total compensation levels for onshore wind projects, including the price of electricity plus the market premium, range from €0.127/kWh to €0.291/kWh, depending on the project size. Feed-in tariffs/premiums are available for the first 20 years of onshore wind project operations. Wind projects smaller than 60 kW have direct access to the premium, while projects between 60 kW and 5 MW must apply to a registry with an annual capacity installation limit of 60 MW for the years 2013 through 2015. Starting in 2013, support for onshore wind projects larger than 5 MW is available through a reverse auction process—managed by GSE, the transmission system operator. The amount of new wind capacity eligible for incentives is limited to 500 MW each year for the years 2013 to 2015. The reverse auction process is managed by GSE, which accepts bids from projects during a 60-day open application period. In order to prevent projects from either under- or over-bidding into the reverse auctions, Italy has prescribed floor and ceiling premium values that cannot be exceeded. In 2005 and 2006, the Italian Ministry of Economic Development issued decrees that created a feed-in tariff/premium incentive specifically for solar PV. Known as the Conto Energia , the policy provided an incentive framework with tiered tariffs and premiums for solar PV projects of various sizes and at different sites (buildings, land, etc.). Since it was first introduced in 2005, the Conto Energia policy has been modified several times to change tariff values, impose capacity limits, and adjust other aspects of the policy. Solar PV tariff/premium degression was introduced and took effect at the beginning of 2013. The current version of Italy's solar PV incentive policy, the Conto Energia V , entered into force in August 2012 and provides guaranteed feed-in tariffs and premiums for 20 years. Conto Energia V introduced average incentive cuts of 43% for ground-mounted installations and 39% for rooftop systems when compared to incentive levels that were available prior to August 2012. FiTs range from €0.106/kWh to €0.182/kWh depending on the size and location of the project. Additionally, the policy encourages self-consumption (on-site use) of solar PV electricity by providing premiums (€0.024/kWh to €0.100/kWh) for electricity that is consumed on site and not fed into the electric power grid. The Conto Energia V policy includes an expenditure cap of €6.7 billion annually for solar PV FiTs and premiums. On June 6, 2013, Italy's electricity and gas regulator announced that the expenditure cap had been reached and FiT and premium incentives would no longer be available for new PV projects after July 7, 2013. However, Italy has introduced a tax-based policy that allows owners of rooftop PV systems that are less than 20 kW in size to deduct 36% to 50% of the system capital expenditure from an individual's income tax over a 10 year period. Italy has also introduced a net metering policy that allows solar projects with capacities less than 200 kW to receive compensation for electricity generation that exceeds the amount needed for self-consumption. Analysts forecast that the combination of tax deductions and net metering will support future solar power deployment in Italy, but at much lower levels when compared to solar PV installations in 2010 and 2011. Financial incentives for renewable electricity have affected wind and solar PV deployment in different ways. Whereas Italy's green certificate program did stimulate some level of wind power deployment in the early 2000's, annual wind installations in Italy have hovered around the 1 GW level since 2008. Solar PV, on the other hand, has exhibited more volatile deployment levels. When solar PV FiTs were created in 2005, deployment levels started increasing. As the cost of solar PV equipment started to decline in the late 2000's, in combination with generous FiT incentives and very good solar resources in Italy, solar PV deployment quickly ramped up. In 2011 approximately 7.9 GW of solar PV was installed in Italy, more than any other country in the world that year (see Figure 5 ). Following Italy's record solar PV installation in 2011, Italy reduced FiT incentives, introduced a degression schedule to further reduce FiTs, and placed a €6.7 billion annual spending limit for incentives. Solar PV installations in 2012 were down more than 50% compared to 2011 levels. In June 2013, the €6.7 billion limit was reached and FiT incentives for solar PV will no longer be available after July 2013 for new projects. Much like in Germany, financial incentives for renewable electricity generation are paid for by electricity consumers through an added charge to monthly power bills. Support costs for the green certificate program, feed-in tariffs/premiums for non-solar renewable power generation, and the Conto Energia FiT program for solar PV are calculated, and a surcharge is added to consumer electricity bills to pay for the financial support programs. As of the end of 2011, electric power consumers in Italy were paying approximately €9 billion each year to compensate for renewable electricity incentives. According to the Italian government, these costs are equal to roughly 20% of the average electricity bill in Italy. Subsequently, the Italian government implemented support limits of approximately €12.5 billion per year for all technologies supported by FiT incentives. Renewable electricity has multiple policy dimensions. Congress determines the types and amounts of federal financial incentives that are available to support renewable electricity deployment in the United States. Tax credit policies—production and investment—are the primary federal incentives that support renewable electricity deployment in the United States. Generally, Congress debates whether to extend, eliminate, or phase out either investment tax credits or production tax credits that incentivize deployment of renewable power generation assets. In the 113 th Congress, several bills—including H.R. 2081 , H.R. 2502 , and H.R. 2538 —have been introduced that would either extend or phase-out tax incentives for wind and solar power generation. Should debates and discussions continue, Congress may examine policy design and implementation in other countries during deliberations. The following considerations and issues are provided in order to help inform future discussions about U.S. renewable electricity policies. One of the stated objectives for EU renewable policies is to improve energy security within the EU by reducing the amount of energy imports. According to the European Commission, approximately 54% of EU energy demand was supplied by energy imports in 2010. Energy imports to the United States, on the other hand, supplied roughly 16% of U.S. energy demand in 2012—U.S. energy imports continue to decline. Import situations in the United States and EU are, therefore, quite different. Energy supply motivations may be relatively more compelling in the European Union. Additionally, energy resource endowments, ownership, and regulatory structures in the United States and EU are also very different. These factors can influence energy markets, resource development, and policy decisions. Finally, some fuels used for power generation are priced differently in the United States and EU. For example, natural gas, which typically sets the value of electricity during peak demand periods, is much more expensive in the EU than in the United States. In 2012, the average price of natural gas paid by U.S. electric power generators was $3.52 per million British thermal units (MMBtu). However, EU industrial natural gas consumers were paying, on average, more than $12.00 per MMBtu in 2012. The combination of the above factors may provide the EU with more economic motivation to stimulate renewable electricity generation deployment when compared to other countries. Electricity markets in the United States and EU countries are also different. While the United States does not have a single national market—rather, multiple regional markets with different operating models and pricing structures—many EU member countries do have national electricity markets. In some EU countries (i.e. Spain and Italy) the national government has ownership and/or control rights of electricity markets and transmission infrastructure. Additionally, EU national governments may also control electricity rates charged to consumers. In the United States, there are multiple regional electricity/transmission markets with different operating models and pricing structures. Further, some U.S. electricity markets are based on competitive market dynamics and some are based on cost-of-service models. Also in the United States, consumer electricity price levels are influenced by state-level commissions that regulate and monitor electric power utilities. These fundamental U.S. and EU market structure and regulation differences may result in difficulties—technical and political—associated with applying EU member-country incentive policies to the United States at a national level. Arguably, EU countries and electricity consumers paid for a large part of the development and scale-up of the global solar PV industry. As a result, significant equipment and system cost declines have been realized since 2008. Germany, Spain, and Italy set incentives at high enough levels to support adequate investment returns based on solar equipment and installation costs using a baseline set of assumptions. Incentives in some countries were generous enough to support high investment returns, which created opportunities for manufacturers to offer value-based pricing in order to capture substantial profit margins from the sale of PV equipment. These margin opportunities caused the manufacturing base to expand rapidly as more companies, many of them located in Asia, entered the market. Due to a number of circumstances—including fiscal and economic challenges and declining policy support for renewable electricity—the solar module manufacturing market reached an over-supply situation (i.e., manufacturing capacity exceeded solar PV demand) and prices began a precipitous decline in 2009. Figure 6 compares annual solar PV installations in the United States and EU since 2001 with solar PV module costs over the same period. As indicated in Figure 6 , EU solar PV installations started increasing in 2004 and peaked in 2011. Solar PV module costs began a rapid decline in 2009, reaching less than $1 per watt in 2012. As module costs came down, U.S. PV installations increased. Annual PV installations in the US are projected to continue rising out to 2015, while EU installations are forecasted to decline in the near term. In essence, as the U.S. solar PV market is growing, U.S. solar PV buyers are now paying much less for PV modules than EU buyers did in the period between 2007 and 2011. Both the EU and the United States offer a number of incentives that support deployment of renewable electricity generation. Some policies are at the EU and U.S. national level and some policies are available only in specific EU member-countries and individual U.S. states. Generally, the European Union sets binding renewable electricity requirements for each member, and each member country provides a unique set of financial incentives to motivate deployment of renewable power systems that will achieve the EU-level targets. In the United States, the federal government provides financial incentives for renewable electricity—production tax credits for wind and investment tax credits for solar, for example—and some states have established renewable portfolio standards that mandate a certain percentage of electricity be generated from renewable energy sources. As of June 2013, 29 states and the District of Columbia had binding renewable electricity targets. Details of the policy landscape in both the EU and U.S. are much more complicated than this general description. Additionally, an analysis of the relative success and effectiveness of each renewable electricity support model is beyond the scope of this report. However, it should be noted that the U.S. and EU member-countries, to date, have consistently been two of the world's largest markets for renewable electricity deployment. Feed-in tariffs, depending on the policy design details, stimulate deployment of renewable electricity generation projects. Solar PV market growth in EU countries provides an illustrative example. Generally speaking, deployment follows incentives; countries with the most generous incentives—in combination with solar resources, access to financial capital, and regulatory conditions—typically experience the largest amounts of deployment. Up until 2012, EU countries such as Germany and Italy were installing more solar PV capacity each year than any other country in the world. In 2008, Spain had more solar installations that year than any other country. Each of these countries utilized generous FiT and market premium incentives as a solar PV financial support mechanism. However, managing and controlling FiT incentive programs can be difficult, especially in a dynamic and rapidly changing market like solar PV. Germany and Italy were the largest solar PV markets between 2010 and 2012, but installations in these countries were far exceeding plans and implied targets for annual solar PV capacity additions. Germany reacted by rapidly and frequently reducing incentives offered to new projects. Italy imposed an annual expenditure limit for new solar PV systems; this limit was reached in June 2013 and solar PV FiTs are no longer available as of July 2013. Ultimately, actions by Germany and Italy will reduce annual solar capacity additions in each respective country. Following several years of significant renewable electricity deployment, especially solar PV, some EU countries are changing financial support mechanisms to encourage electricity market integration—i.e., selling electricity in the wholesale market, allowing for curtailment under certain circumstances—instead of electricity generation. To date, FiTs and declining equipment prices have resulted in significant solar PV deployment in the EU, most notably in Germany and Italy. However, concerns with electric power system reliability are prompting these countries to incentivize the integration of renewables into electric power markets. Integration incentives are generally motivated by high levels of renewables penetration into the electric power system and countries are looking for ways to address the output variability of renewable power systems. Market integration incentives could potentially create a situation whereby renewable electricity generators respond to market and price signals, which could help to manage the power production variability from renewable energy sources. Analysis of Germany's renewable electricity production highlights the variability of wind and solar during certain time periods throughout the year; renewable electricity output in Germany ranged from approximately 10 Gigawatts to nearly 70 Gigawatts in 2012. This variability not only causes challenges with grid system operations, but also with wholesale electricity price levels that can potentially strain the economics of power generation assets that may be needed to maintain system reliability. As a result, countries may need to consider different market designs that support various types of generation and services that might be necessary to ensure stable and reliable electric power system operations. Additionally, Germany started offering an energy storage subsidy for solar PV projects to encourage investment in battery storage that might support the integration of solar PV with the electric power system. Germany has indicated that it plans to shift from feed-in tariffs to market premiums as a way to better integrate renewables with the grid and power market. Additionally, Germany now provides a flexibility premium for electricity generated from non-intermittent renewable sources like biogas, which has the ability to ramp production up and down based on grid system needs. Germany also provides bonus incentives for wind and solar projects that are remotely controlled, thereby allowing the grid system operator to control and manage electricity output from variable renewable power sources. Italy's National Energy Strategy (NES) states that the "growing amount of production from intermittent, non-programmable sources is increasingly becoming a challenge for the network infrastructure and for the market." The NES also indicates that Italy aims to "gradually integrate renewable electricity with the market and grid." Germany's renewable electricity support policy, the EEG, was designed to gradually reduce incentives in order to stimulate cost reductions that would, in turn, result in renewable electricity being cost competitive on an unsubsidized basis. Italy also introduced a degression plan to reduce incentives over time and its National Energy Strategy states that "it is expected that incentives will gradually be reduced (and eventually cease ... ), the eventual aim being the full integration with the electricity market and the grid." Generally, the goal of incentive reductions is to match the evolutionary pace of economies of scale and deployment experience to push down system costs, thereby allowing a lower incentive level to stimulate demand for new renewable electricity capacity. However, experience in Germany and Italy indicates that incentive reductions can be challenging to adapt to rapidly changing market circumstances. For example, solar PV installations in Germany and Italy were well above government plans and targets between 2010 and 2012. Germany responded by applying degression every six months to solar PV FiT incentives, instead of once a year, and then instituted monthly FiT degression in order to better manage and control annual solar PV capacity additions. Both Germany and Italy have also instituted policies that eliminate financial incentives for solar PV once certain capacity and cost milestones are reached; Germany's incentives will cease once 52,000 MW of capacity is installed and Italy's incentives will no longer be available when annual support costs reach €6.7 billion. Once these milestones are reached—Italy reached its milestone in June 2013—annual PV capacity additions may decline and it seems unlikely that they could return to 2010-2012 levels in the near future. Balancing incentive availability, policy costs, and renewable electricity market growth is a difficult challenge for policy makers. Multiple EU member-countries have made policy decisions to retroactively reduce financial incentives for renewable electricity projects. As discussed earlier in this report, Spain has introduced retroactive incentive reductions that change the baseline financial performance on which project investment decisions were made. Other EU countries, such as Greece, Bulgaria, and Romania, have also made retroactive cuts to renewable power incentives. In early 2013, Germany proposed a renewable electricity incentive modification plan, which included a one-year 1.5% FiT reduction for all operating renewable projects. This plan was not approved and future policy direction in Germany is not expected until after national elections in September 2013. Retroactive incentive cuts immediately impact the economics of existing projects that are subject to the reduction. However, future projects are also affected and the cost of electricity from renewables will likely increase, all else being equal. Retroactive incentive reductions introduce an element of policy risk and uncertainty into the finance and investment decision matrix. This additional investment risk is likely to increase the cost of capital used to finance future renewable electricity projects. Higher financing costs generally result in renewable electricity generation cost increases. Further, as renewable electricity generation costs increase, so does the cost of the certain incentive programs since these costs are calculated as the difference between renewable generation costs and electricity market prices.
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European Union (EU) countries have provided support for the development and deployment of renewable energy technologies, dating back to as early as the 1980s. Today, the European Union has established binding renewable energy targets with the goal of having the entire EU derive 20% of total energy consumption (electricity, heating/cooling, and transportation) from renewable sources by 2020. EU member countries have discretion to decide how best to achieve EU-level targets. Each country uses a unique set of policies and financial incentives to stimulate renewable energy production. While EU and U.S. energy markets are very different, knowledge of the history, evolution, financial mechanics, and market impacts of EU renewable electricity policies may be useful to Congress during future debates about renewable electricity policy in the United States. Renewable electricity generation is one component of the EU energy sector that has been emphasized. Several member countries have designed and implemented various mechanisms to encourage renewable electricity production. To date, the majority of renewable electricity deployment has been in the form of onshore wind and solar photovoltaic (PV) power generation. Feed-in tariffs (FiT) are the most commonly referenced incentive mechanism used by EU countries. However, other mechanisms, such as market premiums, green certificates, and reverse auctions are also used to motivate renewable electricity generation. Germany, Spain, and Italy are EU countries that have deployed renewable electricity generation systems at a relatively large scale. At the end of 2012 Germany and Italy were the top two countries in terms of cumulative installed solar PV capacity with 32 Gigawatts (GW) and 17 GW, respectively. Spain was the largest global solar PV market during calendar year 2008. Those high deployment levels have established these countries as leaders in renewable electricity generation. However, political, economic, and power system concerns are causing these same countries to adjust, modify, and often reduce financial support incentives. Further, the policies, deployment profiles, financial mechanics, and incentive modifications differ for each country. To control escalating surcharges on consumer electricity bills, German policy officials have been rapidly reducing financial incentives for solar PV and have instituted a solar PV capacity support limit of 52GW, at which point incentives will no longer be available for new projects. Similarly, Italy has placed limits on financial support—also paid through consumer surcharges—for all renewable electricity generation. In 2012, Italy's renewable electricity surcharge represented approximately 20% of the average electricity bill. As of June 2013, financial support limits for solar PV in Italy were reached and feed-in tariffs are no longer available for new projects. Spain has completely suspended FiT incentives for renewable electricity and has implemented retroactive incentive reduction policies that affect revenue, cash flow, and investment returns for existing operational projects. EU countries are transitioning from electricity production-based incentives (i.e., feed-in tariffs) to market integration incentives such as market premiums, bonus payments for remotely controlled wind and solar projects, and flexibility premiums for renewable generation that can reduce grid instability. Power market integration of renewables, combined with declining costs of renewable electricity, may result in a more stable, albeit smaller, competitive market for renewable electricity generation. A second trend in EU countries is the implementation of retroactive incentive reductions to control costs associated with renewable electricity support. While retroactive measures may be fiscally necessary, they will likely affect future renewable electricity deployment by introducing an element of policy risk that causes financing costs, and thus production costs, to rise. These trends are likely to result in lower EU renewable capacity additions for some member countries. However, carbon policies and declining technology costs may support future EU renewable electricity market growth.
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Since 1976, Congress has funded programs to develop high-density, low-cost batteries to operate electric and hybrid vehicles. In the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ), Congress authorized support for lithium-ion battery manufacturing, with $2.4 billion in grants. Since then, President Obama has asked Congress to further expand these initiatives with additional R&D funding requests and a recommendation that an electric vehicle tax credit be expanded to $10,000 and converted into a federally funded rebate program, available to consumers at the time they purchase a vehicle. Promotion of electric vehicles and the batteries to power them is part of a long-standing federal effort to reduce oil consumption and air pollution. This effort has taken a variety of directions, including mandated use of biofuels and research into hydrogen-fueled vehicles. Development of vehicles that use electricity as a power source, either by itself or in conjunction with smaller, supplementary internal combustion engines, is part of this initiative. In general, the cost of operating a plug-in hybrid or all-electric vehicle is substantially less than the cost of fueling a gasoline-powered car or truck, but up-front costs are much higher. Depending on the source of the electricity, the total carbon footprint of an electric vehicle may be less than that of a vehicle with a traditional internal combustion engine. The major hurdle in providing a large national fleet of hybrid electric vehicles (HEVs), plug-in hybrid electric vehicles (PHEVs), and fully electric vehicles (EVs) is the size, cost, weight, durability, and safety of the batteries that would power them. Because battery technology is crucial to the development of these vehicles, the U.S. Department of Energy (DOE) has funded research by universities, federal laboratories, and the private sector over several decades on a variety of new types of batteries. Automakers have also invested substantial amounts in research. As manufacturers have brought hybrid, plug-in hybrid, and fully electric vehicles to market, U.S. policymakers have become concerned about the development of an electric vehicle supply chain in the United States. This report examines the nascent battery manufacturing industry and considers efforts to strengthen U.S. capacity to manufacture batteries and battery components for hybrid and electric vehicles. For the last 100 years, Americans have primarily driven vehicles with internal combustion engines. An internal combustion (IC) engine burns fuel inside a combustion chamber when a mix of fuel and air is sprayed into it. The mixture is compressed by a piston while a spark plug produces a spark that ignites the fuel. The resulting combustion, and the expanding gases, drives the piston back down. The piston is connected to a crankshaft which, in turn, powers the axles and propels the vehicle. See Figure 1 for a cross-section diagram of part of an IC engine. Most modern vehicles use either gasoline or diesel as a fuel source because they are energy dense and inexpensive. Gases are a byproduct of the combustion. The engine's exhaust valves remove them from the cylinder and send them on to the car's exhaust system. The engine's heat, another byproduct of the combustion process, is the source of a vehicle's heating system in the winter. A critical element in a car's engine operation is the battery. When a driver turns the key in the ignition, the battery's stored energy is drawn down, powering the electric engine starter and thereby cranking the engine. An electric vehicle operates differently from a vehicle with an IC engine. An all-electric vehicle is powered by electricity with a large, rechargeable battery, an electric motor, a controller that sends electricity to the motor from the driver's accelerator pedal, and a charging system. These parts of an electric vehicle replace the IC engine, fuel tank, fuel line, and exhaust system in a traditional car. While the IC engine is central to the operation of a traditional vehicle, it is the rechargeable battery that is central to the operation of an electric vehicle. All-electric vehicles recharge their batteries by plugging them into a household electrical outlet or a special charging station. As discussed later in this report, there are different kinds of electric vehicles. Some are all-electric and others are hybrids, with small electric motors and small IC engines (using both electricity and gasoline as a fuel). Some of the hybrids can be plugged in for recharging, and others, such as the original Prius, are recharged from their gasoline engine and other internal systems. Batteries are a form of energy storage. They store and release energy through electrochemical processes. All battery technologies have two fundamental characteristics that affect battery design, production, cost of operation, performance, and durability: Power density is the amount of energy that can be delivered in a given period of time, affecting how fast a vehicle accelerates, and Energy density is the capacity to store energy, affecting the range a vehicle can travel. There is generally a trade-off between these two characteristics: some battery technologies have higher power density with a correspondingly lower energy density and vice versa. For vehicle applications, it is desirable to have both high power density and high energy density to compete with the high power and energy density of gasoline and other petroleum-based fuels. Battery alternatives to gasoline power have so far not achieved this parity and are heavy, large in size, and costly. The first rechargeable lead-acid battery was invented in France in 1859. By the 1880s, French inventors improved the design, which in turn enabled the development of new types of electric automobiles at the beginning of the 20 th century. Auto manufacturers, however, soon discovered that the lead-acid battery is better suited for supporting IC engines than for powering vehicles. There are a number of reasons why this 19 th -century technology has been the battery of choice around the world for so long. Lead-acid batteries are simple, inexpensive to manufacture, and based on a technology that is widely understood and easily duplicated. Relatively small in size, the batteries fit easily in the engine compartment, are durable and dependable, and require virtually no maintenance. Most importantly, they provide sufficient bursts of energy to start engines, while recharging over many cycles. In addition, 98% of lead-acid batteries are recycled, among the highest recycling rates for any manufactured product, thus minimizing the environmental impacts of disposal. The typical automotive lead-acid battery is encased in a durable plastic casing. It generates 12 volts of electricity through six interconnected compartments (called cells), each of which contains 16 metal plates, set in an electrolyte solution of water (65%) and sulfuric acid (35%). The internal cell plates and separators are shown in Figure 2 . The positive anode side of each plate is coated in lead oxide; the negative cathode side in lead. As electrons move from the anode, they generate up to 2 volts of electricity within each cell. The cells are arranged in a series so that the electricity passes from one cell to the other, making the charge additive. By the time the charge has passed through each of the six cells, 12 volts of electricity are discharged through the terminals on the top of the battery to start the car and run the other automotive components. Once the gasoline-powered engine is started, it not only powers the pistons in the engine, thereby moving the car forward, but through the alternator it also provides recharging for the battery. In this process, the chemical process that created electricity is reversed: a flow of electrons moves backwards from the cathode toward the anode, restoring the chemicals on the plates to their original position. This ongoing process of charging and recharging the battery takes place automatically as the car is being driven. The lead-acid battery has been the standard battery technology for most of the past century, but because of its low energy density, it is poorly suited for electric vehicles. A 2010 DOE report noted that batteries have been "too costly, too heavy, too bulky and would wear out too soon." Were a group of lead-acid batteries placed in a hybrid or all-electric car, they would take up an inordinate amount of space and would add exceptional weight to a car. Accordingly, new kinds of batteries are being developed that offer higher power and energy densities for these types of vehicles. Given the shortcomings of lead-acid batteries, researchers have sought better battery technologies since the 1970s. One of the first commercially feasible technologies automakers adopted was the nickel metal-hydride (NiMH) battery. Because it has greater energy density and is lighter than a similarly powerful lead-acid battery, NiMH batteries became the choice for early hybrid vehicles. They are used in many hybrid vehicles today, including the Toyota Prius and Honda Insight. Toyota announced in 2009 that after testing alternatives, it would continue using NiMH batteries in many of its hybrid vehicles. A second technological approach involves improvement of lead-acid batteries. Recent federal research grants were given to two U.S. lead-acid battery manufacturers to advance use of lead-carbon in batteries and to further work on an "ultrabattery" that could replace NiMH with a more efficient, lower-cost alternative. A third technology is the "Zebra" battery, using sodium-nickel chloride chemistry. These produce 50% more energy than NiMH and, according to some manufacturers, as much as some lithium-ion batteries. These so-called "hot" batteries have operating temperatures up to 360 degrees (F) and reportedly perform well in very hot and very cold climates. The most prominent major new battery technology is based on lithium, a naturally occurring and lightweight metal used in laptop computer batteries. Li-ion batteries have high energy and power densities. Because lithium is lightweight, it can be fabricated into large battery packs for use in hybrid and electric vehicles. An important characteristic of lithium is that it is reusable and can be extracted from depleted batteries and recycled for use in new batteries. Ford Motor Co. began using only lithium ion batteries in its hybrids in 2012. There are several types of lithium-based battery technologies available for commercial application; not all automakers are using the same approach. While the types of chemistries shown in Table 1 differ, they have similar energy and power densities. Li-ion batteries share five basic structural components with lead-acid batteries: cathode, anode, separator, electrolyte solution, and a durable case. Li-ion batteries, like many other batteries, also have a safety structure in light of potential chemical leakage and flammability. Figure 3 shows a cross-section of a lithium-ion cell in cylinder form. An anode is the point on the battery where current flows in from outside; the cathode is the point where the current flows out of the battery. During electrical discharge, lithium in the anode is ionized and emitted, along with electrons, into the electrolyte. The ions and electrons move through the porous separator and into the lithium metal oxide cathode, where the electric current they have produced is discharged. Li-ion battery cells can also be manufactured in rectangular shapes using gel as the electrolyte, and then encased in laminated film. Rectangular cells can be more efficient because their shape means more finished cells can be assembled in a battery pack, increasing the density of the battery. The main parts of the cell and their functions are the following: Battery packs containing Li-ion cells are much larger than a conventional lead-acid battery. In the Chevrolet Volt, the battery pack is 6 feet long, weighs 435 pounds and is arranged in a T-shape that sits under the center of the passenger cabin, as shown in Appendix B . Automakers have not disclosed the costs of the Li-ion batteries they use. As discussed later in this report, the batteries reportedly cost from $375-$750 kWh, making a 16 kWh battery cost as much as $12,000. Fully electric vehicles with a longer driving range would need as much as 35 kWh, meaning that the batteries alone would cost more than many vehicles now on the road. To travel 300 miles on battery power, it is estimated that vehicles would need a capacity of 100 kWh of stored electric power. Because they are lightweight and have relatively high energy intensity, Li-ion batteries have been used predominantly in a range of small consumer products that are manufactured mainly in Asian countries, so many Li-ion battery manufacturers have located production in Asia. Automotive batteries are one of the fastest-growing applications. Navigant Research, a private firm formerly known as Pike Research, forecasts that the worldwide market for lithium-ion batteries in light duty transportation will grow from $1.6 billion in 2012 to almost $22 billion in 2020, and that "the Asia Pacific region will continue to be the global leader in both Li-ion production and consumption in the transportation industry, with support by major governments for aggressive goals in plug-in vehicle (PEV) production, creation of charging infrastructure, and incentives for consumer purchases." Japan and South Korea held an estimated 80% share of global production of advanced Li-ion batteries in 2010; China, 12%; others, nearly 6%; and the United States, about 2%. While ARRA sought to spur development of a U.S. electric vehicle supply chain, many of the recipients of stimulus grants have not prospered, as discussed later in this report. Although present demand for Li-ion vehicle batteries is low, it is still possible that U.S. market share could increase in the next decade if demand for electric and plug-in hybrid vehicles increases. (Navigant estimates that worldwide electric vehicle sales will reach 3.8 million annually by 2020.) The potential demand for Li-ion automobile batteries may encourage creation of a domestic battery supply chain. In ARRA, Congress encouraged this development with $2.4 billion of grants for battery manufacturing facilities. There are several market factors that may favor the creation of a domestic supply chain. First, most U.S. auto plants practice just-in-time manufacturing, with key suppliers located near the assembly plants they supply. Automakers may want their Li-ion battery suppliers near their plants as well. In addition, the heavy weight of large Li-ion batteries for cars and light trucks makes it more cost-effective to assemble those batteries near the motor vehicle assembly plants where they will be used, rather than transporting them for thousands of miles. The Li-ion battery assembly plants, however, are only the final link in a lengthy supply chain that includes research and development, raw material search and mining, manufacture of equipment to make Li-ion batteries and cases, assembly of the batteries and electronics themselves, marketing, financing, shipping, and customer service. Much of this supply chain did not exist in the United States prior to the passage of ARRA. A 2010 report on the Li-ion battery supply chain by Duke University's Center on Globalization, Governance & Competitiveness (CGGC) divides the Li-ion supply chain into four levels. The automakers are the first level. Tier 1 suppliers are generally larger supplier firms that directly sell to the automakers. Tier 2 and 3 suppliers often supply the Tier 1 supplier with components. There are a number of Tier 3 U.S. suppliers of lithium compounds, electrolyte solutions, and graphite (used on anodes). Two of the world's largest suppliers of lithium are U.S.-based FMC Lithium and Chemetall Foote, a division of Rockwood Holdings. Chemetall alone supplies over a third of all lithium used in the world, sourcing it from brine deposits in Chile and ore from a mine in North Carolina. According to the Mineral Information Institute, "most lithium is recovered from brine, or water with a high concentration of lithium carbonate. Brines trapped in the Earth's crust (called subsurface brines) are the major source material for lithium carbonate. These sources are less expensive to mine than rock such as spodumene, petalite, and other lithium-bearing minerals." While U.S. firms have a strong foothold at this level of the supply chain, most of the raw material comes from abroad, although sites in Nevada are being developed to supply the U.S. market. It is estimated that the United States has approximately 760,000 tons of lithium. The resources in the rest of the world are estimated to be 12 million tons. The United States is the world's leading consumer of lithium and lithium compounds. The leading producers and exporters of lithium ore materials are Chile and Argentina. China and Russia have lithium ore resources, but it is presently cheaper for these countries to import this material from Chile than to mine their own. Industry analysts say there is no shortage of lithium in the foreseeable future and that by 2020, there may be excess supply, driving down prices and undermining investments by current producers. In addition to lithium, manganese, nickel, cobalt, copper, and aluminum are used in different forms to make Li-ion batteries. While there are diverse sources for most of these minerals, some are concentrated in a few locations that could have implications for supply or pricing. For example, more than a third of the world's production of cobalt comes from the Democratic Republic of Congo, and some rare earth minerals used in producing electric vehicle components are mined primarily in China. U.S. suppliers have strong positions in the manufacture of several other basic materials used in battery manufacturing. Novolyte makes electrolytes at its Baton Rouge, LA, plant, and a Honeywell facility produces high-quality lithium salt for use in electrolytes. Future Fuel Chemical in Batesville, AR, produces graphite components used in anodes. Moving up the supply chain, the Tier 2 suppliers provide components and chemicals for Li-ion cells, as well as electronics used in the final battery packs (see Table 2 ). U.S. firms included in this part of the supply chain are Celgard, the world's third-largest producer of separators, as well as DuPont and Applied Materials. ConocoPhillips and Superior Graphite produce active materials and binders used for anodes. 3M, Dow Kokam, and SouthWest NanoTechnologies make active materials, binders, and carbon electric conductors for cathodes. Electronics developed for Li-ion batteries are similar to those used in consumer goods, and are used to manage various battery functions. They check the voltage and cell balance and monitor and report charging status. Chips are also used to monitor and regulate the temperature of the Li-ion battery so it does not overheat. Texas Instruments, Atmel, and Maxim Integrated Products are among the electronics and controls companies that produce electronic components. Other components used in the battery include the steel or aluminum can, which houses the Li-ion cell (made by H&T Waterbury); insulators; safety vents; gaskets; and center pins. Tier 1 suppliers put all the pieces together into a battery. The cell and battery-pack manufacturers are the most visible part of the U.S. electric battery supply chain, but this stage has been the weakest link. Prior to ARRA, only one company—Indiana-based EnerDel—had operated a domestic high-volume anode and cathode coating and cell manufacturing facility. Many U.S. pack manufacturers still import cells. For example, the Li-ion cells used in the in GM Volt's batteries are made by LG Chem in South Korea, shipped to Michigan, and made into batteries there. This is the part of the supply chain that has received significant federal subsidies through ARRA to jump-start U.S. production, as described in the following section. The firms that are building Li-ion manufacturing capacity in spring 2013 include LG Chem; Johnson Controls; A123 Systems ; and Dow Kokam. These U.S-based facilities compete with Asian facilities that have been making and marketing Li-ion batteries for consumer products in large volumes for decades, including BYD, Hitachi, NEC, Panasonic, Samsung, and Toshiba. U.S. makers of Li-ion vehicle batteries will need to achieve high-volume production to realize economies of scale and drive unit costs down. Achieving adequate volume may remain a challenge for the Tier 1 suppliers in the United States in light of a highly competitive marketplace for battery packs. Researchers at the Massachusetts Institute of Technology highlighted the central role of scale in vehicle electrification: Manufacturing is key to achieving a commercially successful EV battery pack. Low cost is only achieved in large-volume, highly automated factories. This raises two issues. Successful development of EVs requires attention to both R&D and manufacturing of battery systems. Understanding possible economies of scale in manufacturing is an important aspect of battery technology development since manufacturing cost is decisive in the ultimate economics of EVs. Second, battery manufacturing will not necessarily occur in the country that creates the battery technology. This is an especially vexing political question in the US where it is widely believed, perhaps correctly, that high-technology manufacturing of products such as batteries is taking place abroad, especially Asia, despite low labor content. Both issues have implications for the government role in supporting EV development. The Tier 1 suppliers deliver batteries to the automakers for final assembly into vehicles. The automakers' role is quite different from that with traditional lead-acid batteries, which are simply dropped into a vehicle's engine compartment and connected to the electrical system. In manufacturing hybrid and fully electric vehicles, the automakers provide additional critical, proprietary technologies that mesh the battery's output with the vehicle's overall operation. GM has highlighted one such technology application in its Chevy Volt: "Three different systems are used to regulate the temperature of the coolant," said Bill Wallace [GM's Director of Global Battery Systems]. "When the Volt is plugged in and charging in cold weather, an electric heater at the front of the battery pack is used to warm the coolant and pre-heat the battery. During normal operations, the coolant is passed through a heat exchanger at the front of the car, while a chiller in the air conditioning circuit can be used to dissipate heat from the battery when temperatures really climb." The management system monitors feedback from 16 thermal sensors arranged throughout the battery pack to maintain a spread of no more than 2 degrees centigrade from the optimal temperature across the pack. Automakers are integrally involved in the design and production of Li-ion batteries for their vehicles. As GM observed, "the Volt's battery pack design is directly coupled with the vehicle design to assure complete integration between the battery pack and the vehicle." This means that the automaker's decision as to which battery to procure will be in effect for a prolonged period, perhaps the life of the vehicle model, as a battery designed for one vehicle may not function optimally in another. Some automakers have entered joint ventures or partnerships with battery manufacturers. The batteries for the Nissan Leaf all-electric vehicle are sourced from a Nissan partnership with NEC, for example, and Toyota has a battery joint venture with Panasonic. These arrangements may benefit the battery manufacturers by permitting large-volume production, but may also tie the battery manufacturer's fate to the success of a single vehicle manufacturer. U.S. automakers appear to have rejected such corporate alliances, deciding instead to shop for batteries for particular models. For example, General Motors sought competitive bids before selecting South Korea-based LG Chem for its Volt Li-ion battery, reportedly over A123 Systems, which at the time was U.S.-owned. Li-ion batteries have generally been produced in Asia, near manufacturing sites for battery-dependent portable consumer products. But the transition from small, consumer-goods batteries to larger batteries for motor vehicles may well open the door for new entrants into the industry. In the motor vehicle industry, according to one analyst, "extended cycle life, high specific energy, and safety in extreme conditions—necessitate much tighter tolerances on material and manufacturing specifications, and often require a fundamental rethinking of core battery technology." This implies that the companies that have been most successful in manufacturing Li-ion batteries for consumer products will not necessarily dominate the automotive market. The first step in manufacturing a battery is to procure the lithium, which is mined primarily in Chile. The mineral is refined into a white powder (lithium carbonate) at Chilean plants and shipped as either a powder or as 11-pound ingots to Tier 2 or 3 manufacturers. The Tier 2 and 3 suppliers convert the ingots or powder into lithium metal that is used in battery cells. This is a highly automated process requiring great precision. The manufacturers apply an extrusion process to the ingot and flatten it into a more manageable piece of metal which is 1/100 th of an inch thick and 650 feet long. Eventually, the metal, rolled even thinner (1.25 miles long), will produce over 200 batteries. Because the lithium metal strip can stick to itself, a soft film is laminated to it so it can be further wound into spools. At this stage, the lithium is divided into individual cells, heated at a high temperature for 90 minutes, and then tested for electrical transmission capabilities. A punch machine cuts out cells in the sizes needed for their application (automobiles, cell phones, laptops, etc.). It has been estimated that 70% of the value added in making Li-ion batteries is in the development and manufacture of the cell itself (compared with, for example, only 15% in the assembly of the battery and 10% in electrical and mechanical components). The individual cells are packaged carefully and shipped to a Tier 1 fabrication plant, where they are sprayed with molten metals that will establish the anodes and cathodes of the battery cell. The cathodes, as shown in Table 1 , are especially important in the battery function, because there are different options for their chemical composition and they have unique characteristics which each manufacturer has developed and may have patented. Some cathode manufacturers may partner with companies that specialize in producing advanced cathode materials. As the battery industry develops, Tier 2 battery component plants may be built adjacent to the Tier 1 facilities, as geographic proximity is generally seen as a competitive advantage in the supplier-automaker relationship. Tier 1 manufacturers and automakers assemble the individual cells, fabricate the modules, and assemble all components from Tier 2 and 3 suppliers into battery packs ready for placement in a motor vehicle. Battery packs have 250-500 cells. GM chooses to do the final battery pack assembly at its Brownstown, MI, plant, giving it more control over how the battery pack interacts with the vehicle's overall power system. As one analyst noted, "the fact GM is keeping 100% of the battery integration in-house illustrates the centrality of the battery in electric vehicles." In 2009, ARRA provided $2.4 billion in stimulus funding to support the establishment of Li-ion battery manufacturing facilities in the United States. At the time it was enacted, the Obama Administration asserted that ARRA investments may lower the cost of some types of electric car batteries by 70% by the end of 2015, enabling the production of as much as 40% of the world's advanced vehicle batteries in the United States. In August 2009, DOE announced that it would fund 48 new advanced battery manufacturing and electric drive vehicle projects for PHEVs and EVs in over 20 states, stating, "the grantees were selected through a competitive process conducted by DOE and are intended to accelerate the development of U.S. manufacturing capacity for batteries and electric drive components as well as the deployment of electric drive vehicles to help establish American leadership in developing the next generation of advanced vehicles." DOE provided $1.5 billion in grants to accelerate the development of a domestic battery supply chain, including $28.4 million to develop lithium supplies; $259 million to produce Li-ion cell components such as cathodes, anodes, separators, and electrolyte solution; $735 million to make cells using diverse chemistries such as iron phosphate, nickel cobalt metal, and manganese spinel; $462 million for pack assembly facilities; and $9.5 million for a lithium recycling facility. Appendix A provides detail on these grants. The seven largest grants, totaling more than $1.2 billion—half of total grant funding—went to the companies in Table 3 . The remaining ARRA funding for new electric battery development was allocated for two related goals: (1) $500 million was provided for U.S. production of electric drive components for vehicles, including electric motors, power electronics, and other drive train components; and (2) $400 million for purchase of several thousand PHEVs for demonstration purposes, installation of a charging station network, and workforce training related to transportation electrification. The Obama Administration has contended that ARRA spending had an immediate impact in transforming the U.S. advanced battery industry. In a statement issued in January 2011, when Vice President Joe Biden visited the Ener1 battery manufacturing facility in Mt. Comfort, IN, the U.S. Department of Energy (DOE) said ARRA would increase U.S. advanced technology battery manufacturing capability from two plants and a 2% global market share to more than two dozen manufacturers and a projected 40% of the world's EV batteries by 2015, and that it would cut the cost of batteries in half by 2013. DOE reports that the cost of Li-ion batteries dropped from $1,000/kWh in 2008 to $500/kWh in 2012. DOE seeks to lower the cost to $300/kWh by 2014 and $125/kWh by 2022. In February 2013, the DOE inspector general issued a report concerning the ARRA grant to LG Chem, identifying $106 million in "inappropriate" payments to the company. In congressional testimony in March 2013, Inspector General Gregory Friedman said that the grant language did not require a transfer of manufacturing from LG Chem's Korean operations to the new Michigan plant, although that was the intention of the grant. Moving beyond ARRA, President Obama has outlined several initiatives that could make electric vehicles more affordable, calling on Congress to Raise the tax credit for electric vehicles to $10,000 and make it a rebate from the dealer available to a car buyer at the time of purchase. The Administration argues that a rebate would encourage more Americans to buy electric vehicles if they did not have to wait to file their tax return to realize the savings. Automobile dealers, many of whom oppose it, would be integral to this plan as the rebates would be made available at point of purchase. Raise R&D investment in electric drive, battery, and energy storage technologies. The President's FY2012 budget proposed to increase funding for the DOE Vehicles Technologies program from $304 million to $588 million, with a goal to "move mature battery technologies closer to market entry through the design and development of advanced pre-production battery prototypes." Instead, Congress authorized $328 million. For FY2013, the Administration requested the program be funded at $420 million, a 28% increase over FY2012. DOE's budget request states that the FY2013 activities "focus on meeting the President's 2015 electrification goal, and addressing key program goals through 2020 and beyond." Establish a $2 billon energy trust fund that uses revenues from offshore oil and gas leases to support development of cars and trucks powered by electricity, biofuels, and natural gas. In addition, the Administration launched the EV Everywhere Challenge, committing $50 million of federal funds to "set technical goals for cutting costs for the batteries and electric drivetrain systems, including motors and power electronics, reducing the vehicle weights while maintaining safety, and increasing fast-charge rates." As part of this program, DOE is also sponsoring the Workplace Charging Challenge, with a goal of achieving a tenfold increase in the number of U.S. employers offering workplace charging in the next five years. Congress first acted to support electric and hybrid vehicle technologies in 1976, when it established a demonstration project that was to lead to the federal purchase of 7,500 electric vehicles. The legislation was vetoed by President Gerald Ford on the grounds that it was premature to demonstrate vehicle technologies before adequate batteries had been developed, but Congress overrode his veto. This law initiated DOE's hybrid and electric vehicle research and development program. Recognizing that advanced technology vehicles were only as good as the batteries that would propel them, DOE began a research program to improve existing—that is, lead acid—battery technology and to study what were then advanced concepts of battery chemistry, such as sodium sulfur and lithium iron metal sulfides. A number of electric demonstration vehicles were produced in the following years by Ford, General Motors, and American Motors, but Congress realized in 1978 that producing so many demonstration vehicles quickly was unrealistic. It stipulated a new schedule, mandating the introduction of only 200 vehicles in 1978, 600 in 1979, and more in the 1980s. However, President Ronald Reagan cancelled the program in 1981, basing the decision in part on a critical 1979 General Accounting Office report. GAO asserted commercialization would require a major effort to improve electric vehicle technology, strengthen the electric vehicle industry, establish a new market, and create an infrastructure to support it. It found that the private sector demonstration project was premature and urged refocusing of government R&D. In subsequent years, DOE continued research on vehicle energy storage options. In 1990, California mandated that zero emission vehicles be sold by major automakers, ushering in new interest in hybrid and electric vehicles. The Energy Policy Act of 1992 ( P.L. 102-486 ) directed DOE to develop a research, development, and demonstration project for fuel cells and electric vehicles. DOE has provided support to the research programs of the U.S. Council for Automotive Research (USCAR), which was established in 1992 as the U.S. motor vehicle industry's research consortium on advanced vehicles. USCAR houses the U.S. Advanced Battery Consortium (USABC), focused on research and development of battery technologies. In 1993, the Clinton Administration expanded the scope of advanced vehicle research by establishing the Partnership for a New Generation of Vehicles (PNGV). This initiative was a public-private partnership between the federal government and USCAR. Its goals were to (1) leverage federal and private sector resources to develop advanced manufacturing technologies, within 10 years; (2) produce near-term improvements in automobile efficiency, safety and emissions; and (3) triple vehicle fuel efficiency from the average 1994 level to 80 miles per gallon, while still meeting all environmental regulations and keeping the cost affordable. A top priority of the program was to develop advanced auto manufacturing technologies that would spawn production of vehicles with low gasoline consumption and emissions. PNGV officials believed that if such vehicles were attractive commercially, then they would sell in high volumes, driving down costs. While PNGV supported work on a broad range of manufacturing technologies and products, such as new lightweight materials and new fuels, a prominent aspect of the program was the decision of the automakers to seek to build diesel-powered, hybrid-electric vehicles (HEV) through this program. Consequently, PNGV's focus included research and development of advanced energy storage systems for use in HEVs. Battery research under PNGV was focused primarily on NiMH and Li-ion batteries because these technologies were thought to offer the best prospects for performance, cost, durability, and safety. In a review of PNGV in its final year of 2001, the National Research Council (NRC) of the National Academy of Sciences reported that while the new batteries were not ready for widespread use, "The soundness of choosing these [NiMH and Li-ion] systems for development is confirmed by the substantial progress made by PNGV toward most of these targets and the commercial use by all Japanese HEVs of either NiMH or Li-ion batteries." The Bush Administration revamped PNGV administratively, as there was no statutory basis for it. In its place, it established in 2002 a similar initiative with more of a focus on commercial as well as passenger vehicles and on fuel cell research: the FreedomCAR and Fuel Partnership within DOE. USCAR was still the private sector partner, but other federal agencies that had been part of PNGV, such as the Department of Commerce, were no longer involved. In addition, five major oil companies, including ExxonMobil and Chevron, joined the research effort to develop more efficient IC engines focused on hydrogen fuel cells and, eventually, hybrid electric vehicles. Two utilities, DTE Energy (Detroit) and Southern California Edison, also joined the Partnership. As with PNGV, the new initiative included an energy storage program, called "FreedomCAR and Vehicle Technologies," or FCVT. It built on the research base of predecessor programs with industry-government technical teams. About 61% of the federal research funding was spent on work at the national laboratories, 35% on industry research, and 4% on university and other types of research. Its goal was to demonstrate that high-power Li-ion batteries would be able to meet the performance targets for hybrid electric vehicles. Over three-fourths of FCVT's spending was directed toward development of high power density batteries for near-term use in hybrid vehicles. The remainder supported long-term exploratory research to find the high energy density technologies for a second-generation Li-ion system that would be appropriate for use in electric vehicles. The Obama Administration has continued DOE's Vehicle Technologies research and development program in addition to promoting battery manufacturing. Current research emphasizes reducing the cost and improving the performance of Li-ion batteries and assessing new materials for cathodes, such as manganese oxides and iron phosphates. These may eventually offer cheaper and more stable alternatives to lithium cobalt oxide, contributing to cost reductions for electric vehicles. Table 4 shows federal spending on battery and battery-related research and development since 2002. Between 2008 and 2012, federal spending on battery research increased by 86%. Congress established the ATVM program at DOE in 2007 to help raise fuel economy standards for vehicles and to encourage domestic production of more fuel-efficient cars and light trucks. ATVM is authorized to award up to $25 billion in loans, funded by a $7.5 billion appropriation to cover the loan subsidy costs. To date, five companies have received $8.4 billion in loans, primarily for work on hybrid and electric vehicles: Fisker, Ford, Nissan, Tesla, and the Vehicle Production Group. The program has $16.6 billion of loan authority remaining. For a discussion of this program, see CRS Report R42064, The Advanced Technology Vehicles Manufacturing (ATVM) Loan Program: Status and Issues , by [author name scrubbed] and [author name scrubbed]. The U.S. battery industry will grow only as fast as the hybrid and electric vehicle market. There has been significant interest in new types of vehicles, as shown by the list of current and future hybrid and electric vehicles in Appendix C . Nearly all automakers are offering some type of electric vehicle, and a small but dedicated consumer base is increasingly purchasing some form of electric car or pickup truck. In 2012, more than 434,000 hybrid and more than 52,000 electric vehicles were sold in the United States. Combined, these partial and total electric vehicles comprised 3.38% of sales in 2012, up from 2.37% in 2010. In his first term, President Obama set a goal of having 1 million fully electric vehicles on the road by 2015. In February 2011, DOE issued a report stating that "leading vehicle manufacturers already have plans for cumulative U.S. production capacity of more than 1.2 million electric vehicles by 2015, according to public announcements and news reports." However, DOE's past projections of annual electric vehicle sales have proven optimistic, and the goal of 1 million electric vehicles sold by 2015 appears ambitious. Nonetheless, the Administration seems to remain committed to its pledge, as the DOE budget for FY2013 states that "the FY 2013 [Vehicle Technologies program] activities focus on meeting the President's 2015 electrification goal." In addition to the level of federal support, these other factors will influence the development of a domestic advanced battery industry: Cost. There is a consensus that the current cost of electric batteries is too high. Most automakers have not said how much their batteries cost "because of proprietary information, and battery companies may sell batteries below cost in order to gain market share." Battery costs are commonly expressed in kilowatt hours (kWh). Recent reports indicate that Li-ion batteries cost about $500/kWh, which would mean the 16kWh Volt battery would cost $8,000 and the 24kWh Leaf battery would cost about $12,000. (The 2013 Volt retails for $39,145, and the 2013 Leaf for $28,100.) If production of batteries were to increase substantially, then economies of scale could drive these costs down, as could research breakthroughs. The U.S. Advanced Battery Consortium has a mid-term target of $250/kWh and a longer-term goal of $100/kWh. Charging. Electric vehicles will need to be recharged as often as every day, depending on how far the cars are driven. Current charging applications using standard 110-volt household current (called Level 1 charging) can take over 12 hours. Homeowners can install more powerful charging stations at home, but a 240-volt charging station (Level 2) would still require a car to charge for six hours or more. At commercial 440-volt charging stations (Level 3), a driver would have to leave the vehicle for 30 minutes if its battery is depleted. In addition, the driving range of an electric vehicle drops if many accessories, such as air conditioning, are used, potentially requiring more frequent recharging. A related issue is the availability of charging stations to service electric vehicles. DOE counted 5,612 charging stations accessible to the public as of March 2013. In March 2013, ChargePoint and ECOtality, which together handle about 90% of U.S. public car charging, announced a joint venture to make access to chargers easier for motorists. Range . Many vehicles with IC engines can travel over 350 miles before needing a refill of gasoline. Vehicles with electric motors have a shorter range, which may cause some consumers to avoid purchasing them. The U.S. Environmental Protection Agency (EPA) estimates that the Leaf can travel 73 miles before recharging, and the Volt, 37 miles. (The Leaf is an all-electric vehicle; the Volt also has a small gasoline tank that extends its total range to 379 miles.) Ranges are lower if the heater or air-conditioning is used extensively, as the power for these accessories is drawn totally from the battery. However, improvements in regenerative braking systems, which provide power for the vehicle and simultaneously recharge the battery, may extend range. Price of gasoline . Sustained high gasoline prices would be expected to spur stronger demand for fuel-efficient vehicles, including hybrid and electric vehicles. Improved IC engine technology. A number of low-cost vehicles with IC engines now tout fuel efficiency of 40 miles per gallon (mpg) or more. They include the Chevrolet Cruze, Hyundai Elantra, Ford Fiesta, and Ford Focus. The hybrid Toyota Prius is rated at 51 mpg. The most fuel-efficient cars with IC engines sell from just under $14,000 to $23,000, well below the current cost of either the Volt or Leaf, even after the $7,500 federal tax credit. Improved fuel efficiency in IC engines may reduce the attraction of electric vehicles. Subsidies by other governments. The U.S. government is not alone in wanting to establish a Li-ion battery supply chain. Governments in Japan, South Korea, and China are providing similar incentives. Japan is currently the leader in manufacturing of advanced automobile batteries, although its industry is modest given the low level of global demand. South Korea has announced a $12.5 billion investment in the "Battery 2020 Project," which seeks to make that country the dominant battery manufacturer in the next decade. China has a similar national policy and is reportedly investing $15 billion over the next decade. European manufacturers have generally favored further improvements in IC engines, and there is a greater acceptance of diesel engine fuel economy technology than in the United States. Europeans, however, are seemingly beginning to embrace electric vehicles. German Chancellor Angela Merkel said at a 2011 auto forum that "if we want to remain the world leader in automobiles, then we have to be at the forefront of electromobility." BMW, Daimler, and Volkswagen all have electric vehicles ready for market, as shown in Appendix C . But the poor performance of European auto sales since the end of the recession is having an impact. According to a New York Times report, BMW has been reemphasizing conventional technology and downplaying the prospects of electric vehicles. Without action by the U.S. government in 2009 through ARRA, there would be little likelihood that the United States would have any foundation in the Li-ion battery supply chain. Automakers have been clear that minus those incentives to build plants here, they would have sourced many cells straight from plants in Asia. As shown in Appendix C , nearly all automakers are offering electric vehicles, and some of the federal and private investments made since the recession have increased capacity in the domestic battery supply chain. GM Chairman and CEO Dan Akerson told an audience in March 2013 that "the era of using electricity to help improve performance and fuel economy is already here and the trend is only going to grow." Electric vehicles are still in their infancy, and there is a gap between the Administration's goal of having 1 million electric vehicles on the road by 2015 and consumer demand for such vehicles. Sales of both GM's Volt and Nissan's Leaf have fallen short of the manufacturers' initial forecasts, but when hybrid vehicle sales are added to the mix, vehicles able to run on battery power are gaining in popularity. Two major obstacles may stand in the way of the United States creating a significant electric vehicle industry based on a domestic electric battery supply chain. First, there is intense international competition, both in vehicles and in the batteries to power them. Whatever their long-run prospects, electric vehicles and batteries are unlikely to be profitable for manufacturers in the near term. Some have called for additional government support and public education so that alternative-vehicle fuel systems such as hybrid and electric vehicles are more readily deployed, and the benefits of the cleaner environment they may create are more widely understood and accepted by consumers. Given that capacity outstrips current demand for both vehicles and advanced batteries, the point at which a domestic battery industry could stand on its own, without federal support, cannot be predicted. Secondly, to attain broader consumer acceptance and thereby build the scale to drive down production costs, battery technology needs to advance further to address cost, range and recharging issues. It remains uncertain that Li-ion batteries will be the ultimate solution. As a recent academic report asserted: Lithium-ion batteries may never have adequate energy density to independently power a household's primary multi-purpose vehicle. Although there have been significant improvements in battery technology since the 1990s, policymakers should consider a large increase in federal R&D investments into innovative battery chemistries, prototyping and manufacturing processes. Advanced battery manufacturing is still an infant industry whose technology and potential market remain highly uncertain. Its development in the United States is likely to depend heavily on how the federal government further addresses the challenges of building a battery supply chain and promoting advances in battery technologies. Appendix A. ARRA Awards Appendix B. Hybrid Vehicle Battery Placement Appendix C. Current and Planned Electric and Hybrid Vehicles in the U. S. Market
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The United States is one of several countries encouraging production and sales of fully electric and plug-in hybrid electric vehicles to reduce oil consumption, air pollution, and greenhouse gas emissions. The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5) provided federal financial support to develop a domestic lithium-ion battery supply chain for electric vehicles. Some of these companies have brought on new production capacity, but others have gone bankrupt or idled their plants. While early in his Administration President Obama forecast that 1 million plug-in electric vehicles would be sold by 2015, motorists have been slow to embrace all-electric vehicles. At the beginning of 2013, about 80,000 plug-in electrics were on U.S. roads. In making a national commitment to building electric vehicles and most of their components in the United States, the federal government has invested $2.4 billion in electric battery production facilities and nearly $80 million a year for electric battery research and development. To increase sales of such vehicles, the President has recommended that the current $7,500 tax credit for purchase of a plug-in hybrid be converted into a $10,000 rebate, available at point of sale to car buyers upon purchase of a vehicle. Developing affordable batteries offering long driving range is the biggest challenge to increasing sales of plug-in electric vehicles. Batteries for these vehicles differ substantially from traditional lead-acid batteries used in internal combustion engine vehicles: they are larger, heavier, more expensive, and have safety considerations that mandate use of electronically controlled cooling systems. Various chemistries can be applied, with lithium-ion appearing the most feasible approach at the present time. The lithium-ion battery supply chain, expanded by ARRA investments, includes companies that mine and refine lithium; produce components, chemicals, and electronics; and assemble these components into battery cells and then into battery packs. Auto manufacturers design their vehicles to work with specific batteries, and provide proprietary cooling and other technologies before placing batteries in vehicles. Most of these operations are highly automated and require great precision. It has been estimated that 70% of the value added in making lithium-ion batteries is in making the cells, compared with only 15% in battery assembly and 10% in electrical and mechanical components. Despite these supply chain investments, it will be difficult to achieve the goal of 1 million plug-in electric vehicles on U.S. roads by 2015. Costs remain high; although data are confidential, batteries alone are estimated to cost $8,000 to $18,000 per vehicle. Vehicle range limitations and charging issues have so far slowed expected purchases. Lower gasoline prices and improvements in competing internal combustion engine technologies could slow acceptance of electric vehicles, whereas persistent high gasoline prices could favor it. Advanced battery manufacturing is still an infant industry whose technology and potential market remain highly uncertain. Its development in the United States is likely to depend heavily on foreign competition and how the federal government further addresses the challenges of building a battery supply chain and promoting advances in battery technologies.
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Congress passed the Air Carrier Access Act (ACAA) in 1986, with several goals. First, Congress intended to address the "unique difficulties" faced by individuals with disabilities, who often had no way to predict the extent of a given airline or flight crew's accommodation. Second, Congress intended the ACAA to overrule a Supreme Court case, Department of Transportation v. Paralyzed Veterans of America (PVA) , in which the Court held that certain nondiscrimination regulations then in effect could not be enforced against commercial airlines. Finally, Congress also intended to balance protecting individuals with disabilities from discrimination, on one hand, and the need to ensure general passenger safety, on the other. The inquiry regarding the extent of protections under the ACAA is timely given public concern in 2007 about a man infected with XDR-TB who traveled on several passenger airplanes before he was placed in isolation and public concern in 2009 about the influenza A(H1N1) outbreak. This report discusses ACAA requirements and regulations, including regulations regarding airplane passengers with communicable diseases. It will also briefly discuss S. 2554 , 110 th Congress, and H.R. 5129 , 110 th Congress, which proposed to amend the ACAA to provide aggrieved individuals with a private right of action, attorneys' fees, expert fees, and the costs of the action. The ACAA prohibits discrimination by air carriers against "otherwise qualified individual[s]" on the basis of disability. The statutory language regarding the scope of "disability" was the same under the ACAA as under the Americans with Disabilities Act (ADA) prior to the enactment of the Americans with Disabilities Amendment Act on September 25, 2008. Specifically, a person is an "individual with a disability" under the ACAA if the individual (1) "has a physical or mental impairment that substantially limits one or more major life activities," (2) "has a record of such an impairment," or (3) "is regarded as having such an impairment." Under the regulations, such individuals are "qualified" individuals with disabilities if they (1) take steps to avail themselves of services offered by air carriers, (2) make good faith efforts to obtain tickets for air transportation, or (3) purchase or possess valid tickets for air transportation and meet reasonable contracts of carriage. Prior to enactment of the ADA Amendments Act, courts typically found that individuals met this "qualified" requirement if they also satisfied the "individual with a disability" requirement. The ACAA's statutory language is brief, leaving implementation to the Department of Transportation (DOT). The department originally promulgated regulations to implement the ACAA on March 6, 1990. Under the regulatory framework, air carriers violate the ACAA's nondiscrimination provision if they discriminate against an individual with a disability, "by reason of such disability, in the provision of air transportation." Additionally, air carriers may not require passengers to accept special services. DOT's goal for this provision was to ensure that individuals with disabilities are not treated differently than other passengers. In Deterra v. America West Airlines , a federal district court noted that asking a person utilizing a wheelchair to advance to the front of a ticket line when he had not requested special service could constitute discriminatory conduct under the regulations. The regulations provide two major exceptions to the general nondiscrimination requirement. First, carriers may refuse to serve individuals with disabilities "on the basis of safety." Second, carriers may refuse to serve individuals with disabilities when doing so would violate "FAA [Federal Aviation Administration] or TSA [Transportation Security Administration] requirements or applicable requirements of a foreign government." If a carrier denies service to an individual with a disability under either of these exceptions, it must specify its reason in writing. The ACAA impacts nearly all air carriers that transport passengers. Air carriers are defined as "U.S. ... or foreign citizen[s] ... [that undertake], directly or indirectly, or by a lease or any other arrangement, to engage in air transportation." It is clear from the ACAA's legislative history that the ACAA applies to both government and commercial air carriers. Additionally, in Bower v. FedEx , the Sixth Circuit held that the ACAA applied to a company that routinely allowed employees to ride as passengers in its cargo planes. The original version of the ACCA exempted foreign air carriers. However, in 2000, Congress passed a law amending the ACAA such that it now applies to foreign air carriers. On May 13, 2008, the regulations were revised to include foreign air carriers, and the new provisions went into effect on May 13, 2009. Foreign air carriers now are required to comply with the ACAA for flights "that begin or end at a U.S. airport." The ACAA contains no statutory reference to communicable diseases, but the regulatory text specifically addresses them. Additionally, the regulatory definition of "individual with a disability" appears to include individuals with communicable diseases. Similarly, courts generally accept communicable diseases as falling within the scope of "disability" under the ADA if the diseases meet the same parameters that other physical or mental impairments must satisfy. Although no federal court has reached the issue, it follows that courts would likely reach similar conclusions under the ACAA. The regulations prohibit various actions by carriers against individuals with communicable diseases. Namely, a carrier may not "(1) [r]efuse to provide transportation to the passenger; (2) [d]elay the passenger's transportation ... ; (3) [i]mpose on the passenger any condition, restriction, or requirement not imposed on other passengers; or (4) [r]equire the passenger to provide a medical certificate." However, an exception applies when "the passenger's condition poses a direct threat." The regulations define "direct threat" as "a significant risk to the health or safety of others that cannot be eliminated by a modification of policies, practices, or procedures, or by the provision of auxiliary aids or services." Carriers have discretion in determining whether a given passenger poses a "direct threat." The carrier must make an "individualized assessment, based on reasonable judgment ... to ascertain: (i) [t]he nature, duration, and severity of the risk; (ii) [t]he probability that the potential harm to the health and safety of others will actually occur; and (iii) [w]hether reasonable modifications of policies, practices, or procedures will mitigate the risk." However, note that within the scope of their discretion, carriers must choose the "least restrictive response" from the passenger's point of view. For example, a carrier should not "refuse transportation to the passenger if ... [it] can protect the health and safety of others by means short of a refusal." The Department of Transportation regulations require most air carriers to take specific actions in order to fulfill the ACAA's broad nondiscrimination requirement. Note that these requirements are minimum standards only. Aircraft must conform to multiple accessibility requirements under the regulations. First, "aircraft with 30 or more passenger seats on which passenger aisle seats have armrests" must be "equipped with movable aisle armrests on at least one-half of the aisle seats in rows in which passengers with mobility impairments are permitted to sit under FAA or applicable foreign government safety rules." Second, each aircraft with 100 or more passenger seats must offer priority space in its cabin for storing at least one folding wheelchair. Third, aircraft with "more than one aisle in which lavatories are provided shall include at least one accessible lavatory." Finally, aircraft with more than 60 passenger seats providing one or more accessible lavatories must provide an "on-board wheelchair" for passengers' use. Generally, air carriers may not require that an individual with a disability travel with an attendant. However, a carrier may require that an individual travel with an attendant if one of the following applies and the carrier determines that an attendant's assistance is "essential for safety": (1) the passenger will travel in a stretcher or incubator; (2) the passenger is unable to comprehend or respond appropriately to safety instructions; (3) the passenger has a "mobility impairment so severe that the person is unable to physically assist in his or her own evacuation of the aircraft"; or (4) the passenger has both severe hearing and vision impairments and "cannot establish some means of communication with carrier personnel." Air carriers must allow individuals with disabilities to travel with service animals. In addition, carriers must "permit the service animal to accompany the passenger with a disability at any seat in which the person sits, unless the animal obstructs an aisle or other area that must remain unobstructed to facilitate an emergency evacuation." Also, carriers must accept service animal identification cards, tags, and even "credible verbal assurances" from qualified individuals as proof that a given animal is a "service animal." Similarly, airlines must allow qualified individuals with disabilities to bring ventilator or respirator equipment into the airplane cabin and use those devices during flights "operated on aircraft originally designed to have a maximum passenger capacity of more than 19 seats." Additionally, airlines must permit qualified individuals to stow assistive devices "in designated priority storage areas or in overhead compartments or under seats," including "(1) [m]anual wheelchairs ... ; (2) [o]ther mobility aides, such as canes ... , crutches, and walkers; and (3) [o]ther assistive devices for stowage or use within the cabin." These devices must be "consistent with FAA, PHMSA [Pipeline and Hazardous Materials Safety Administration], TSA, or applicable foreign government requirements concerning security, safety, and hazardous materials with respect to the stowage of carry-on items," and a carrier "must not count assistive devices ... toward a limit on carry-on baggage." The regulations require all carriers to assist individuals with disabilities with boarding and deplaning if either the individual has requested such service or the carrier has offered such service and the individual agreed to receive it. Also, carriers may not require individuals with disabilities to sit in particular seats or refuse to seat them in any seat on the basis of disability. However, a narrow exception applies when refusing to accommodate a passenger in a particular seat is necessary in order for the carrier to comply "with FAA or applicable foreign government safety requirements." Carriers generally may not require individuals with disabilities to provide advance notice of the fact that they are flying. However, various exceptions apply. Specifically, a carrier may require up to 48 hours of advance notice of a passenger's disability if that passenger plans to carry or utilize certain equipment on the flight or seeks certain accommodations enumerated in the regulations. The regulations require that individuals with disabilities be required to undergo no more security screening procedures than individuals without disabilities. Likewise, security personnel must conduct screening of individuals with disabilities in the same manner in which they conduct screening of individuals without disabilities. However, they may examine an assistive device that might, "in their judgment," conceal a weapon or other prohibited item. In the most recent cases, two federal circuits have held that private individuals have no ability to sue airlines for discrimination under the ACAA. Instead, those courts have suggested that the ACAA merely gives individuals the ability to complain to the Department of Transportation (DOT) and then to file petitions for review with federal circuit courts if DOT fails to investigate individual complaints. These holdings limit individuals' ability to enforce the ACAA through the federal courts. Instead, individuals often must rely on DOT to enforce complaints against air carriers. Furthermore, some experts have argued that DOT's enforcement ability is relatively weak, in part because it handles enforcement through its enforcement office rather than through its office of civil rights. DOT has indicated that it has investigated numerous ACAA complaints, sometimes seeking millions of dollars in civil penalties as a result of ACAA violations. The Civil Rights Act of 2008, S. 2554 and H.R. 5129 , was introduced in the 110 th Congress and proposed, in part, to amend the ACAA to provide for a private right of action. As noted previously, judicial decisions under the act have held that individuals have no ability to sue the airlines individually but must rely on the DOT to enforce complaints. The bills indicated that Congress disagreed with the judicial interpretations and noted that "[t]he absence of a private right of action leaves enforcement of the ACAA solely in the hands of the Department of Transportation, which is overburdened and lacks the resources to investigate, prosecute violators for, and remediate all of the violations of the rights of travelers who are individuals with disabilities." Although both S. 2554 and H.R. 5129 were referred to committee, the 110 th Congress did not enact this legislation. As of the date of this report, the 111 th Congress has not introduced any similar legislation.
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The Air Carrier Access Act (ACAA), 49 U.S.C. § 41705, prohibits discrimination by air carriers against individuals with disabilities. Public attention regarding an airplane passenger who traveled while infected with Extensively Drug Resistant Tuberculosis (XDR-TB) in 2007 raised questions regarding the ACAA's requirements and guarantees. Additionally, public concern about the 2009 influenza A(H1N1) outbreak may increase congressional interest in air travel regulations. This report briefly discusses the ACAA's statutory provisions, accompanying regulations, relevant judicial opinions, and legislation in the 110th Congress.
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The United States maintains a range of economic sanctions on the Government of Sudan. The United States generally restricts foreign aid because Sudan has been found, by the Secretary of State, to be a supporter of acts of international terrorism, is operating under a military dictatorship, and has fallen into arrears in its debt repayment. The United States has also suspended bilateral preferential trade treatment, restricted commercial exports and imports, denied the export of defense articles and defense services, and refused to support requests from Sudan for funding or program support in the international financial institutions for reasons related to terrorism, regional stability, and human rights—including religious freedom, worker rights, and trafficking in persons. As a member state of the United Nations, the United States, is also required to cease the sale or supply of arms and related materiel—transactions the U.S. government already blocks—to non-government entities and individuals operating in Sudan, deny visas or passage through the United States to those cited by the United Nations as those committing human rights atrocities in Darfur, and freeze the assets of those cited. On September 9, 2004, Secretary of State Powell testified before the Committee on Foreign Relations to report his assessment of the current crisis in Darfur, in Sudan's western region bordering Chad. Secretary Powell reported that the U.S. State Department had "concluded that genocide has been committed in Darfur and that the Government of Sudan and the jinjaweid bear responsibility—and genocide may still be occurring." The Congress, also in mid-2004, declared "that the atrocities unfolding in Darfur, Sudan, are genocide. In January 2005, however, an International Commission of Inquiry on Darfur to the United Nations Secretary General concluded that the Government of the Sudan has not pursued a policy of genocide. This report outlines actions taken by the United Nations and the economic sanctions currently imposed on Sudan by the United States—describing what is restricted, the statutory basis for the sanctions, and where the authority lies to ease or strengthen those restrictions. On July 30, 2004, the United Nations Security Council (UNSC) adopted Resolution 1556 to condemn "acts of violence and violations of human rights and international humanitarian law by all parties to the crisis" in the Darfur region of western Sudan, and to single out the Government of Sudan for its primary responsibility to respect human rights, maintain law and order, and protect the population of the region. In doing so, the Security Council cited its authority, under chapter VII of the U.N. Charter, to address threats to the peace, breaches of the peace, and acts of aggression. By issuing UNSC Resolution 1556, the Security Council calls on the Government of Sudan to facilitate international relief of the humanitarian disaster, investigate human rights violations, establish credible security conditions for the civilian population and those attempting to assist them, and resume peace talks with all factions. The Security Council, furthermore, endorses the African Union's deployment of international monitors to Darfur, and urges U.N. member states to materially support the African Union effort. UNSC Resolution 1556 also requires U.N. member states to prevent the sale or supply of arms and related materiel to non-government entities and individuals operating in Sudan. The U.N. Security Council has demanded that the Government of Sudan "fulfill its commitments to disarm the Janjaweed militias and apprehend and bring to justice Janjaweed leaders and their associates who have incited and carried out human rights and international humanitarian law violations and other atrocities." The Security Council requested that Secretary General Kofi Annan report in 30 days, and monthly thereafter, on any progress of the Government of Sudan to fulfill its commitments, and made it clear that it intends to take further steps against the Government of Sudan "in the event of non-compliance." According to press reports, Secretary General Annan's appointed envoy to Sudan, Jan Pronk of the Netherlands, in his briefing to the Security Council that constituted Secretary General Annan's first required monthly report, concluded that "there is no recent evidence linking Khartoum to Arab militias rampaging through black African villages in Darfur." The United States publicly criticized the conclusions, citing a report prepared by African Union monitors that contradicted Mr. Pronk's assessment, and urged the mobilization of more observers to the region. In his testimony before the Committee on Foreign Relations on September, 9, 2004, Secretary of State Powell announced that the State Department identified genocide in the events of Darfur, and would return to the United Nations to call for immediate action. He declared: the United States will call for a "full-blown and unfettered investigation" by the United Nations to "confirm the true nature, scope and totality of the crimes our evidence reveals." It was acknowledged at the time, however, that adoption of sanctions in the United Nations would be a hard won accomplishment, as China, Pakistan, Russia, Britain, and others had stated that they were unlikely to support punitive measures at this time. On September 18, 2004, the Security Council adopted Resolution 1564 to request Secretary General Annan to establish an international commission of inquiry empowered to investigate "reports of violations of international humanitarian law and human rights law in Darfur by all parties, to determine also whether or not acts of genocide have occurred, and to identify the perpetrators of such violations with a view to ensuring that those responsible are held accountable...." UNSC Resolution 1564 also declares the United Nations' support of the African Union's efforts to expand and enhance its monitoring efforts that grew out of North/South cease-fire negotiations, and encourages member states to provide material support for the AU efforts, to fulfill their earlier pledges for humanitarian contributions, and to provide sustained support to humanitarian efforts in Darfur and neighboring Chad. UNSC Resolution 1564 declares the Security Council's intent to impose restrictions on Sudan's oil industry, and travel and asset restrictions targeting individual members of the Government of Sudan, if Sudan fails to meet the requirement and intent of UNSC Resolutions 1556 and 1564. No timeframe for further imposition of sanctions is stated, however. Pursuant to Resolution 1564, in October 2004, the Secretary General appointed a five-member International Commission of Inquiry on Darfur, and requested it report within three months. On January 25, 2005, the International Commission reported its findings in four categories: (1) violations of international humanitarian law and human rights law in Darfur by all parties; (2) whether or not acts of genocide have occurred; (3) the identification of perpetrators of violations; and (4) recommendations on how to hold those perpetrators accountable. The International Commission "established that the Government of the Sudan and the Janjaweed are responsible for serious violations of international human rights and humanitarian law amounting to crimes under international law" and, in particular, found that: ... Government forces and militias conducted indiscriminate attacks, including killing of civilians, torture, enforced disappearances, destruction of villages, rape and other forms of sexual violence, pillaging and forced displacement, throughout Darfur. These acts were conducted on a widespread and systematic basis, and therefore may amount to crimes against humanity. The extensive destruction and displacement have resulted in a loss of livelihood and means of survival for countless women, men and children. In addition to the large scale attacks, many people have been arrested and detained, and many have been held incommunicado for prolonged periods and tortured. The vast majority of the victims of all of these violations have been from the Fur, Zaghawa, Massalit, Jebel, Aranga and other so-called "African" tribes. The International Commission of Inquiry, at the same time, however: ... concluded that the Government of the Sudan has not pursued a policy of genocide ... the crucial element of genocidal intent appears to be missing, at least as far as the central Government authorities are concerned.... The Commission does recognize that in some instances individuals, including Government officials, may commit acts with genocidal intent. Whether this was the case in Darfur, however, is a determination that only a competent court can make on a case by case basis. [emphasis added] The report of the International Commission of Inquiry, ambiguous in its findings of no genocide, lack of "genocidal intent," but acts possibly committed with "genocidal intent," and its call for a "competent court" to evaluate the evidence, led to a flurry of international debate and diplomatic maneuvering. The United States called on the United Nations either to establish a new "accountability tribunal" or refer criminal investigations to the special tribunal in Tanzania that oversaw cases related to the 1994 massacres in Rwanda, deploy peacekeepers and impose economic sanctions that would have an impact on Sudan's oil exports. Most other U.N. Security Council members supported the International Commission of Inquiry's recommendation to have the International Criminal Court in The Hague oversee any prosecution. And the Government of Sudan insisted that any prosecution of war crimes in Darfur should be pursued in Sudan's own courts. On March 29, 2005, the Security Council adopted Resolution 1591 to require member states to "prevent entry into or transit through their territories of all persons," identified by a newly formed Committee of the Security Council, who "impede the peace process, constitute a threat to the stability in Darfur and the region, commit violations of international humanitarian or human rights law or other atrocities," or violate the arms embargo stated in Resolution 1556. Resolution 1591 also requires member states to "freeze all funds, financial assets and economic resources" of those identified by the Committee. The Resolution delayed the imposition of these two sanctions for 30 days, however, leaving enough time for the removal and relocation of most assets held by an individual or entity subject to the sanction. Two days later, the Security Council adopted Resolution 1593 to refer the situation in Darfur to the Prosecutor of the International Criminal Court. Sudan has been denied U.S. foreign aid under the law since 1988, when it defaulted on servicing its external debt. Subsequent developments—the military overthrow of a democratically elected government in 1989, and support of acts of international terrorism, as determined by the Secretary of State in 1993—also require that the United States deny foreign assistance to Sudan. Humanitarian aid and food aid are exempted from the restrictions, however, and from 1988 to 2001, such assistance to Sudan averaged more than $48 million each year, primarily in food aid (see Table 1 , below). This stands in contrast to 1987 and earlier, when Sudan averaged more than $216 million per year, and aid ran the gamut from food aid, development assistance, Economic Support Funds, military assistance and International Military Education and Training (IMET). Today, the United States is the largest donor of humanitarian assistance to Darfur. From February 2003 through September 2005, the United States provided nearly $768 million to nongovernmental organizations (NGOs) working in Darfur and on the Chad/Sudan border. The United States has also provided funding to support the African Union's deployment of cease-fire observers and human rights monitors to the region. The United Nations has called for an expansion of the African Union forces to 7,700, with possible supplement up to 12,000, with airlift and logistical help from NATO (including the United States), the European Union, and Ukraine (a party to neither NATO nor the EU). In December 1988, Sudan fell more than one year in arrears in servicing its debt to the United States. This debt was accumulated in the form of non-grant U.S. foreign and military aid. As a result, since 1988, Sudan has been denied most foreign assistance pursuant to sections in both authorization and appropriations legislation. The President may waive the restriction if he finds it in the U.S. national interest to do so. Most recently, Sudan's debt arrearage—along with its support of international terrorism and its military dictatorship—was also cited by the State Department and the Millennium Challenge Corporation as cause for ineligibility for assistance under the terms of the Millennium Challenge Account. On June 30, 1989, Sudan's democratically elected government, led by Prime Minister Sadiq al Mahdi, was overthrown by that country's military forces. As a result, Sudan is denied most foreign assistance pursuant to the annual foreign operations appropriations. On February 28, 1990, President George H.W. Bush invoked this section of law to announce that aid, other than humanitarian assistance, would be denied Sudan. This prohibition continues until the President can determine and certify to Congress that democracy has returned to Sudan on the national level. Sudan is also deemed ineligible for Millennium Challenge Account funding because of its military dictatorship. Since FY1989, the annual foreign operations appropriations act has explicitly prohibited Sudan from receiving aid under the Foreign Military Financing Program. FY2005's foreign operations appropriations act specifically denies Sudan eligibility for U.S. debt restructuring programs "unless the Secretary of the Treasury determines and notifies the Committees on Appropriations that a democratically elected government has taken office." The debt restructuring program includes debt accrued through the International Affairs Budget Function 150 account, P.L. 480 agricultural loans, the Export-Import Bank, and certain debt reduction programs enacted in prior years. Sudan is also denied any assistance under the current foreign operations appropriations "except as provided through the regular notification procedures of the Committees on Appropriations." The foreign operations appropriations measure to fund programs through FY2006, currently under consideration in the 109 th Congress, seeks to continue the restrictions on aid to Sudan related to democracy, foreign military financing, and regular notification procedures. Restrictions on aid imposed because of military regimes or debt arrearage, though not explicitly directed at Sudan, are also continued. The proposal also makes available not less than $112.35 million in bilateral economic assistance to Sudan for disease control programs and debt reduction. None of those funds will be provided to the Government of Sudan, however, unless the Secretary of State can determine and certify to Congress that (1) the Government of Sudan has disarmed and disbanded government-supported militia groups operating in Darfur; (2) the Government of Sudan and related militia groups are honoring the cease-fire agreement of April 2004; and (3) the Government of Sudan allows international humanitarian and human rights groups access to Darfur. In August 1993, the Secretary of State determined that the Government of Sudan had "repeatedly provided support for acts of international terrorism." As a result, Sudan is subject to a long list of economic restrictions and a withdrawal of U.S. foreign aid. U.S. exporters are required to obtain validated licenses for the export of goods or technology to Sudan, and generally there is a presumption that the Departments of Commerce (for dual-use goods) or State (for defense articles and defense services) will deny the issuance of those licenses. As a U.S.-designated supporter of international terrorism, Sudan is generally denied foreign assistance, Millennium Challenge Account funding, agricultural aid, Peace Corps programs, support through the Export-Import Bank, support in the international financial institutions, opposition to loans or credits from the International Monetary Fund, and withholding of trade preferences under the Generalized System of Preferences. In April 1999, at the height of debate in Congress over the effectiveness—and unintended consequences—of economic sanctions, the Clinton administration announced that it would remove food and medicine from its sanctions policies in future applications, and it would issue new regulations for some countries—Iran, Libya, and Sudan—denied access to U.S. agricultural and medical exports. Congress later enacted the Trade Sanctions Reform and Export Enhancement Act of 2000 to place in permanent law the exemption of food and medicine exports in sanctions regimes. For state sponsors of terrorism, including Sudan, the export of agricultural commodities, medicine, or medical devices requires a license from the Department of Commerce. U.S. government financing of commercial exports to state sponsors of terrorism, including Sudan, is prohibited unless the President determines and certifies to Congress that such financing is in the United States' national security interest, or should be provided for humanitarian reasons. Typically, as it is the case with Sudan, economic and diplomatic prohibitions are multilayered, incrementally denying access to funds needed to legitimize a targeted government. United States condemnation for Sudan's military dictatorship in 1989 denied the country many forms of U.S. foreign aid. In 1991 President George H.W. Bush suspended trade preferences afforded Sudan under the Generalized System of Preferences. He cited the Government of Sudan's failure to promote and protect internationally recognized standards of worker rights. In 1993, the State Department added Sudan to the list of countries found to be supporting acts of international terrorism. In 1997, President Clinton invoked the most powerful economic authority available to his office to prohibit nearly all trade and transactions between the United States and Sudan. In each case, it is left to the President to determine that improved conditions warrant a restoration of bilateral relations and resumption of aid, trade, support in the banks, and transactions. On November 3, 1997, President Clinton invoked authority under the National Emergencies Act and the International Emergency Economic Powers Act to declare that a national emergency existed because of the Government of Sudan's "continued support of international terrorism; ongoing efforts to destabilize neighboring governments; and the prevalence of human rights violations, including slavery and the denial of religious freedom...." He issued Executive Order 13067 to block property and assets held by the Government of Sudan in the United States, and to prohibit most transactions with Sudan. Executive Order 13067 prohibits a U.S. person from engaging in any of the following: import into the United States of any goods or services of Sudanese origin, other than information or informational materials; export or reexport to Sudan of any goods, technology, or services from the United States, except for donations of articles intended to relieve human suffering, such as food, clothing, and medicine; facilitation of exports to or imports from Sudan; performance of a contract in support of an industrial, commercial, public utility or governmental project in Sudan; grant or extension of credits or loans to the Government of Sudan; transactions related to transportation of cargo to or from Sudan, or actual transportation to or from Sudan, including intermediate stops in the country; and any other transaction that is committed with the intention of evading or avoiding the other prohibitions. In November 2000, Congress adopted legislation to require the Secretary of the Treasury to consider approving licenses for the import of gum arabic from Sudan. Gum arabic, a resin-based substance widely used in the manufacture of inks, adhesives, soft drinks, confections, and medicines, is one of Sudan's chief exports. While U.S. manufacturers were denied gum arabic from Sudan, European competitors could trade in the commodity freely. Congress found that Sudan held a "virtual monopoly on the world's supply of the highest grade of gum arabic" and a prohibition on its importation under Executive Order 13067 was devastating to the U.S. gum arabic processing industry. Gum arabic became the exception to the comprehensive trade restrictions imposed by the Executive Branch. Any executive order issued under the authority of the National Emergencies Act and International Emergency Economic Powers Act requires annual renewal from the President, and only the President may revoke such an order. On September 9, 2003, President George W. Bush imposed economic sanctions on Sudan—one among a half dozen countries—for having failed to meet the minimum human rights standards and obligations set forth in the Trafficking Victims Protection Act of 2000. The President noted that, as Sudan received no nonhumanitarian, nontrade-related foreign assistance from the United States, he was limited to denying funding for participation by Sudanese officials or employees in educational and cultural exchange programs until Sudan complied with minimum standards or make significant efforts to bring itself into compliance with the law. In September 2005, however, the President moved Sudan from Tier 3 (sanctionable), as it was so designated by the Secretary of State in June 2005, to Tier 2 (watchlist) status, because of significant steps the government had taken to fight trafficking. The State Department's Office to Monitor and Combat Trafficking in Persons reported, for those countries so elevated: These countries took concrete actions to prosecute traffickers, protect victims, and to prevent the crime of trafficking. They increased efforts to identify and rescue trafficking victims, crafted new anti-trafficking legislation and procedures among other significant measures. In several instances, these actions were taken by countries facing resource constraints and/or significant internal political challenges. This demonstrates what can be accomplished when the commitment exists to combat trafficking in persons. We commend these governments for their actions. Sudan was reassessed based in large part on the government's commitment to implement a plan of action to end sexual violence against women in Darfur. We will look to the Sudanese government to ensure quick and effective implementation of the plan. In fine-tuning the imposition of economic sanctions on Sudan, Congress made an effort to distinguish between the Government of Sudan, the people of Sudan, and areas of the country outside of control of the government, to make aid and commerce available to the general population, with enactment of the following in the Assistance for International Malaria Control Act: Sec. 501. Assistance Efforts in Sudan. (a) Additional Authorities.—Notwithstanding any other provision of law, the President is authorized to undertake appropriate programs using Federal agencies, contractual arrangements, or direct support of indigenous groups, agencies, or organizations in areas outside of control of the Government of Sudan in an effort to provide emergency relief, promote economic self-sufficiency, build civil authority, provide education, enhance rule of law and the development of judicial and legal frameworks, support people-to-people reconciliation efforts, or implement any program in support of any viable peace agreement at the local, regional, or national level in Sudan. (b) Exception to Export Prohibitions.—Notwithstanding any other provision of law, the prohibition set forth with respect to Sudan in Executive Order 13067 of November 3, 1997 (62 Fed. Register 59989) shall not apply to any export from an area in Sudan outside of control of the Government of Sudan, or to any necessary transaction directly related to that export, if the President determines that the export or related transaction, as the case may be, would directly benefit the economic development of that area and its people. The Foreign Operations, Export Financing, and Related Programs Appropriations Act, 2005, further limits the implementation of economic sanctions to only those parts of the country under control of the Government of Sudan. Thus, despite fairly comprehensive and longstanding restrictions on foreign aid imposed under various statutes for terrorism, debt arrearage, or military dictatorship, language in the Assistance for International Malaria Control Act, and subsequent acts, authorizes the President to override those restrictions as they might apply to large portions of Sudan's population. Congress also singled out the National Democratic Alliance of Sudan as exempt from economic sanctions restricting foreign aid in the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 2005. Economic Support Funds may be made available to that group "to strengthen its ability to protect civilians from attacks, slave raids, and aerial bombardment by the Sudanese Government forces and its militia allies..." though such funding is "subject to the regular notification procedures of the Committees on Appropriations." The Sudan Peace Act, as originally enacted, requires the President to determine and certify to Congress, on a semi-annual basis, whether "the Government of Sudan and the Sudan People's Liberation Movement are negotiating in good faith and that negotiations should continue." Since its enactment, on October 21, 2002, the President regularly made a positive determination, most recently on April 24, 2004. If the President found himself unable to make this determination, he was required to: instruct U.S. executive directors in the international financial institutions to continue to vote against loans, credits, guarantees, or extension of any of these, to the Government of Sudan; consider downgrading diplomatic relations; take all steps, unilateral and multilateral, to deny the Government of Sudan access to oil revenues; and seek a U.N. Security Council Resolution to impose an arms embargo on the Government of Sudan. If these economic and diplomatic sanctions are imposed, the President could certify at any time that good faith negotiations had resumed, and lift the sanctions. The Sudan Peace Act also instructs the President to consider "downgrading or suspending diplomatic relations between the United States and the Government of Sudan...," though this is not mandatory. The act also: (1) authorizes the President "to provide increased assistance to the areas of Sudan that are not controlled by the Government of Sudan to prepare the population for peace and democratic governance, including support for civil administration, communications infrastructure, education, health, and agriculture"; (2) requires the President to suspend assistance for the Sudan People's Liberation Movement (SPLM), except for aid related to health, education, and humanitarian assistance, if he finds that the SPLM "has not engaged in good faith negotiations or has failed to honor the agreements signed"; and (3) requires the President to suspend foreign aid to the Government of Sudan if he finds that it has resumed objectionable human rights behavior after he certifies to its cessation. The Comprehensive Peace in Sudan Act of 2004, however, also amended the Sudan Peace Act to authorize the President to provide $100 million for FY2005 and unspecified amounts for the subsequent two years, notwithstanding any other provision of law , "to support the implementation of a comprehensive peace agreement that applies to all regions of Sudan, including the Darfur region." The amended Act also authorizes the President to use $200 million in FY2005 "to address the humanitarian and human rights crisis in the Darfur region and eastern Chad, including to support the African Union mission in the Darfur region, provided that no assistance may be made available to the Government of Sudan." The Comprehensive Peace in Sudan Act of 2004 requires the President to impose the economic and diplomatic sanctions stated in the Sudan Peace Act (and outlined above, relating to international financial institutions, oil revenues, diplomatic relations, and an arms embargo)) as well as freeze U.S.-based assets of senior officials of the Government of Sudan, within 30 days of enactment (which occurred December 23, 2004). The President is authorized to waive implementation if he finds it in the national interest to do so. The Comprehensive Peace in Sudan Act of 2004 also continues restrictions imposed on foreign aid in the foreign assistance appropriations Act, 2004, unless the President finds that the following conditions, stated in the Sudan Peace Act, as amended, are met, namely: that the Government of Sudan has taken demonstrable steps to— (A) ensure that the armed forces of Sudan and any associated militias are not committing atrocities or obstructing human rights monitors or the provision of humanitarian assistance; (B) demobilize and disarm militias supported or created by the Government of Sudan; (C) allow full and unfettered humanitarian assistance to all regions of Sudan, including the Darfur region; (D) allow an international commission of inquiry to conduct an investigation of atrocities in the Darfur region, in a manner consistent with United National Security Council Resolution 1564 (September 18, 2004), to investigate reports of violations of international humanitarian law and human rights law in the Darfur region by all parties, to determine also whether or not acts of genocide have occurred and to identify the perpetrators of such violations with a view to ensuring that those responsible are held accountable; (E) cooperate fully with the African Union, the United Nations, and all other observer, monitoring, and protection missions mandated to operate in Sudan; (F) permit the safe and voluntary return of displaced persons and refugees to their homes and rebuild the communities destroyed in the violence; and (G) implement the final agreements reached in the Naivasha peace process and install a new coalition government based on the Nairobi Declaration on the Final Phase of Peace in the Sudan signed on June 5, 2004.
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The United States maintains a range of economic sanctions on the Government of Sudan. The United States generally restricts foreign aid because Sudan has been found, by the Secretary of State, to be a supporter of acts of international terrorism, is operating under a military dictatorship, and has fallen into arrears in its debt repayment. The United States has also suspended bilateral preferential trade treatment, restricted commercial exports and imports, denied the export of defense articles and defense services, and refused to support requests from Sudan for funding or program support in the international financial institutions for reasons related to terrorism, regional stability, and human rights—including religious freedom, worker rights, and trafficking in persons. Notwithstanding the restrictions, the Congress has made an effort to hone the economic sanctions imposed against Sudan to distinguish between the Government of Sudan and the people of the country, to relieve the latter from sanctions' sting. In 2000, legislation was enacted to allow foreign aid to Sudan if it would be applied to nongovernmental efforts "to provide emergency relief, promote economic self-sufficiency, build civil authority, provide education, enhance rule of law and the development of judicial and legal frameworks, support people-to-people reconciliation efforts, or implement any program in support of any viable peace agreement...." [§ 501 of the Assistance for International Malaria Control Act]. With Secretary of State Powell's assessment that genocide has been committed in the Darfur region of west Sudan, stated before the Committee on Foreign Relations on September 9, 2004, and with continuing reports of extreme violence committed against the civilian population of Darfur, and against those who have fled that region to take up shelter in refugee camps along the Sudan/Chad border, the United States must consider its relationship with Sudan, the effectiveness and impact of economic assistance to Sudan, the appropriateness and impact of economic sanctions, and the nexus of the two. Especially as it states the case of genocide before the United Nations, which has not found the condition of "genocidal intent" among the perpetrators of the violence, a new assessment of the use of economic sanctions might be timely. This report describes U.N. actions and U.S. economic sanctions currently in place on Sudan, and the exceptions to those sanctions. It will be updated as events warrant.
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The Export-Import Bank of the United States (Ex-Im Bank or the Bank), a wholly owned U.S. government corporation, is the official export credit agency (ECA) of the United States. Its mission is to assist in the financing of U.S. exports of goods and services to support U.S. employment. Ex-Im Bank is among the federal government agencies involved in promoting U.S. exports of goods and services. It operates under a general statutory charter, the Export-Import Bank Act of 1945, as amended (P.L. 79-173; 12 U.S.C. §635 et seq.). A FY2015 continuing resolution (§147 of P.L. 113-164 ) includes a provision extending Ex-Im Bank's authority through June 30, 2015. Ex-Im Bank previously was authorized through September 30, 2014 ( P.L. 112-122 ). The 114 th Congress may debate whether to renew Ex-Im Bank's authority and, if so, for how long and under what terms; and if not, the possibility of other policy options. This report provides (1) a general background of Ex-Im Bank; (2) a discussion of the international context of the Bank; (3) analysis of key issues that Congress may consider in a reauthorization debate; and (4) the congressional outlook on Ex-Im Bank. Other CRS resources on Ex-Im Bank include CRS Report R43671, Export-Import Bank Reauthorization: Frequently Asked Questions , coordinated by [author name scrubbed]; CRS Report IF10017, Export-Import Bank (Ex-Im Bank) Reauthorization , by [author name scrubbed]; and CRS Report IF00039, Export-Import (Ex-Im) Bank and the Federal Budget (In Focus) (pdf), by [author name scrubbed]. On a demand-driven basis, Ex-Im Bank seeks to provide financing (1) when the private sector is unwilling, or unable, to undertake alone such financing at commercially viable terms; and/or (2) to meet foreign competition by countering government-backed financing offered by other countries to their companies. The rationales behind Ex-Im Bank's activities are subject to congressional debate. Congress sets statutory requirements for Ex-Im Bank's activity in its charter (see Table 1 for summary). Under the charter, Ex-Im Bank's financing must offer a "reasonable assurance of repayment" and must supplement, not compete with, private sources of financing. The charter also includes other statutory requirements that serve as the basis for Ex-Im Bank's policies, for example, with respect to providing terms that are fully competitive with other ECAs, economic and environmental considerations, and focusing on supporting specific types of exports. Ex-Im Bank also abides by the Organization for Economic Co-operation and Development (OECD) Arrangement on Officially Supported Export Credits (the "Arrangement"), which establishes terms and conditions for the export credit agencies of the United States and other participants (discussed later). Ex-Im Bank groups its financial products into four main categories: (1) direct loans; (2) loan guarantees; (3) working capital finance; and (4) export credit insurance. Its commitments and repayment periods can range from short-term (less than one year); to medium-term (one to seven years); to long-term (more than seven years). The Bank may determine repayment terms based on variables such as buyer, industry, and country conditions; common repayment terms that the market gives such products; terms of international rules on export credit activity; and the matching of terms offered by foreign ECAs. Ex-Im Bank, a demand-driven agency, charges interest, risk premia, and other fees for its services. Ex-Im Bank provides direct loans to foreign buyers of U.S. goods and services, usually for U.S. capital equipment and services (see Figure 1 ). Direct loans have no minimum or maximum size, but generally involve amounts of more than $10 million. The Bank extends to the U.S. company's foreign customer a loan covering up to 85% of the U.S. contract value. Direct loans are available for medium- and long-term transactions, but most commonly are offered on a long-term basis. The direct loans carry fixed interest rates and generally are made at terms that are the most attractive allowed under the provisions of the OECD Arrangement. The specific rates charged by Ex-Im Bank are based on the Commercial Interest Reference Rates (CIRR). Prior to 1980, Ex-Im Bank's direct lending program was its chief financing vehicle. Both the budget authority requested by the Administration and the level approved by Congress for direct lending dropped sharply during the 1980s, reportedly as a target of budget cuts. In the past decade, demand for Ex-Im Bank direct loans has been limited, because commercial interest rates were low. According to the Bank, demand for direct loans increased significantly with the international financial crisis of 2008-2009, as banking problems limited the ability of commercial banks to originate export finance transactions at competitive rates. Ex-Im Bank provides medium- and long-term guarantees of loans made by a lender to a foreign buyer of U.S. goods and services, promising to pay the lender, if the buyer defaults, the outstanding principal and accrued interest on the loan (see Figure 2 ). Loan guarantees are intended to cover repayment risk. Medium- and long-term loan guarantees are typically used to finance purchases of U.S. capital equipment and services. Unlike insurance (discussed below), loan guarantees are unconditional —representing Ex-Im Bank's commitment to a commercial bank for full repayment in the event of a default. There is no limit on the transaction size for a loan guarantee. Ex-Im Bank provides a guarantee of up to 85% or 100% of the U.S. content, whichever is lower, with a minimum 15% down payment required from the buyer. It provides coverage for 100% of the commercial and political risks of borrower repayment. Ex-Im Bank's working capital program is intended to facilitate finance for businesses, primarily small businesses, which have exporting potential but need working capital funds (e.g., to buy raw materials or supplies) to produce or market their goods or services for export. Working capital guarantees provide repayment guarantees to lenders (primarily commercial banks) on secured, short- and medium-term working capital loans made to qualified exporters. They can be for a single loan or a revolving line of credit, and typically are for one year, but can be extended to up to three years. Working capital guarantees cover up to 90% of the principal and interest on a loan made to an exporter by a private lender for export-related accounts receivables, and up to 75% for export-related inventory. Generally, each product must have more than 50% U.S. content based on all direct and indirect costs for eligibility. The interest rates for working capital loans guaranteed by Ex-Im Bank are set by the commercial lender. The working capital guarantees are secured by export-related accounts receivable and inventory (including work-in-process). The collateral requirement under the guaranteed loan to issue letters of credit is 25% of the face value of the letter of credit, compared with the standard 100% cash collateral generally required by the private sector. On a case-by-case basis, the letter of credit collateral requirement may be lowered to 10%. Working capital loans are fixed-rate lines of credit to small business exporters of up to $500,000 for a 6-month or 12-month period. Ex-Im Bank provides insurance policies to exporters and lenders to protect against losses of non-repayment for commercial and political reasons. Like loan guarantees, insurance is intended to reduce the risks involved in exporting by protecting against commercial or political uncertainty. However, in contrast, insurance is conditional on the fulfillment of various requirements for Ex-Im Bank to pay a claim (e.g., compliance with underwriting policies, deadlines for filing claims, payment of premiums and fees, and submission of proper documentation). The Bank issues short-term insurance policies to U.S. exporters to reduce their risk of nonpayment by the foreign buyer. Insurance, for example, could allow the exporter to extend more competitive terms of credit to foreign buyers (see Figure 3 ) and/or provide additional working capital to increase the exporter's borrowing base. Short-term exporter insurance is available for products shipped from the United States and with at least 50% U.S. content (excluding mark-up). Ex-Im Bank offers a renewable one-year policy that generally covers up to 180-day terms, but can be extended up to 360 days for qualifying transactions. It also maintains short-term insurance policies for lenders. Depending on the policy, the Bank will cover 90%-95% of nonpayment losses due to commercial and political risks. Ex-Im Bank can extend medium-term insurance, generally up to five years and with a maximum cover of $10 million, to both exporters and lenders, covering one or a series of shipments. The Bank will insure up to 85% of the contract price prior to delivery. If the foreign content is more than 15%, it will only support the U.S. portion. It requires the buyer to make cash payment to the exporter equal to 15% of the net U.S. contract value. It covers 100% of nonpayment due to commercial and political risk. Ex-Im Bank's programs include specialized finance products, such as: project finance, which is limited recourse finance to newly created companies, usually in amounts greater than $10 million. Project finance typically covers large, long-term infrastructure and industrial projects (e.g., airport construction, oil and gas power sector projects, wind turbines), involving multiple contracts for completion and operation. Sponsor support during construction, combined with the project's future cash flows, form the basis for the Bank's analysis of the creditworthiness of the project, as well as its source of repayment (rather than repayments by foreign governments, financial institutions, or established corporations). Repayment terms are generally up to 14 years, but can be up to 18 years for renewable energy projects. structured finance, which is finance to existing companies located overseas, based on their balance sheets and other sources of collateral or security enhancements. Through structured finance, Ex-Im Bank has financed fiber-optic cable, oil and gas projects, air traffic control systems, satellites, and manufacturing equipment. Repayment terms generally are for up to 10 years, but can be up to 12 years for power transactions. transportation finance , including for aircraft, ship, and railroad exports, based on the guidelines set by specific sector understanding under the OECD Arrangement. While Ex-Im Bank is a demand-driven agency, it has certain focus areas. Congress requires Ex-Im Bank to support certain types of exports, that is, exports by U.S. small businesses, U.S. exports related to renewable energy sources, and U.S. exports to sub-Saharan Africa. The Bank also seeks to support U.S. exports based on Administration goals and policy initiatives. For example, under the Obama Administration, Ex-Im Bank has been involved in efforts to boost U.S. exports worldwide as part of the National Export Initiative, as well as regional initiatives for sub-Saharan Africa and the Asia-Pacific region. Key focus areas for the Bank include the following. Geographical focus: The Bank is open to supporting buyers of U.S. exports in around 190 countries around the world. Congress has identified sub-Saharan Africa as a priority region. Countries subject to U.S. sanctions are ineligible for Ex-Im Bank support, as well as certain other countries, including those under the charter's current Marxist-Leninist prohibition. Sectoral focus: Ex-Im Bank has identified several industries with high potential for U.S. export growth: oil and gas, mining, agribusiness, renewable energy, medical equipment and services, construction equipment and services, aircraft, and power generation and related services. Infrastructure development in emerging economies is a major focus of the Bank's financing. Military or defense items, as well as sales to military buyers, generally are ineligible for support, with certain exceptions. Focus on specific types of exporters: Ex-Im Bank has a long-standing focus on supporting exports of U.S. small- and medium-sized enterprises (SMEs). In the context of Ex-Im Bank's activities, its authorizations are the new commitments for credit and insurance that the agency approves each year. Ex-Im Bank authorized 3,746 transactions in the amount of $20.5 billion in FY2014, down from 3,842 transactions totaling $27.3 billion in FY2013 (see Figure 4 ). Following several years of record highs in authorizations since the 2008-2009 financial crisis, Ex-Im Bank's authorizations have declined over the past couple of years with improvements in the lending environment, among other factors. U.S. small businesses account for the majority of Ex-Im Bank's transactions by number (89% in FY2014), while larger companies represent the majority by dollar amount . Ex-Im Bank reported that almost 56% of its total authorizations for FY2014 supported infrastructure projects. Ex-Im Bank has met its 20% small business target from Congress in some years, but has fallen short in other years, based on authorization amount (see Table 2 ). At the same time, small business transactions supported by the Bank constitute the majority of Ex-Im Bank's transactions by number. The Bank's support for renewable energy exports, while increasing, has been below the 10% target, possibly due, in part, to market limitations. Ex-Im Bank's support for sub-Saharan Africa also reflects an overall uptick in activity, compared to previous years. While the Bank seeks to support these export goals, its actual activity depends on alignment with commercial interests, as it is demand-driven. For FY2014, Ex-Im Bank estimates that its authorizations of $20.5 billion are in support of $27.5 billion of U.S. exports and 164,000 U.S. jobs. Ex-Im Bank finances around 2% of U.S. exports annually, but possibly a higher percentage for certain sectors of the U.S. economy. Ex-Im Bank's charter places a statutory limit on the aggregate amounts of loan, guarantees, and insurance that the Bank can have outstanding at any one time (oftentimes referred to as the Bank's exposure cap/ceiling/limit). The outstanding principal amount of all loans made, guaranteed, or insured by Ex-Im Bank is charged at the full value against the limitation. In FY2014, Ex-Im Bank reported an exposure of $112.0 billion—below the $140 billion statutory cap for that year—distributed across financial products, geographic regions, and economic sectors (see Figure 5 ). This represents a decrease following recent years of record highs in Ex-Im Bank's exposure level. Prior years' growing levels of exposure were associated largely with increased demand for Ex-Im Bank's services during the financial crisis as commercial lending declined, as well as possibly greater demand in emerging markets for U.S. exports; increased usage of the Bank by key customers, such as those in the satellite sector; and greater Ex-Im Bank outreach. As with other federal credit programs, beginning with FY1992, Ex-Im Bank's activities have been subject to the Federal Credit Reform Act of 1990 (FCRA, P.L. 101-508 ), which was intended to measure more accurately the cost of federal credit programs and to make the cost of such credit programs more comparable to direct federal outlays for budgetary purposes. For a given fiscal year, under FCRA, the cost of federal credit activities, including those of Ex-Im Bank, is reported on an accrual basis equivalent with other federal spending, rather than on a cash flow basis , as used previously. Under FCRA's rules, credit subsidy estimates are calculated by discounting them using the rates on U.S. Treasury securities with similar terms to maturity—which traditionally have been considered to be risk-free—and are below the rates of commercial loans. Between 1992 and 2008, the Bank received direct appropriations for its administrative expenses and FCRA credit subsidy for those years in which the subsidy was estimated to be positive. Since 2008, Congress and the President gave the Bank permission to use its offsetting collections (e.g., interest, premia, and other fees charged for activities) to fund its administrative and program expenses and to retain a limited amount of any excess collections ("carryover funds") for a certain amount of time. The appropriations language stipulates that the receipts collected by Ex-Im Bank are credited as offsetting collections in the federal budget and are intended to cover the cost of the Bank's operations. Therefore, the offsetting collections are intended to reduce the appropriations from the General Fund to $0. At the start of the fiscal year, the U.S. Treasury provides Ex-Im Bank with an "appropriation warrant" for operating costs and administrative expenses. The amount of the warrant is established by the spending limits set by Congress and agreed to by the President in the appropriations process. According to Ex-Im Bank, it uses these offsetting collections to repay the warrant. Thus, Ex-Im Bank initially receives funds from the U.S. Treasury and subsequently repays those funds as offsetting collections come in. In addition, borrowings from the U.S. Treasury are used to finance medium- and long-term loans, and carry a fixed interest rate. Ex-Im Bank repays these borrowings primarily as repayments are received from recipients of its medium- and long-term loans. As part of the annual appropriations process, Congress and the President set an upper limit on the level available to the Bank for its activities and provide a direct appropriation for its Office of Inspector General (OIG). FY2014 appropriations legislation set an upper limit of $115.5 million for Ex-Im Bank's administrative expenses and provided $5.1 million for the Bank's OIG (see Table 3 ). No additional appropriation was needed as the credit subsidy calculated under FRCA was estimated to be negative for FY2014. Congress also allowed carryover funds of up to $10 million to remain available until September 30, 2017. For FY2015, the Bank has an upper limit of $106.3 million for administrative expenses, funding of $5.8 million for the OIG, and up to $10 million in carryover authority until September 30, 2018. Ex-Im Bank states that it contributes regularly to the U.S. Treasury. In FY2014, Ex-Im Bank reported transferring $674.7 million to the Treasury after covering operating expenses. This amount is on a cash basis, and is different than the amount calculated on a budgetary basis. Ex-Im Bank seeks to manage the risks it faces in its transactions (see Table 4 ). Its charter requires a reasonable assurance of repayment for all transactions supported by the Bank and for the Bank to have reasonable provisions for losses. The Bank has a system in place to mitigate risks through credit underwriting and due diligence of potential transactions, as well as monitoring risks of current transactions. If a transaction has credit weaknesses, the Bank will try to restructure it to help prevent defaults and increase the likelihood of higher recoveries if the transaction does default. Ex-Im Bank also has a claims and recovery process for transactions in default. The effectiveness of Ex-Im Bank's risk management is subject to congressional debate (see discussion in " Selected Issues for Congress "). Ex-Im Bank's reserves for loan losses total more than $4 billion. The Bank reported a default rate of 0.175% as of September 2014, which it provides quarterly to Congress. According to a non-partisan Government Accountability Office (GAO) study, the ultimate impact of Ex-Im Bank's recent business on default rates is not yet known as it contains a large volume of transactions that have not reached their peak default periods. GAO also has stated that trends in Ex-Im Bank's default rate should be viewed with caution because of limitations in the agency's analysis of its financial performance. Since 1992, Ex-Im Bank has been able to recover 50 cents on the dollar on average for transactions in default. Backed by the U.S. government, Ex-Im Bank can take legal action against obligors for transactions in default. It is also able to recover assets because its loans are heavily collateralized, as a high percentage of its transactions are asset-backed (e.g., aircraft). As international trade has grown, trade finance has expanded. Some 80%-90% of world trade relies on trade finance, and the global market for trade finance is estimated to be at around $10 trillion a year. In addition to financing through government-backed ECAs, the private sector also provides export financing, including through commercial backs, capital markets, lessors, and manufacturing self-financing. While the private sector is the leading source of export finance, ECAs are considered in the trade finance community to play an important role in certain niches. Most developed countries and many developing countries have ECAs. An estimated 60 ECAs exist worldwide. The relative attractiveness of seeking export financing through the private sector, ECAs, or a combination of both can change depending on credit market conditions in the private sector, as well as how ECA financing terms may change or respond to these market conditions. The role of ECAs may be more prominent, in part, due to tight credit market conditions associated with the 2008-2009 international financial crisis and the regulatory impact of Basel III on commercial banks. Private lenders and insurers conduct the majority of short-term export financing, though ECAs may play an active role in supporting certain sectors, such as taking on risks of financing small business exports. ECAs also appear to be more heavily involved in longer-term export financing, including financing for complex, multi-billion dollar sales such as aircraft and infrastructure projects. In such sectors, the private sector plays an active role, but in certain cases, ECA support can help make transactions more commercially attractive by mitigating risks of financing or by providing another source of funding to diversify risks. The Organization for Economic Co-operation and Development (OECD) Arrangement on Officially Supported Export Credits (the "OECD Arrangement") guides the scope of certain financing activities of Ex-Im Bank and other participating foreign ECAs (generally developed countries). The United States generally opposes subsidies for exports of commercial products. Since the 1970s, the United States has led efforts within the OECD to adopt international protocols which reduce the subsidy level in export credits by raising the interest rates on government-provided export credits to reflect market levels more closely. The OECD Arrangement, which came into effect in April 1978, establishes minimum interest rates and premiums, maximum repayment terms, guidelines for classifying risk, and other terms and conditions for government-backed export financing. The Arrangement has been revised a number of times over the years. For example, participants agreed to tighten restrictions on the use of tied aid (see text box ). In addition, sector understandings govern the terms and conditions of exports of, for example, civilian aircraft, ships, nuclear power plants, renewable energy, and railway infrastructure. OECD member countries also have agreed to other guidelines for official export credit. For example, in 2007, members agreed to revise guidelines on environmental procedures, referred to as "Common Approaches on Environment and Officially Supported Export Credits." These guidelines call for member governments to review projects for potential environmental impacts; to assess them against international standards, such as those of the World Bank; and to provide more public disclosure for environmentally sensitive projects. The OECD also adopted new guidelines on sustainable lending principles that aim to help developing countries avoid a renewed build-up of debt after receiving debt relief, as well as an anti-bribery agreement. Export credit financing that is covered by the OECD Arrangement generally is exempt from the World Trade Organization (WTO) Agreement on Subsidies and Countervailing Measures (SCM), which disciplines the use of export subsidies and the actions countries can take to counter the effects of these subsidies. The SCM Agreement is interpreted to indicate that, for non-agricultural products, an export credit practice in conformity with the OECD Arrangement on export credits shall not be considered as an export subsidy prohibited by the SCM Agreement. The OECD Arrangement does not cover all officially supported export credit activity. According to Ex-Im Bank, in 2013, traditional OECD export financing support represented 34% of total government-backed trade-related support (see Figure 7 ). Sources of government-backed export financing support that are unregulated by the OECD Arrangement are (1) emerging economies that are not a part of the OECD providing export financing through their ECAs; and (2) OECD members providing forms of export financing that are not regulated by the OECD Arrangement. Emerging markets such as China, Brazil, and India are not members of the OECD, but are increasingly active providers of government-backed export credit financing. In 2013, new medium- and long-term government-backed export financing conducted by the 34 members of the OECD as a whole stood at $97.9 billion, down about 22% from 2012 (see Figure 8 ; see Appendix for expanded data). U.S. new medium- and long-term support totaled $14.5 billion in 2013. In contrast, the combined new medium- and long-term financing provided by selected emerging markets was $55.4 billion, up a little over 10% from 2012. Notably, China alone accounted for at least $45 billion of such financing in 2013. The government-backed export credit activities of these non-OECD countries may not comply with international export credit standards. China, Brazil, and India may offer below-market and concessionary financing alternatives with which it is difficult for ECAs of OECD members to compete (see text box ). For example, in 2011, Brazil's largest landline telephone company reportedly chose to purchase network equipment from China's Huawei Technologies because of access to China Development Bank's $30 billion credit line, a two-year grace period on payments, and an interest rate of two percentage points below the London interbank offered rate (LIBOR). Officially backed export credit activity by emerging economies may increase in strategic markets, such as oil and gas, renewable energy, and natural resources extraction. For instance, Chinese ECAs "have shown strong signs of growing usage of export credits for export promotion purposes, especially in Africa, where they were offering preferential loans either in exchange for much needed resources (e.g., oil) or low cost loans on very extended repayment terms on projects in order to gain market share." In November 2013, the Export-Import Bank of China announced that Chinese state-owned banks would be providing about $1 trillion in financing through 2025 for transportation infrastructure projects in Africa. The ECAs of OECD member countries also conduct export credit financing and other activities that fall outside of the Arrangement. One form of unregulated financing is the "market window," which is a government-owned entity or program that offers export credits on market terms. Market windows generally do not operate on purely commercial terms, as they tend to receive benefits from their government status that commercial lenders cannot access. Many ECAs operate market windows, such as Canada, Germany, and Italy; Ex-Im Bank does not have a market window. It is difficult to obtain data on market window operations of foreign countries. Another form of unregulated financing is untied lending support, which is credit support extended by a government entity to a recipient for the purpose of providing credit for strategic interests of the donor country. Because the untied loan is not tied to exports, it is not subject to the OECD export credit guidelines. As stated previously, the United States historically has led efforts to impose international disciplines on government-backed export credit activity. The 2012 Ex-Im Bank reauthorization act went further, directing the Secretary of the Treasury (which takes the lead on U.S. international export credit negotiations) to negotiate to reduce and eliminate government-backed ECA financing altogether. Congress also required the Secretary of the Treasury to negotiate with all countries that finance air carrier aircraft through funds from a state-sponsored entity to reduce and eliminate aircraft export credit financing for all aircraft covered by the 2007 OECD Aircraft Sector Understanding. These efforts reportedly have run into difficulty in the OECD. While exports play an important role in the U.S. economy, the economies of other countries are far more reliant on exports, constituting a larger share of their respective gross domestic product (GDP). Moreover, other OECD countries presumably would be reluctant to terminate their export credit programs while countries outside of the OECD, such as China, Brazil, and India, could continue their financing programs. Separately, the United States and China announced that they would establish an International Working Group on Export Credits (IWG) to develop a new set of international guidelines for official export credit support. The IWG reportedly has met six times as of November 2014. Past discussion has included a focus on developing guidelines for the ships and medical equipment sectors, and future discussions may include a focus on developing horizontal, broadly applicable guidelines. Over time, Congress has debated the acceptability of federal support for U.S. exports, with the debate growing more complex as the global marketplace has become more competitive. Ex-Im Bank's authority has been extended through June 30, 2015, by the FY2015 continuing resolution (CR) (§147 of P.L. 113-164 ). As Ex-Im Bank's new sunset date nears, Congress may take up consideration of Ex-Im Bank's authority. The Administration's legislative proposal submitted in April 2014 requested, among other things, an extension of Ex-Im Bank's authority through FY2019 and an incremental increase in its exposure to $160 billion by FY2018. Members of Congress hold a range of views regarding how to address the status of Ex-Im Bank's authority. In the 114 th Congress, legislation related to Ex-Im Bank reauthorization includes the following. H.R. 597 (Fincher) would extend Ex-Im Bank's authority through FY2019 and reduce its exposure cap to $130 billion. It also would provide for certain reforms, such as on ethics, fraud controls, requirements for applicants to demonstrate inability to obtain credit elsewhere, auditing, earnings retention for possible losses, risk sharing, and loan terms; negotiations with the possible goal of eliminating export credit financing; and negotiations with non-OECD members to bring those countries into a multilateral export credit agreement, among other provisions. H.R. 1031 (Waters) would extend Ex-Im Bank's authority through FY2022 and incrementally raise its exposure cap to $160 billion by FY2022, subject to certain conditions. It also would include certain reforms, such as on ethics, fraud controls, auditing, due diligence, and risk sharing; negotiations with non-OECD members to bring those countries into a multilateral export credit agreement; and identification of non-OECD Arrangement countries not in compliance with the WTO Agreement on Subsidies and Countervailing Measures, among other provisions. H.R. 1605 (Amash) would abolish Ex-Im Bank. It reportedly is the same as a bill introduced in the 113 th Congress ( H.R. 2263 ), which included specifications for Ex-Im Bank's wind-down. S. 819 (Kirk) would extend Ex-Im Bank's authority through FY2019 and reduce its exposure cap to $135 billion for each of FY2015-FY2019, subject to certain conditions. It also would include certain reforms, such as on loan loss reserves, fraud controls, ethics, risk management, auditing, the small business financing target, and loan terms; international negotiations with the possible goal of eliminating export credit financing; and negotiations with non-OECD members to bring those countries into a multilateral export credit agreement, among other provisions. S. 824 (Shaheen) would extend Ex-Im Bank's authority through FY2022 and incrementally raise its exposure cap to $160 billion by FY2022, subject to certain conditions. It also would include certain reforms, such as on the small business financing target, risk sharing, ethics, fraud controls, auditing, project monitoring, and due diligence; negotiations with non-OECD members to bring those countries into a multilateral export credit agreement; and identification of non-OECD Arrangement countries not in compliance with the WTO Agreement on Subsidies and Countervailing Measures, among other provisions. Certain policy options are discussed below. Options for a renewal of Ex-Im Bank's charter include a "clean reauthorization," extending its termination date, or reauthorization with limited changes, such as revising its exposure cap. Some Members of Congress have called for reauthorization of Ex-Im Bank in its current form—as an independent federal government agency that serves as the official ECA of the United States. Among those that favor a renewal of the Bank's charter, some may call for a "clean reauthorization" or renewal with limited changes, while others may support a reauthorization that includes certain reforms to the Bank, such as to its policies or risk management practices (see discussion below). Proponents of Ex-Im Bank reauthorization hold that the Bank is critical in supporting U.S. jobs and U.S. exports by addressing market failures (such as imperfect information and barriers to entry) and leveling the playing field by countering foreign government-backed export financing activity. They say that U.S. government backing of Ex-Im Bank activity can make certain transactions (e.g., for large infrastructure projects or for small business exports) more commercially attractive by mitigating and diversifying risks, as well as provide the Bank leverage to guarantee repayment or recover assets in a way not available to the private sector. Critics of Ex-Im Bank may concede that the Bank's programs can help individual firms, but hold that its programs shift production among sectors within the economy and do not add permanently to the overall level of U.S. exports. They contend that the Bank competes with, or crowds out, private sector activity; the Bank picks "winners and losers" through its support and operates as a form of "corporate welfare"; poses a risk to taxpayers through its activities; and that the private sector is more efficient and better suited than the federal government to finance exports. Critics of the Bank also may call for intensified U.S. efforts through the OECD, as well as other venues, to eliminate all government-backed export credit activity internationally. An issue related to renewal of Ex-Im Bank is the length of time to extend the Bank's authority. Shorter extensions of authority in the past arguably have given Congress the opportunity to weigh in on Ex-Im Bank operations more frequently through the lawmaking process, while a longer extension could enhance the Bank's long-term planning ability and provide more assurance to clients of its viability. The most recent stand-alone renewal of Ex-Im Bank's authority, which occurred in 2012, was for about two years and four months ( P.L. 112-122 ). Recent longer-term extensions have been around four to five years and, going further back in the Bank's history, as long as approximately six to seven years. Congress also has extended Ex-Im Bank's authority on a short-term basis, including provisions in continuing resolutions. For instance, the FY2015 continuing resolution ( P.L. 113-164 ), passed in the 113 th Congress, includes a provision extending Ex-Im Bank's authority through June 30, 2015. Renewal of Ex-Im Bank's charter could include more substantive reforms, such as to its authorities, policies, and risk management practices (discussed further below). Such reforms could be motivated by a range of reasons, including enhancing Ex-Im Bank's ability to fill in gaps in private sector financing and offsetting competition from foreign ECAs; limiting the size and scope of its activities and its exposure to U.S. taxpayers; and furthering efforts to eliminate all ECA activity. Proposed reforms may raise, among other things, issues regarding the extent to which such changes would balance Ex-Im Bank's core mission to boost U.S. and jobs with supporting other policy interests. Some Members of Congress support allowing Ex-Im Bank's authority to expire. Some may favor a temporary expiration until consensus is reached on certain reforms to require of the Bank, while others may call for a permanent expiration. Congress could allow Ex-Im Bank's authority to expire by taking no action, or alternatively, by passing legislation that, for instance, sets specific parameters for a wind-down in its functions. Uncertainty over whether Congress would renew Ex-Im Bank's authority in 2014 reportedly led, in some instances, to foreign buyers selecting other suppliers over U.S. suppliers for certain export contracts, out of concern about financing. Generally speaking, according to Ex-Im Bank, if its authority were to lapse, no new commitments (including new loan, guarantee, or insurance transactions) could be approved by its Board of Directors or under delegated authority, but prior obligations (including disbursements on already-approved final commitments) could continue. The Bank could continue to make expenditures in its operations (including salary, rent, etc.), while developing a plan for orderly liquidation. It is unclear what form a liquidation plan would take. The primary statutory basis for Ex-Im Bank's activities under a lapse in authority is found in its charter in 12 U.S.C. §635f (see text box ). Beyond the specific impact of a lapse on Ex-Im Bank's day-to-day functions, there is broader debate about its implications for the U.S. economy in the long term, with stakeholders' positions based on their views of the validity of Ex-Im Bank's rationales, that is, to fill in gaps in private sector financing and offset competition from foreign ECAs. From one perspective, the absence of Ex-Im Bank financing could adversely affect particular U.S. firms or their employees that use Ex-Im Bank support in cases where they face difficulty accessing financing from the private sector at competitive terms. From another perspective, there are doubts over whether the absence of Ex-Im Bank support would affect the overall level of exports and employment in the United States. Given the various factors that affect U.S. export and employment levels, it may be difficult to determine the precise impact of the presence or absence of Ex-Im Bank financing on the U.S. economy in the long run. In terms of competitiveness, supporters of the Bank argue that, without Ex-Im Bank financing, it may be difficult for certain U.S. companies to compete for export contracts on a "level playing field" with foreign competitors that receive support from their government-backed ECAs or may lead to U.S. sourcing in overseas markets. They argue that a lapse in Ex-Im Bank's authority would amount to "unilateral disarmament," given continued operations by other countries of their ECA programs—for many of whom exports constitute a larger part of the national economy and ECAs are a core part of their national export strategies. Critics argue that allowing the Bank's authority to lapse would provide the United States with an opportunity to lead by example in efforts to eliminate government-backed ECA programs internationally, and enable the United States to focus on what they view as more effective ways to boost U.S. exports, such as through U.S. tax reform or the negotiation and enforcement of international trade agreements. Reorganization of Ex-Im Bank's functions may be considered as an alternative to reauthorization or a lapse in authority. Motivations could include an interest in increasing the effectiveness and efficiency of government export promotion services, reducing their costs, and eliminating duplicative activities. Various reorganization proposals have been considered over time. These have included proposals to consolidate certain trade and export finance functions of various government agencies into a "Department of Trade." In recent years, the reorganization debate has been renewed with President Obama's proposal in 2012 to reorganize the business- and trade-related functions of Ex-Im Bank and certain other federal entities into one department, a proposal reiterated in the President's FY2016 budget request. Trade reorganization discussions have rekindled policy debates about whether reorganization would reduce costs and improve the effectiveness of trade policy programs, or undermine the effectiveness of federal agencies, given their differing missions, and result in the creation of larger, more costly bureaucracy. While some stakeholders argue that consolidation of trade functions would result in more streamlined federal export assistance, others contend that it may result in federal services that are not responsive to the specific needs of certain exporter groups. Reorganization discussions also have renewed debates about whether overlap in services provided by federal government agencies constitutes duplication or the use of the same or similar tools to meet different goals. If Congress decides to reauthorize Ex-Im Bank, it may consider whether to revise the Bank's exposure cap. When Congress established the Bank as an independent agency in 1945, it authorized a limit on the Bank's outstanding aggregate credit and insurance authority that was no greater than three and one-half times the Bank's authorized stock of $1 billion. Since then, Congress has periodically raised the Bank's exposure cap (see Table 5 ). The 2012 reauthorization act increased the Bank's exposure cap from the previous limitation of $100 billion incrementally to $140 billion in FY2014, with the increase in the exposure cap contingent on the Bank maintaining a default rate on payment obligations under its financing of less than 2% and on meeting various reporting requirements. Some stakeholders favor increasing Ex-Im Bank's exposure cap, based on the Bank's role in supporting U.S. exports. Others support maintaining or reducing the exposure cap, based on concerns over Ex-Im Bank's ability to prudentially manage its portfolio (see discussion below). The Administration's legislative proposal submitted in April 2014 to reauthorize the Bank requested an incremental increase of the Bank's exposure cap to $160 billion by FY2018. Legislation introduced in Congress has varied (see " Status of Ex-Im Bank Authority " section above). Ex-Im Bank's policies could be part of the reauthorization debate. Congress could choose to pass a "clean reauthorization" that introduces no major changes to the Bank's policies. Proponents may argue that Congress has struck a fair balance among the various stakeholder interests—such as business and labor interests—in its present requirements of Ex-Im Bank and that adjustments to this balance are unwarranted. However, a number of long-standing debates concerning the Bank's policies remain. Should Congress consider revisions to Ex-Im Bank's policies, at issue is the extent to which potential changes would (1) balance Ex-Im Bank's core mission to boost U.S. exports and jobs with supporting other policy interests; and (2) compare to the policies of foreign ECAs, which may have different mandates and priorities, but nevertheless serve as competitors to Ex-Im Bank. Certain policies that may be debated are summarized below. "Content" relates to the amount of domestic and foreign content (e.g., labor, materials, and overhead costs) associated with the production of an export. The OECD Arrangement contains no specific guidelines regarding content requirements. Each ECA generally establishes its own guidelines in this area. Ex-Im Bank's content policy is based on its congressional mandate to support U.S. jobs, viewing content to be "a proxy to evidence support for U.S. jobs." The policy is intended to encourage U.S. companies to maximize their sourcing of U.S. content. However, Ex-Im Bank recognizes that U.S. export contracts may contain goods and services that are foreign-originated and allows financing support for such contracts, subject to certain restrictions and limitations. Under its content policy, for all medium- and long-term transactions, Ex-Im Bank limits its support to the lesser of (1) 85% of the value of all goods and services contained within a U.S. supply contract; or (2) 100% of the U.S. content of an export contract. Thus, if the foreign content exceeds 15%, the Bank's support would be reduced proportionally. For short-term export contracts, the U.S. content requirement for full Ex-Im Bank financing is generally 50%. In contrast to Ex-Im Bank, foreign ECAs generally have lower domestic content requirements, and some even have no domestic content requirements. ECAs of other countries have revised their content policies to reflect the changing nature of manufacturing, including the rise of global supply chains and the sourcing of inputs from multiple countries (see Table 6 ). In the 2012 reauthorization legislation, Congress required Ex-Im Bank to review its domestic content policy for medium- and long-term transactions to "examine and evaluate the effectiveness of the Bank's policy in maintaining and creating jobs in the [United States]; and in contributing to a stronger national economy through the export of goods and services" by taking into account various factors, including U.S. employment considerations and competitiveness to foreign ECAs. Following the review, Ex-Im Bank announced certain policy updates. For example, in an effort to increase U.S. services exporters' access to its financing, Ex-Im Bank provided clarification on how its content policy determines the eligibility of a U.S. services provider and a U.S. services contract, as well as how foreign-developed technology and the tools or equipment used to execute a services contract are treated on a content basis. According to Ex-Im Bank, it made no changes to its underlying content policy with these clarifications. In the past, some stakeholders have argued that the Bank's definition of national content does not take into account "the high value U.S. jobs in R&D [research and development], supply chain management, software design engineering, business development, and marketing, IP [intellectual property] support, branding, and profit," which have been considered as limitations to U.S. service providers' ability to use Ex-Im Bank financing. On the one hand, given the proliferation of global supply chains and foreign ECA policies, U.S. exporters have called for greater flexibility in Ex-Im Bank's content policy. For example, industry proposals have included recommendations that Ex-Im Bank lower its domestic content requirement, such as to 50% (the policy for short-term financing); match the average among OECD countries; adopt a policy similar to the European Union ECAs and "automatically cover non-U.S. content for U.S. FTA [free trade agreement] partners who offer reciprocity for U.S. content under their export credit agencies"; or expand the definition of domestic content to include, for instance, R&D or other elements that support high-value additions to the U.S. economy. On the other hand, labor groups tend to be concerned about the impact that lowering domestic content requirements may have on employment in the home country. From their point of view, reducing these requirements may result in an outsourcing of labor to other countries. Others counter that the current requirements may induce firms to use other ECAs for alternative sources of financing, which may cause them to shift production overseas. Ex-Im Bank is required to have regulations and procedures to insure that full consideration is given to the extent that any loan or guarantee is likely to have an adverse effect on U.S. industries and U.S. employment. These regulations and procedures are in support of the congressional policy that, in authorizing any loan or guarantee, the Board of Directors must take into account any serious adverse effect of such loan or guarantee. Furthermore, the Bank is prohibited from extending any loan or guarantee that would establish or expand the production of any commodity for export by any other country if the commodity is likely to be in surplus on world markets or the resulting production capacity will compete with U.S. production of a similar commodity and will cause "substantial injury" to U.S. producers of a similar commodity. The Bank defines risk of substantial injury as the extension of a loan or guarantee that will enable a foreign buyer to establish or expand foreign production by an amount that is equal to or greater than 1% of U.S. production. The same prohibition applies to loans or guarantees subject to U.S. trade measures, such as anti-dumping or countervailing duties. However, these prohibitions do not apply if the Board of Directors determines that the proposed transaction's short- and long-term benefits to U.S. industry and U.S. employment are likely to outweigh the injury to U.S. producers and U.S. employment of similar commodities. Like Ex-Im Bank, other G-7 ECAs have a broad mandate to support transactions that benefit their domestic economy, and base their decision to provide support on economic impact. However, in contrast to foreign ECAs, Ex-Im Bank is required by law to use an economic impact analysis to assess each transaction for potential adverse impact on U.S. industry, which can lead to a denial of financing. Among the key issues in the 2012 reauthorization debate was whether Ex-Im Bank's economic impact analysis sufficiently analyzes the potential impacts to U.S. industry of Ex-Im Bank transactions, including downstream effects. The 2012 reauthorization act required Ex-Im Bank to develop and make publicly available methodological guidelines to be used by the Bank in conducting economic impact analyses. In April 2013, Ex-Im Bank published revised economic impact analysis procedures and guidelines, including for aircraft exports. Supporters of Ex-Im Bank maintain that the economic impact analysis requirements ensure that the Bank meets its congressional mandate. At the same time, some U.S. exporters are concerned that the economic impact policies may be overly burdensome, detract from its core mission to support U.S. exports and jobs, and not be competitive to the policies of other ECAs. Other critics continue to be concerned that the economic impact policy does not adequately take into account downstream effects of Ex-Im Bank support. Ex-Im Bank's charter authorizes the Bank to grant or withhold financing support after taking into account the potential beneficial and adverse environmental effects of goods and services for which Ex-Im Bank direct lending and guarantee support is requested. The Bank must conduct an environmental review of all transactions greater than $10 million. Recent developments in Ex-Im Bank's environmental policies related to high-carbon projects, including support for exports for coal-fired power plants, have been subject to congressional action (see text box ). According to Ex-Im Bank, its Environmental and Social Due Diligence Procedures and Guidelines, Supplemental High Carbon Guidelines, and public disclosure requirements (e.g., tracking and publishing greenhouse gas emission data associated with projects) have expanded over time and remain more comprehensive than those of other OECD ECAs. In addition, Ex-Im Bank faces competition from ECAs outside of the OECD, such as China, which tend to be less rigorous in their environmental requirements for financing than OECD countries. Supporters of Ex-Im Bank's environmental policy argue that the Bank must balance U.S. exporting interests with environmental policy considerations, per its mandate. However, some U.S. exporters are concerned that Ex-Im Bank's environmental impact policies may be overly burdensome and detract from its core mission to support U.S. exports and jobs. From this standpoint, situations in which Ex-Im Bank denies financing for projects that do not meet environmental requirements are contrary to its mission because it may result in lost export and employment opportunities. Ex-Im Bank's seaborne shipping policy is based on Public Resolution 17 (PR-17, approved March 26, 1934, by the 73 rd Congress), whose purpose is to "support the U.S. strategic objective of maintaining a merchant marine sufficient to carry a substantial portion of its waterborne export and import foreign commerce." Under the shipping policy, most products supported by the Ex-Im Bank must be transported exclusively on U.S. vessels (e.g., direct loans of any amount, guarantees above $20 million, and products with repayment periods of more than seven years). Under limited conditions, a waiver on this requirement may be granted on a case-by-case basis by the U.S. Maritime Administration (MARAD). Supporters contend that maintaining U.S. flag vessels is "critical to U.S. national security" and "essential to maintaining a commercial U.S.-flag merchant marine." They argue that, from a budgetary standpoint, cargo preference is a "highly cost efficient way" to support a privately owned U.S.-flag commercial fleet. Because the goods will be shipped regardless of which ship carries them, and therefore the cost will be incurred regardless, "requiring that some of the cargoes be shipped on U.S.-flag vessels leverages that basic transportation expense to provide other benefits to the nation at a fraction of direct cost purchase." The concern under this view is that otherwise, the U.S. government would have to "duplicate sealift capacity at enormous expense with government-owned vessels." These merchant U.S.-flag vessels are then available to transport U.S. troops and military equipment. Proponents also argue that the cargo preference requirements help to support the U.S. shipping industry and the employment of shipboard crew. Critics of the shipping policy argue that "both U.S. strategic requirements and the global shipping market have changed dramatically." U.S. business groups contend that the shipping requirements can make U.S. goods less competitive relative to foreign goods for a host of reasons. While one or more countries used to have similar shipping requirements in the past, the United States appears to be the only country that continues to impose such requirements. There may also be capacity constraints because there are a limited number of U.S. bulk cargo carriers. According to lenders and exporters, the higher rates and the route scheduling challenges associated with shipping with U.S.-flagged vessels can make it difficult for them to use Ex-Im Bank support. In addition, some businesses express concern about processing time and outcomes. Ex-Im Bank introduced the co-financing program in 2001. Co-financing arrangements enable export credit financing from multiple ECAs. They allow goods and services from two or more countries to be marketed to a buyer under a single ECA financing package. According to U.S. exporters and lenders, co-financing arrangements allow Ex-Im Bank to participate with other ECAs on the non-U.S. content portion of an export contract. Otherwise, Ex-Im Bank would be limited to supporting the U.S. portion of the export contract and, from this view, the U.S. exporter may not win the sale because the ECA supported portion was insufficient or the terms and conditions were disadvantageous. In 2013, Ex-Im Bank conducted 51 co-financed transactions. According to the Bank, 99% of the volume, approximately $5 billion, involved some type of aircraft, with the exception of a medical equipment sale and a power transaction. The Bank states that, in most aircraft transactions, without co-financing, the exporter would not have been able to offer the maximum 85% support to its customers in one financing package. Following a review of its content policy, Ex-Im Bank announced changes to its co-financing arrangements. Under the revised co-financing policy, the Bank is willing to co-finance export contracts with a range of ECAs, if the proposed transaction complies with its statutory and policy requirements and benefits the U.S. economy. Some stakeholders call for more flexibility in Ex-Im Bank's co-financing arrangements. Some U.S. exporters and lenders believe that Ex-Im Bank's tied aid policies may place them at a competitive disadvantage. U.S. exporters have expressed concern that increased tied aid activity by other countries, coupled with the more flexible tied aid rules of other ECAs, has threatened certain U.S. exporter sales prospects. Some groups argue that the tied aid war chest funds should be increased and that the Bank should have more flexibility and authority in initiating tied aid to compete with foreign ECAs for export contracts, rather than limiting its use to a defensive tool. In some cases, it may be difficult for exporters and lenders to make a case for receiving matching support to counter foreign tied aid competition, because of challenges in "obtaining credible evidence of case-specific financing terms from non-OECD ECA competitors." Congressional mandates that require the Bank to focus support on specific exports may raise a number of questions, including the following. Should Congress mandate that Ex-Im Bank seek to finance specific types of exports? On one hand, congressional mandates may enable Ex-Im Bank to support strategic, high-growth U.S. economic sectors; U.S. exporters that may need the financing assistance the most (e.g., small businesses); and sectors where federal support can make the most difference (e.g., for renewable energy exports that rely on newer forms of technology and for which commercial banks may be unwilling to provide financing on their own because of actual or perceived risks). On the other hand, such targeted forms of export assistance may be viewed as a mechanism whereby the federal government determines "winners and losers" in the market, and, from this standpoint, may lead to economic distortions and harm other productive U.S. firms. Although such requirements give Congress a greater role in guiding Ex-Im Bank's activities, under this view, they may obscure the Bank's core mandate to support U.S. exports and employment. To what extent has Ex-Im Bank fulfilled congressional mandates? Given the demand-driven nature of Ex-Im Bank activities, congressional mandates for Ex-Im Bank to support particular types of U.S. exports can be viewed as statutory "targets." Ex-Im Bank can make financing available for certain purposes, but the actual composition of its financing portfolio depends on commercial interest and demand. Ex-Im Bank has met its 20% small business target from Congress in some years, but fallen short in other years. The Bank's support for renewable energy exports has been below the 10% target, possibly due, in part, to market limitations. Ex-Im Bank's support for sub-Saharan Africa reflects an overall uptick in activity. Notwithstanding Ex-Im Bank's demand-driven nature and market limitations, some stakeholders express concern that Ex-Im Bank's prioritization of activities, allocation of resources, policies, and operations (e.g., application process and approval system) may limit its ability to consistently meet its congressional mandates to support specific exports. What is the appropriate measure of success? Debates over whether Ex-Im Bank is fulfilling its congressional mandates often have centered on small businesses. Some stakeholders may argue that the focus on the dollar value of Ex-Im Bank support to small businesses is misleading, because larger corporations naturally conduct business requiring greater amounts of support. In addition, the data may not reflect all of the small businesses who benefit from Ex-Im Bank services through their role in the supply chain, such as by supplying parts and services to larger companies that are the direct beneficiaries of Ex-Im Bank financing, or by operating at sub-levels of the supply chain and serving as "suppliers to the suppliers." Others express concern over the amount of Ex-Im Bank financing, by dollar value, that has been directed to large U.S. corporations that they believe are capable of shouldering the risks of exporting to developing countries. For instance, some have criticized the fact that Boeing Corporation, a U.S. aerospace company, historically has been the single largest beneficiary of its support. In addition, some critics do not make a distinction between large and small business support, remaining opposed to taxpayer funds being directed toward private benefits. Congressional concern in Ex-Im Bank's financial soundness and risk management has been longstanding. U.S. taxpayer interests are implicated by Ex-Im Bank because its activities are backed by the full faith and credit of U.S. government and its exposure levels have grown. Such dynamics draw attention to Ex-Im Bank's financial soundness and risk management practices. The 2012 reauthorization act, among other things, required Ex-Im Bank to monitor its default rate, report it on a quarterly basis to Congress, and develop a plan to reduce the default rate if it equals or exceeds 2% (sometimes called "the 2% rule"). Pursuant to the 2012 reauthorization act, GAO published reports in March 2013 and May 2013 that reviewed Ex-Im Bank's risk management and reporting practices. GAO found that Ex-Im Bank is moving toward a more comprehensive risk management framework and has made certain improvements over time, including enhancing credit loss modeling with qualitative factors. At the same time, GAO considered further improvement to Ex-Im Bank's risk management practices necessary and provided recommendations to Ex-Im Bank to addressing remaining weaknesses. Ex-Im Bank reported accepting all of GAO's recommendations. To date, according to GAO, Ex-Im Bank has addressed recommendations in the areas of collecting data for estimating losses of transactions; managing financial risks through stress testing and monitoring default rates of sub-portfolios; and forecasting exposure levels. Ex-Im Bank has begun addressing other GAO recommendations regarding its workload and associated operational risks. The Bank also notes other changes it has made in recent years, including appointing a Chief Risk Officer in 2013 to ensure prudential risk management, as well as establishing an Enterprise Risk Committee, modernizing its credit monitoring, creating a Special Assets unit to address emerging credit issues, expanding pro-active monitoring efforts, and improving underwriting criteria. At the same time, debate continues over Ex-Im Bank's risk management and accounting practices, with key questions including the following. Does Ex-Im Bank manage its risk adequately and balance it properly with other considerations ? Supporters of Ex-Im Bank contend that the Bank has adequate systems and staffing in place to manage its risk and poses low risk to U.S. taxpayers. They argue that the Bank has a strong risk management mandate under its charter, which requires the Bank's transactions to have a "reasonable assurance of repayment" and for the Bank to have reasonable provisions for losses. They further note Ex-Im Bank's low default rate and high recovery rate. Critics hold that there are weaknesses in the Bank's risk governance and question the methodology used to calculate Ex-Im Bank's expected losses and contributions to the Treasury. They express concern that the Bank's growing exposure and concentrations in that exposure, such as in aircraft, pose a risk to U.S. taxpayers and the federal budget, and point to certain findings in studies by the GAO and Ex-Im Bank's own Office of Inspector General (OIG) over time. Other stakeholders caution that the Bank may be becoming too risk-averse. Of particular interest has been heightened credit standards (e.g., higher collateral requirements) introduced by Ex-Im Bank for its medium-term program, whose default rate is higher than that of Ex-Im Bank's overall portfolio. These tighter standards have been associated with a decrease in Ex-Im Bank medium-term lending in recent years, and have raised concerns about the appropriate balance in Ex-Im Bank's risk management with its overall mandate to support U.S. exports. Does Ex-Im Bank have adequate human capital to prudentially manage its growing portfolio? Supporters contend that the Bank, with around 400 full-time equivalents in FY2014, is effective and efficient, and that in areas where weaknesses in risk management have been identified, the Bank is taking corrective measures, such as increasing resources devoted to due diligence and asset monitoring. Critics argue that the Bank does not have enough expertise devoted to underwriting and due diligence. They point to an assertion by Ex-Im Bank's OIG in 2012 that, "Ex-Im Bank's current risk management framework and governance structure are not commensurate with the size, scope, and strategic ambitions of the institution." Is the cost of federal credit by Ex-Im Bank appropriately priced? Some stakeholders argue that rules under the Federal Credit Reform Act (FCRA) may understate the cost of loan programs managed by federal credit agencies, and express interest in moving to a fair value system of accounting. As previously noted, under FCRA's rules, budget estimates are calculated by discounting them using the rates on U.S. Treasury securities with similar terms to maturity—which traditionally have been considered risk-free—and are below rates on commercial loans. In contrast, fair value accounting would factor in the market risk, which the non-partisan Congressional Budget Office (CBO) says "provides a more comprehensive measure of federal costs." CBO estimated that between FY2015 and FY2024, Ex-Im Bank's activities would generate a negative subsidy of $14 billion under FCRA (i.e., budgetary savings), but would generate $2 billion in positive subsidy during this period on a fair value basis (i.e., budgetary costs). However, some stakeholders question CBO's assumptions, including for risk, and assert that CBO's assumptions overlook Ex-Im Bank's actual record, for example, in terms of its contributions to the U.S. Treasury and low default rate. Stakeholders have debated whether the OECD Arrangement on Officially Supported Export Credits is effective in leveling the playing field for exporters in the current trading environment. According to the Office of the U.S. Trade Representative (USTR), the OECD Arrangement has saved U.S. taxpayers about $800 million annually, with its minimum interest rate rules limiting subsidized export financing and reducing competition based on below-cost interest rates and long repayment terms by ECAs, and its minimum exposure fees for country risks also reducing costs. The USTR also states that the further leveling of the playing field created by the OECD tied aid disciplines has boosted U.S. exports by $1 billion a year. At the same time, questions about the OECD Arrangement's effectiveness are growing, particularly with the increasing official export credit activity of non-OECD members such as China, Brazil, and India. To the extent that the ECAs of these non-OECD countries provide financing on terms that are more advantageous than those under the OECD Arrangement, Ex-Im Bank and other OECD export credit agencies may find it difficult to compete with such export credit programs. Concerns about the effectiveness of the OECD Arrangement are further heightened due to unregulated financing being conducted by OECD member countries, such as through market windows, which are not subject to the Arrangement. To address concerns about the OECD Arrangement, one possible approach is to focus on strengthening the international disciplines guiding ECA activity. For example, Congress could direct the United States to encourage greater engagement by the OECD with non-OECD emerging market economies on official export credit activity; negotiate rules in the OECD that limit government-backed export credit financing in other developed countries; or pursue a greater role for the World Trade Organization (WTO) in disciplining international ECA activity. On one hand, such efforts may help to level the playing field for U.S. exporters by reducing trade-distorting export credit competition and associated economic losses. On the other hand, changes to the international export credit rules, if achieved, may be slow to materialize, given the complex nature of multilateral and plurilateral negotiations. In addition, developing high-standard, comprehensive rules that cover both developed and developing countries may be a challenge. Rather than strengthening international rules, another possible approach is to renew efforts by the U.S. Treasury to negotiate to eliminate all government-backed export financing internationally. This perspective often is found with critics of Ex-Im Bank, while supporters of the Bank contend that even if all countries agree to eliminate government-backed export credit activity, there would still be a need for Ex-Im Bank to fill in gaps in private sector financing due to market failures. In recent years, discussion of whether to reauthorize Ex-Im Bank, revise its exposure cap, and make policy and operational adjustments to it, among other issues, has dovetailed with debates about the agency's role in supporting U.S. exports and the appropriate size and scope of the U.S. government. The changing export finance landscape, including the 2008-2009 international financial crisis and the growth of government-backed export financing being conducted by emerging markets, as well as increased questions about Ex-Im Bank's financial soundness and risk management, have intensified congressional interest in Ex-Im Bank. Many of these issues may be focal points in any Ex-Im Bank reauthorization debate in the 114 th Congress.
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The Export-Import Bank of the United States (Ex-Im Bank or the Bank), a wholly owned U.S. government corporation, is the official export credit agency (ECA) of the United States. Its mission is to assist in the financing of U.S. exports of goods and services to support U.S. employment. The FY2015 continuing resolution (§147 of P.L. 113-164) extends its general statutory charter (Export-Import Bank Act of 1945, as amended, 12 U.S.C. §635 et seq.) through June 30, 2015. The 114th Congress may debate whether to renew Ex-Im Bank's authority; if so, for how long and under what terms; and if not, other policy alternatives. Under its charter, Ex-Im Bank's financing must have a "reasonable assurance of repayment" and should supplement, and not compete with, private capital, among other requirements. The Bank also abides by international rules for government-backed export credit activity under the Organization for Economic Co-operation and Development (OECD). In FY2014, Ex-Im Bank reported authorizing about $20.5 billion for 3,746 transactions of finance and insurance, to support an estimated $27.5 billion in U.S. exports of goods and services and 164,000 U.S. jobs. Its overall portfolio exposure level in FY2014 was $112 billion—below the $140 billion statutory cap for that year. Ex-Im Bank assesses credit and other risks of proposed transactions, monitors current commitments for risks, and maintains reserves against potential losses. It reported a default rate of 0.175% as of September 2014 (provided quarterly to Congress) and, since 1992, an average recovery rate of 50% for transactions in default. Ex-Im Bank uses offsetting collections to cover costs of its operations. FY2015 appropriations legislation set an upper limit of $106.3 million for the Bank's administrative expenses, provided $5.8 million for its Office of Inspector General (OIG), and allowed carryover funds of up to $10 million to remain available until September 30, 2018. Members of Congress hold a range of views on Ex-Im Bank. Proponents assert that the Bank supports U.S. exports by addressing market failures that dampen export levels and helping U.S. exporters compete against foreign companies backed by their governments' ECAs. Critics oppose the use of taxpayer funds for private benefit, whether for large or small businesses, and contend that the private sector is more efficient in financing exports. The reauthorization issues facing Congress are two-fold. The first issue is whether to renew Ex-Im Bank's authority. Scenarios include renewal in a "clean" manner or with reforms; a sunset in authority; and a reorganization of its functions. Second, should Congress choose to renew its authority, specific issues include For how long should Ex-Im Bank be reauthorized? Should Ex-Im Bank's exposure cap be adjusted and if so, by what amount? What revisions should be made to Ex-Im Bank's policies, if any? How well does the Bank manage the risks associated with its portfolio? How should the United States approach international disciplines to guide government-backed export credit activity?
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Legislation to rewrite and reauthorize the Export Administration Act of 1979 (EAA)( P.L. 96-72 ) may be considered in the 111 th Congress. In the 110 th Congress, several pieces of legislation were introduced that addressed various aspects of the current system, including penalties, enforcement, diversion or transhipment of goods, and the integration of export control data into the Automated Export System. The EAA provides the statutory authority for export controls on sensitive dual-use goods and technologies, items that have both civilian and military applications, including those items that can contribute to the proliferation of nuclear, biological and chemical weaponry. The EAA, which originally expired in 1989, periodically has been reauthorized for short periods of time, with the last incremental extension expiring in August 2001. At others times, including currently, the export licensing system created under the authority of EAA has been continued by the invocation of the International Emergency Economic Powers Act (IEEPA)( P.L. 95-223 ). The EAA is the statutory authority for the Export Administration Regulations (EAR), which are administered by the Bureau of Industry and Security (BIS) located in the Department of Commerce. These regulations establish the framework for regulating exports of dual-use, potentially sensitive commodities, software, computers, and technology. Exports are restricted by item, country, and recipient entity. The EAA, which was written and amended during the Cold War, focuses on the regulation of exports of those civilian goods and technology that have military applications (dual-use items). Export controls under the EAA were based on strategic relationships, threats to U.S. national security, international business practices, and commercial technologies many of which have changed dramatically in the last 20 years. Some Members of Congress and most U.S. business representatives see a need to liberalize U.S. export regulations to allow American companies to engage more fully in international competition for sales of high-technology goods. Other Members and some national security analysts contend that liberalization of export controls over the last decade has contributed to foreign threats to U.S. national security, that some controls should be tightened, and that Congress should weigh further liberalization carefully. This report discusses the Export Administration Act in terms of its evolution in the 20 th century, its major features including the types of controls authorized by the act, the Commerce Control List and export licensing procedures, and issues concerning the maintenance of export controls under IEEPA. It then highlights several controlled commodities that have been featured prominently in export control discussions. Finally, it discusses competing business and national security perspectives concerning several of more contentious themes in the export control debate: the controllability of technology, the effectiveness of multilateral control regimes, the organization of the export control system, and the impact of export controls on the U.S. economy and business. Export controls in time of war have been an element of U.S. policy for almost one hundred years. The end of WWII, however, ushered in a new era in which export control policy would become an extensive peacetime undertaking. The start of the cold war led to a major refocusing of export control policy on the Soviet-Bloc countries. Enactment of the Export Control Act of 1949 (P.L. 81-11) was a formal recognition of the new security threat and of the need for an extensive peacetime export control system. The 1949 Act identified three possible reasons for imposing export controls. Short-supply controls were to be used to prevent the export of scarce goods that would have a deleterious impact on U.S. industry and national economic performance. Foreign policy controls were to be used by the President to promote the foreign policy of the United States. The broad issues of regional stability, human rights, anti-terrorism, missile technology, and chemical and biological warfare have come to be controlled under this rubric. National security controls were to be used to restrict the export of goods and technology, including nuclear non-proliferation items, that would make a significant contribution to the military capability of any country that posed a threat to the national security of the United States. Coincident with the establishment of the post-war U.S. export control regime was the establishment of a multilateral counterpart involving our NATO allies. The large amount of critical technology being transferred from the United States to the NATO allies, and the growing capability for technological development by the allies themselves required the establishment of a multilateral control regime. Toward this end, the Coordinating Committee for Multilateral Export Controls (CoCom) was established in 1949. CoCom controls were not a mirror image of U.S. controls but generally did reflect a uniformly high level of restrictions. With little change in the perceived threat, the Export Control Act was renewed largely without amendment in 1951, 1953, 1956, 1958, 1960, 1962, and 1965. With the onset of the U.S.-Soviet era of "detente" in the late 1960s, however, the first serious reexamination and revision of the U.S. export control system occurred. At this time, the growing importance of trade to the U.S. economy and those of our allies began to exert significant political pressure for some liberalization of export controls. Congress passed the Export Administration Act of 1969 to replace the near-embargo characteristic of the Export Control Act of 1949. The continued shift of policy toward less restrictive export controls continued in the renewal of the act in 1974 and 1977. The act was comprehensively rewritten in 1979, and this act forms the basis of the export control system today. It was amended in 1985, and some moderate further liberalization occurred in the following years. The collapse of the Soviet Union in 1989, an event some have partially attributed to the success of U.S. cold war export control policy, marked a dramatic change in the nature of the external threat the United States. Beginning with the George H.W. Bush Administration, the export control system has been reduced in scope and streamlined, but the basic structure of the law remains intact. There are many who see a need to revamp the act, whether to enhance exports, to shift the focus to current national security threats, or to increase penalties for violations. The dissolution of CoCom in 1994 and its replacement by the Wassenaar Arrangement in 1997, also significantly changed the export control environment. This new multilateral arrangement is more loosely structured than CoCom and members do not have the authority to block transactions of other members. Generally more liberal control practices abroad raise important questions about the ultimate effectiveness of U.S. export controls (under either the current or a revised EAA) in achieving national security objectives and the fairness of unilateral controls to American industry. Congress has not been able to agree on measures to reform the Export Administration Act that regularly have been introduced since the 101 st Congress. The export control process was continued from 1989 to 1994 by temporary statutory extensions of EAA and by invocation of the International Emergency Economic Powers Act (IEEPA). Thereafter, export controls were continued for six years under the authority of Executive Order No. 12924 of August 19, 1994, issued under IEEPA authority. Many of those who favor reforming the act, whether to liberalize or to tighten controls, contend that operating under IEEPA imposes constraints on the administration of the export control process and makes it vulnerable to legal challenge, thus undermining its effectiveness. Legislation passed by the House and Senate and signed by the President on November 13, 2000 ( P.L. 106-508 ) extended the EAA of 1979 until August 20, 2001, temporarily removing the need to operate the export control system under IEEPA powers. Since then, export control authority has again been operating under IEEPA provisions pursuant to Executive Order 13222, issued August 17, 2001. Legislation to rewrite the Export Administration Act has been introduced in the last several Congresses. In the 104 th Congress, the House passed the Omnibus Export Administration Act of 1996 ( H.R. 361 ) on July 16, 1996, after hearings and consideration by the Committee on International Relations, the Committee on Ways and Means, and by the Committee on National Security. On July 17, 1996, the bill was received by the Senate and referred to the Committee on Banking, Housing and Urban Affairs, which held a hearing but took no further action. Export control legislation ( H.R. 1942 ) was introduced in the 105 th Congress, but no action was taken. In the 106 th Congress, the Export Administration Act of 1999 ( S. 1712 ) was introduced by Senator Michael P. Enzi. On September 23, 1999, the Senate Banking Committee voted unanimously (20-0) to report this legislation to the Senate floor ( S.Rept. 106-180 ). However, action by the Senate on S. 1712 was not taken due to the concerns of several Senators about the bill's impact on national security. Export control legislation was again introduced in the 107 th Congress. On January 23, 2001, Senator Enzi introduced the Export Administration Act of 2001 ( S. 149 ). Hearings were held on this legislation by the Senate Banking Housing and Urban Affairs Committee in February 2001, and the measure was reported favorably for consideration by the Senate by a vote of 19-1 on March 22, 2001 ( S.Rept. 107-10 ). The Senate debated the legislation on September 4-6, 2001, and it passed with three amendments by a vote of 85-14. This bill was similar though not identical to S. 1712 , introduced by Senator Enzi in the 106 th Congress. The House International Relations Committee held hearings on EAA and export controls on May 23, June 12, and July 11, 2002. The House version of the Export Administration Act, H.R. 2581 , was introduced on July 20, 2001, by Representative Benjamin Gilman. As introduced, it was identical to S. 149 , except for the additions of provisions related to oversight of nuclear transfers to North Korea. At the markup session on August 1, the House International Relations Committee passed the legislation with 35 amendments. The House Armed Services Committee (HASC) and the House Permanent Select Committee on Intelligence(HPSCI) received H.R. 2581 through sequential referral. On March 6, 2002, HASC further amended H.R. 2581 and reported out the legislation by a vote of 44-6 ( H.Rept. 107-297 ). HPSCI held hearings on the legislation but did not alter it. The legislation received no further consideration in the 107 th Congress. The Administration supported S. 149 and opposed House attempts to revise it. In the 108 th Congress, Representative Dreier introduced EAA legislation ( H.R. 55 ), which was identical to S. 149 , but no action was taken on it. The National Defense Authorization Act (NDAA) has also been used periodically as a vehicle to attempt to amend the export control regime. In 2004, the House version of NDAA 2005 ( H.R. 4200 ) contained two export control-related provisions that would have affected dual-use export controls. The first (Sec. 1404) would have required a license for dual-use goods controlled under the Export Administration Regulations (EAR) for technology and items contained in the Militarily Critical Technology List (MCTL), a list compiled by the Department of Defense (DOD) (see p. 6). The provision is in response to a March 2004 DOD study, which noted that several MCTL technologies were not controlled under the EAR or the International Traffic in Arms Regulations (ITAR). The second provision (Sec. 1405) would have required that exporters obtain licenses for items controlled under the EAR or the ITAR to a destination if that destination had previously exported such items to China. In addition, the granting of the license would be conditional on the written assurance of the foreign government or entity not to transfer the licensed item without the written consent of the President. The House NDAA report ( H.Rept. 108-491 ) expresses concern that military embargoes on China imposed after the Tiananmen Square massacre may be repealed which may lead to the transfer of such U.S. goods or technology to China. However, neither of these provisions were contained in the conference report ( H.Rept. 108-767 ) signed by the President on October 28, 2004. In the 109 th Congress, a bill to revise and extend the Export Administration Act was introduced by Representative Henry Hyde on December 16, 2005, and was referred to House International Relations Committee. It was not a comprehensive overhaul of 1979 EAA, but rather one that addressed penalties, enforcement, and the relation of the United States to multilateral control regimes. According to an administration official, the legislation reflected "targeted changes ... that all sides can be supportive of." The bill also would have extended the expired EAA for two years from the date of enactment, and provided authorization of appropriations for export control activities. This bill did not receive consideration in the 109 th Congress. No comprehensive legislation to rewrite or reauthorized the EAA was introduced in the 110 th Congress. Legislation was introduced that sought amend the enforcement and penalty structure of the Act ( S. 2000 , Dodd; H.R. 6828 , Sherman/Manzullo), to integrate export control information into electronic filing of export data under the Automated Export System (AES) ( H.R. 6828 ), and to target countries of diversion concern ( S. 3445 , Dodd/ H.R. 7112 , Berman; H.R. 6828 ). H.R. 6828 also would have required the GAO to conduct an investigation of BIS' validated end-user program. S. 2000 and parts of other legislation reflected the draft legislation that the Administration submitted to Congress on April 24, 2007. Only S. 3445 / H.R. 7112 was acted upon in the 110 Congress; S. 3445 was reported out of the Banking, Housing, and Urban Affairs Committee on August 1,2008 ( S.Rept. 110-443 ), but received no floor consideration. H.R. 7112 was both introduced and passed in the House under suspension of the rules on September 26, 2008. On July 31, 2009, Representative Sherman introduced the Export Control Improvements Act ( H.R. 3515 ), co-sponsored by Representative Manzullo and Representative A. Smith, that contains provisions on export controls enforcement, integration of export control data in the AES, and diversion control. The title on export enforcement is notable in that it does not amend the enforcement section of the expired EAA (Sec.12) and bring that section solely back in force as did H.R. 6828 , or amend it with a general renewal of the existing EAA as did S. 2000 . Rather, it provides additional enforcement authority for the Export Administration Regulations, which are maintained during the lapse of the EAA under authority of the International Economic Emergency Powers Act (IEEPA). The draft legislation would grant investigative authority to "any department or agency exercising any function under the EAR" to conduct investigations in the United States, and with the Secretary of Commerce, any investigation outside the United States. It would allow for the search, detention, and seizure of goods by Commerce in locations within the United States. With the concurrence of the Secretary of Homeland Security, the bill would authorize search, detention, and seizures at U.S. ports of entry or exit and overseas. It would also direct the Secretary of Commerce to publish and update best practices guidelines for effective export control compliance programs. The measure restates the confidentiality provisions of the 1979 Act. The bill includes new language governing the use of funds for undercover investigations and operations and would establish audit and reporting requirements for such investigations. Title 1 of H.R. 3515 seeks to integrate the various licensing requirements, embargoes and data collection rules imposed on exporters and shippers into the Automated Export System, an electronic version of the Shipper's Export Declaration (SED) that Customs requires be submitted prior to the clearance of a shipment for export. The export control provisions of this title center on programming the AES to include export control data, and providing notification to filers of possible export control issues with their exports, in order to prevent certain improper shipments. The issue of evasion of U.S. export controls through the diversion of sensitive goods through transhipment hubs remains of interest to the 111 th Congress. This issue first surfaced in 2006 with reports that computer circuits exported to the United Arab Emirates were diverted to Iran, where they were fashioned into bomb detonators and used in Iraq. This revelation initially resulted in licensing requirement on UAE-based Mayrow General Trading and six other entities. However, the focus quickly shifted to the UAE as a transhipment hub, and the status of its export control regime. Perhaps as a means to goad the UAE into action on export controls, the BIS proposed in February 2007 the creation of a 'Country Category C', which would be made up of countries of diversion concern. Country Category C designees would face stricter licensing requirements for products thought to have a high degree of diversion concern. No country was designated as belonging to Category C, and the rulemaking was never completed. H.R. 3515 would legislate the 'Category C' concept with regards to diversion to Iran. It would require the President within 180 days to identify all countries of concern with respect to transhipment, reexportation, or diversion of items subject to the EAR to Iran. A country could either be designated as a country of possible diversion concern or a country of diversion concern. If designated the former, the bill would require the Administration to initiate government-to-government contacts to assist in strengthening that country's export control system. If cooperation or improvements were not forthcoming within a 12-month period from that country, the Administration would be required to designate that country as a Destination of Diversion Concern. If the government of a country is directly involved with such transhipments, reexportations, or diversions, then the country would be listed forthwith as a country of diversion concern. Countries of diversion concern would be subject to additional licensing requirements, more stringent license review, and increased use of end-user checks. A final provision of the legislation would mandate an annual report on transfers of significant dual-use U.S. technology and technical information to countries and entities of concern. On August 13, 2009, President Obama announced the launch of a comprehensive review of the U.S. export control system to be conducted jointly by the National Security Council and the National Economic Council. While the full scope of this review has yet to be released, Defense Secretary Robert M. Gates announced key elements of the administration's agenda for reform of the export control system in a speech on April 20, 2010. In order to replace what he referred to as a "byzantine amalgam of authorities, roles, and missions scattered around different parts of the federal government," Secretary Gates proposed a 4-pronged approach that would create a single export control licensing agency for both dual-use and munitions exports, adopt a unified control list, create a single integrated information technology system, which would include a single database of sanctioned and denied parties, and would establish a single enforcement coordination agency. The administration's blueprint envisions that these changes would be implemented in three phases with the final tier requiring legislative action. In the first phase, preparatory work would be undertaken to harmonize the Commerce Control List (CCL) with the U.S. Munitions List (USML) and to establish a tiered control structure that would allow items to "cascade" from tier-to-tier as technology evolves. Standardized licensing processes among the control agencies would be developed, and an "Enforcement Fusion Center" to synchronize enforcement would be created along with a single electronic gateway to access the licensing system. Phase II would implement a harmonized licensing system with two identically structured tiered control lists. According to the White House fact sheet, implementing the harmonization and tiering of the control lists would "achieve a significant license requirement reduction." The factsheet also foresees that certain items would be moved from the munitions list to the dual-use list, for which congressional notification is required, unilateral controls on certain items would be examined, and consultations would take place with multilateral control regimes partners to add or remove multilateral controls on certain items. Under the proposal, the new export control system would debut in Phase III. A single licensing agency would be established; the two harmonized, tiered control lists would be merged with mechanisms for review and update; a Primary Enforcement Coordination Agency would consolidate enforcement activities; and a single IT system for licensing and enforcement would become operational. In his speech, Secretary Gates predicted that the 3-phase plan will "will unfold over the course of the next year." While the 3-phase plan provides a blueprint for a transition to a new export control system, it leaves many questions unanswered. Some of these proposals would require legislative action (e.g., merging the control lists; their creation is specifically mandated by statute). However, it is less clear whether legislative consent would be required to change the structure of one or both control lists, as is envisioned in Phase II. Changes to the structure of the two control lists would also entail multilateral consultations, as the CCL and USML are derived from the Wassenaar Dual-Use List and Munitions List, respectively. Changes in agency structure may also require legislation, although that it less clear. The placing of the proposed licensing agency, either within an existing Department such as Commerce, State, Defense, or Homeland Security, or as an independent entity, also has not been determined; each choice would doubtless claim proponents and detractors. Several principles and concepts have been common to the EAA and to efforts to renew and reauthorize the legislation. Generally, these provisions set out the types of export controls authorized (including national security, foreign policy and short supply controls), licensing procedures, the license review process, and penalty and enforcement procedures, the latter currently subject to IEEPA authority. Since the 1949 Act, U.S. dual-use export controls have restricted certain items based on national security, foreign policy, or for the effect of domestic exports on the national economy. These three categories form the basis by which items on the Commerce Control List (CCL) (see below, p. 7) and items subject to the Export Administration Regulations are controlled. In practice, the preponderance of items on the CCL are controlled for both national security and foreign policy reasons with different control standards determining the licensing policy of an item to a particular country. The 1979 Act restricted the export of goods or technology that could make a significant contribution to the military capabilities of any other country or groups of countries that would prove detrimental to the national security of the United States. National security control items fall under the National Security licensing requirement of the EAR. The list "Country Group D-1" presently serves as the list of controlled countries. Licenses for items controlled for national security purposes are reviewed on a case-by-case basis and are approved if it is determined the item is destined for civilian use or would not make a significant contribution to the military potential of the country of destination. Pursuant to EAA, the goods and technology to be controlled for national security purposes are identified by the Secretary of Defense and other appropriate agencies. The Secretary of Defense and the Secretary of Commerce (the Secretary) are obligated by the act to periodically review and revise the list. For this purpose, the Secretary of Defense maintains the Military Critical Technology List (MCTL). The national security based control list is also consistent with the control list of the Wassenaar Arrangement. U.S. national security controls, however, do not cover items that are covered under nuclear, chemical, biological or missile proliferation regimes, or to countries covered by anti-terrorism controls. These items and destinations are controlled for foreign policy purposes. Items controlled for national security purposes are subject to a foreign availability determination. Foreign availability exists when a good is available to controlled countries from sources outside the United States in "sufficient quantity and comparable quality" so that control of the item would be ineffective.(Sec. 5(f)(1)(a)) The 1979 Act charges the Secretary, in conjunction with the Secretary of Defense and other appropriate agencies, with determining on a continuing basis whether any item currently subject to export control for reasons of national security meets foreign availability status. Under EAA, a request to make a foreign availability determination can be made by a license applicant or through the initiative of the Secretary. If the Secretary makes a foreign availability determination, the item must be decontrolled, although the President can overturn that decision with a determination that decontrolling such items would be detrimental to the national security of the United States. In such case, the President is directed to enter negotiations with multilateral control partners to eliminate the availability in question. The bill also created an Office of Foreign Availability to gather data for the Secretary to make foreign availability determinations and to report to Congress on operations and improvements on the ability to assess foreign availability. This office no longer exists. However, the Office of Technology Evaluation is now tasked with conducting foreign availability determinations. In addition, the Emerging Technology and Research Advisory Committee (ETRAC) was created in September 2008. This committee was created to allow university experts to play greater role in helping determine which technologies should be in the control list, particularly for purposes of deemed exports. It is also meant to assist in streamlining the CCL to better reflect the narrow set of technologies that should be protected for national security reasons which are not readily available overseas. BIS conducted an overall systemic review of the CCL in 2007-8 and plans to review 1/3 of the CCL each year to create a three review cycle. On May 22, 2009, BIS issued a final rule lifting certain licensing requirements on uncooled thermal imaging cameras to 36 U.S. allied countries. This rule decontrolled low to mid-market night vision cameras, such as those used by firefighters, when they are not incorporated into military commodities and if they are not exported or reexported to be embedded in a civilian product. The rule also tightened export controls on higher-end thermal imaging cameras, unembedded camera cores, and thermal imaging cameras embedded in a military commodity. Exporters must report the transactions to BIS on a semi-annual basis. While this action does support the notion that present mechanisms can accommodate foreign availability concerns, some remain concerned at the length of time taken to resolve the issue. According to an industry source, "it took three years to get BIS engaged on the issue and another three years for BIS to reach interagency agreement with the [Defense Technology Security Administration]. 'It's a small step too late, but it's a step nonetheless.'" The concept of mass market status was proposed in EAA legislation introduced in the 106 th and 107 th Congress. Neither the 1979 EAA nor current regulations provides for decontrol of items based on mass market criterion. Mass market status was defined to apply to items produced or made available for sale in large volume or to multiple buyers. Under legislation introduced in the 106 th and 107 th Congress, the item's manner of distribution; its conduciveness to commercial shipping; or its usefulness for intended purposes without modification or service were also criteria considered when determining mass market status. This feature proved to have been a controversial part of the legislation, and was cited as a stumbling block in negotiations over the bill in the 107 th Congress with some Members arguing that its existence would provide for wholesale decontrol of sensitive items. The EAA authorizes the President to control exports for the purpose of promoting foreign policy objectives, complying with international obligations, or deterring and punishing terrorism. Currently, foreign policy controls are in place for anti-terrorism, regional stability, crime control, United Nations sanctions purposes, unilateral embargoes and sanctions, and non-proliferation objectives. This latter category includes adherence to multilateral non-proliferation agreements in the areas of chemical and biological weapons, nuclear proliferation, and missile technology. The EAA attaches limitations on the use of foreign policy controls. Foreign policy controls must be renewed on a yearly basis. It requires the President to clearly state objectives and criteria for controls to be reported to Congress. It directs the President to engage in negotiations to remove the foreign availability of items controlled for foreign policy purposes, and it requires the President to impose controls to comply with international obligations or treaties. Furthermore, it requires a license for the export of certain items to countries that support international terrorism. Additionally, foreign policy controls are not authorized for sales of medicine or medical supplies, donations of food, medicines, seeds, and water resource equipment intended to meet basic human needs, or for sales of food if the controls would cause malnutrition or hardship. Controls on sales of agricultural products and medicines have been further amended by the Trade Sanctions Reform and Export Enhancement Act of 2000 (Title IX, P.L. 106-387 ). Controls based on the end-use or end-user of an item (also known as catch-all controls) are also administered as foreign policy controls. They were introduced under the Enhanced Proliferation Control Initiative (EPCI) of 1991, and they are contained in Part 744 of the EAR. Catch-all controls require a license for export or reexport of any item, not just specifically controlled items, if the applicant knows or is informed by BIS that item will be used for nuclear, missile, chemical or biological proliferation activities. The Bureau of Industry and Security (BIS) maintains an end-user list of entities requiring licenses subject to EPCI. Current regulations prescribe a presumption of denial for licenses to certain entities in Russia, China, Pakistan, India, and Israel and to foreign terrorist organizations as designated by the Secretary of State. The 1979 EAA authorized restriction on the export of goods and technology to protect domestic industry from shortages of scarce materials and the potential inflationary impact of foreign demand. Few short-supply controls remain in force; they include restrictions on exports of crude oil, petroleum derivatives, unprocessed western red cedar, and the export of horses by sea. The EAA legislation proposed in the 107 th Congress did not provide for short-supply control authority. Within the Department of Commerce, the Bureau of Industry and Security administers the license application process. In FY2008, BIS reviewed 21,213 applications with a total value of approximately $72.1 billion, which included $50.2 billion in licenses for crude oil exports in return for refined petroleum. The value of dual-use technology licenses, approximately $21.9 billion, represented 1.7% of total U.S. exports in FY2008. BIS approved 17,945(84%), denied 177 (1.0%), and returned 3,171 (15%) license applications. Most applications for licenses are referred to other government agencies for evaluation, extending the length of the review process. The average processing time for referred license applications was 27 days, down from 28 days in FY2007. China was the largest destination for controlled goods in FY2008 with 1,990 licenses approved with a value of $2.7 billion, approximately 3.7% of the value of total exports to China that year. The greatest number of approved license applications for one commodity to all destinations in FY2008 was for chemical manufacturing facilities and equipment, accounting for 2,212 applications with a value of $294 million. The 1979 EAA directed the Secretary of Commerce (Secretary) to create a control list, known in the Export Administration Regulations as the Commerce Control List). The CCL includes items controlled for national security, foreign policy, and short-supply purposes. Under foreign policy controls, it incorporates the control lists of the multilateral non-proliferation regimes to which the U.S. adheres. The CCL is the list of specific goods, technology, and software that are controlled by the EAR. The CCL is composed of ten categories of items: nuclear materials, facilities, and equipment; materials, organisms, microorganisms, and toxins; materials processing; electronics; computers; telecommunications and information security; lasers and sensors; navigation and avionics; marine; and propulsion systems, space vehicles, and related equipment. Each of these categories is further divided into functional groups: equipment, assemblies, and components; test, inspection, and production equipment; materials; software; and technology. Each controlled item has an export control classification number (ECCN) based on the above categories and functional group. Each ECCN is accompanied by a description of the item and the reason for control. Currently, there are about 500 ECCN listings. In addition to discrete items on the CCL, nearly all U.S.-origin commodities are "subject to the EAR." This means that any product "subject to the EAR" may be restricted to a destination based on the end-use or end-user of the product. For example, a commodity that is not on the CCL may be denied if the good is destined for a military end-use, or to an entity known to be engaged in proliferation. In addition, items on the CCL often are eligible for license exceptions, a practice that, while not requiring prior approval for an export, vests exporters with certain due diligence and record-keeping requirements related to a given transaction. Yet some products, even if shipped to a friendly nation, will require a license due to the high risk of diversion to an unfriendly destination or because of the controversial nature of the product. A commodity jurisdiction (CJ) is used to determine whether a product is considered a dual-use item or a munition, and thus the regulatory regime that will apply to the product. CJs are determined by the Directorate of Defense Trade Controls at the Department of State. Given the more restrictive nature of defense controls, some exporters would like their products to be classified a dual-use goods and may submit their product for a BIS commodity classification. Under the commodity classification process, the exporter requests from BIS a classification for an export item if that item does not correspond to an existing CCL listing. As the exporter is making a calculated judgment that the item belongs under EAR jurisdiction by making this request, BIS is required to refer these requests to State and Defense under certain referral criteria promulgated in 1996. However, this has not always happened. Commerce was criticized by the General Accounting Office (GAO) for the low number of classifications the agency referred and the lack of criteria for referring classification requests to State and Defense. In a follow-up report, GAO found that out of 5,370 commodity classification requests processed in 2005, only 10 were referred to State and Defense, and that the development of renewed referral criteria with State and Defense had not been undertaken. In 2008 GAO reiterated, Such jurisdictional disagreements and problems are often the result of minimal or ineffective coordination between the two departments and the departments' differing interpretations of the regulations. Despite our recommendations to do so, the two departments have not yet come together to resolve these jurisdictional disputes or develop new processes to improve coordination. Until these disagreements and coordination problems are resolved, exporters--not the government--will continue to determine which restrictions apply and, therefore, the type of governmental review that will occur. The EAA and the implementing Export Administration Regulations (EAR) establish policies and procedures for the review of license applications and the resolution of interagency disputes. Procedures currently employed were created by Executive Order 12981, as amended, of December 6, 1995. These procedures confer on the Secretary of Commerce (the Secretary) the power to review and to determine the disposition of export licenses. The Departments of State, Defense, and Energy have authority to review any licenses submitted, and the Secretary may refer licenses to others as he deems appropriate. These agencies may waive their right to review license applications for certain commodities or to certain destinations. Within nine days of a license application's registration, the Secretary must seek additional information, refer the application to other agencies, assure the security classification is correct, return the application if a license is not required, grant the application, or notify the applicant of denial. In case of review by another agency, the reviewing agency must request any additional information from the Secretary within 10 days. After reviewing the file, the reviewing agency may request additional information which the Secretary shall promptly request from the applicant. Within 30 days of receipt of the application, or of requested review information, the agency must recommend approval or denial of the application, and provide regulatory or statutory justification for a denial. If an agency fails to provide a recommendation within 30 days, the agency is deemed to have no objection to the decision of the Secretary. However, the license application is subject to several actions that can 'stop the clock' on the license application. The 1995 Order created a three-level interagency dispute resolution mechanism. The top tier of this structure is the Export Administration Review Board (EARB), an entity itself created by Executive Order in 1970. The Board consists of the Secretary, who serves as Chair, and the Secretaries of State, Defense, and Energy. The Chairman of the Joint Chiefs of Staff and the Director of Central Intelligence are non-voting members. The Board may also invite the heads of other agencies to participate as appropriate. Under the EARB is the Advisory Committee on Export Policy (ACEP), which consists of the Assistant Secretary for Export Administration, who serves as Chair, as well as the relevant assistant Secretaries and appropriate officials from the agencies represented in the EARB. The Operating Committee (OC) of the ACEP is the third tier which is made up of representatives of the departments listed above. The Chair is selected by the Secretary of Commerce and serves as the Executive Secretary of ACEP. The dispute resolution process begins with the OC. The Chair reviews the recommendations of the examining departments and informs them of his decision within 14 days of the deadline for receiving agency recommendations. Any reviewing department may appeal the decision of the Chair to the ACEP. An appeal may be made within five days by an appointee of the President and must state the statutory or regulatory basis for the appeal. The ACEP members review recommendations and information and vote on the application within 11 days of such an appeal. Within five days of a majority decision of the ACEP, a department head of a dissenting agency may appeal the decision to the Secretary. Within 11 days of such an appeal, the EARB must decide by majority vote on the disposition of the application. A member of EARB may appeal this decision to the President within five days of the application. The interagency appeal process must be completed within 90 days of the registration of the application. However, the Order does not set a time frame for Presidential consideration of a license decision. BIS's denial of an export license must be supported by the statutory and regulatory basis for the denial, giving specific considerations and modifications that would allow BIS to reconsider an application. An explicit appeal procedure is specified in the EAR. One possible basis for appeal is an assessment of foreign availability (see above). If the item in question can be shown to be readily available from a non-U.S. source in sufficient quantity and of comparable quality then a license denial may, in some cases, be reversed. In FY2008, BIS reported that 422 cases were escalated to the OC, and that a further 20 were examined by the ACEP. When the 1979 EAA first expired in September 1990, President George H.W. Bush extended existing export regulations by executive order, invoking emergency authority contained in the International Emergency Economic Powers Act (IEEPA). As required by IEEPA, the President first declared a national emergency "with respect to the unusual and extraordinary threat to the national security, foreign policy and economy of the United States" posed by the expiration of the act. IEEPA-based controls were later terminated during two temporary EAA extensions enacted in 1993 and 1994 as Congress attempted to craft new export control legislation. After the second extension expired in August of 1994, President Clinton reimposed controls under IEEPA. During this period, a major restructuring and reorganization of export control regulations was published as an interim rule in the March 23, 1996 Federal Register . On November 11, 2000, President Clinton signed legislation to extend the authority of the 1979 Act until August 20, 2001, when emergency controls were renewed by President George W. Bush pursuant to Executive Order 13222. Several deficiencies have been noted in maintaining export controls under IEEPA authority: The police power of enforcement agents lapsed with the EAA. Under IEEPA, these agents must obtain Special Deputy U.S. Marshal status in order to function as law enforcement officers, a complication that consumes limited resources better used on enforcement. IEEPA does not authorize the President to limit the jurisdiction of federal courts and thus does not permit him to extend the EAA's general denial of judicial review. In addition, IEEPA does not have an explicit confidentiality provision to authorize protection from public disclosure of information pertaining to the export license applications and enforcement. The IEEPA does not explicitly authorize the executive to implement provisions to discourage compliance with foreign boycotts against friendly countries. It has been argued that the United States sends the wrong message to other countries by not enacting appropriate legislation. Although the United States has been urging countries such as Russia, Kazakhstan, Ukraine, and China to strengthen their export control laws and implementing regulations, goes the argument, U.S. export controls laws have expired and U.S. credibility is diminished by its lack of a statute. In addition, penalty authorities under IEEPA were substantially lower than under the EAA and thus had less of a deterrent effect. However, the International Emergency Economic Powers Enhancement Act ( P.L. 110-96 ), signed by President Bush on October 16, 2007, raised criminal penalties to $1 million (up from $50,000 previously) or up to 20 years' imprisonment for natural persons, or both. The act also raised civil penalties to $250,000 from $50,000 previously. Equivalent penalties under the EAA limit civil penalties to $10,000, or $100,000 for violations involving national security controls, and criminal violations to $250,000 and 10 years' imprisonment for individuals and $1 million or 5 times the value of exports for firms. Controversial exports have included telecommunications and advanced electronic equipment, precision machine tools (especially computer assisted machines), guidance technology (including Global Positioning System technology), aerospace and jet engine technology, synthetic materials (especially high-strength, light-weight, heat- and corrosion-resistant materials), specialized manufacturing and testing equipment (including mixers, high temperature ovens, heat and vibration simulators). In the last few years, congressional attention has focused on the following goods and technologies. These technologically advanced computers can perform multiple, complex digital operations within seconds. Sometimes also called supercomputers, HPCs are actually a wide range of technologies that also include bundled workstations, mainframe computers, advanced microprocessors, and software. Until recently, the benchmark used for gauging HPC computing performance was a metric known as composite theoretical performance (CTP), measured in millions of theoretical operations per second (MTOPS). The actual MTOPS performed by an HPC over a period of time can vary, based on which operations are performed (some can take longer than others or can be performed while other operations are taking place) and the real cycle speed of the computer. However, the Wassenaar Arrangement approved a new standard for calculating computing power in December 2005, which was incorporated into a BIS final rulemaking on April 24, 2006. The new standard, called adjusted peak performance (APP), is the "adjusted peak rate at which digital computers perform 64-bit or larger floating point additions and multiplications," and is measured by a metric known as "weighted teraflops"(WT). The control level is set at 0.75 WT, a level which BIS states "continues to control high-end proprietary HPCs, such as those used by the Department of Defense and the Department of Energy for advanced research, development, and simulation." This level replaces the 190,000 MTOPS benchmark level of January 2002. The level for computer software and technology is set at 0.04 WT and for computer development and production technology at 0.1 WT. Since the advent of HPC technology, there have been restrictions on U.S. exports. However, some advocates have maintained that because the computing capabilities of HPCs have advanced so rapidly, and due to the foreign availability of models comparable to some of those produced in the United States, export restrictions of HPCs are neither practical or enforceable. During the Clinton Administration, HPC export thresholds—or the amount of MTOPS capability that an HPC would need to require a license—were raised several times. The last change to the MTOPS level was in January 2002, when the Bush Administration raised the threshold for HPC exports to Tier 3 countries to 190,000 MTOPS, up from 2,000 MTOPS in 1995. (This process of decontrol has had a significant regulatory impact on BIS. It reports that in 1993 over 11,000 (42% of total license applications that year) were for computer assemblies and hardware; by 2003, that number had dropped to 14 license applications for the category that year.) Despite the conversion to the WT metric, changes in the control level are still subject to the notification requirements of Title XII (B) of Division A of the National Defense Authorization Act of 1998 (NDAA98), which allows implementation of the new performance level 60 days after a report has been submitted to Congress. The National Defense Authorization Act of 1998 imposed special conditions on the export of high performance computers. This Title (a) requires the prior notification requirement for exports of HPCs above the MTOPS threshold to Tier III countries. Under this provision of NDAA, exports of these HPCs are subject to the approval of the Secretaries of Commerce, Defense, Energy, and State; (b) imposes post-shipment verification requirements for these HPCs; and (c) imposes the requirement to notify Congress of an adjustment in the MTOPS threshold levels. Each version of EAA in the 107 th Congress provided for the repeal of NDAA98 provisions. Encryption is the process of encoding electronic messages to transfer important information and data securely. "Keys" are needed to unlock or decode the message. Encryption is an important element of e-commerce security, however this technology is also central to cryptography and could affect military code-breaking capabilities. The increased civilian importance of encryption technology resulted in the transfer in control authority of certain encryption technology from the Department of State to the Department of Commerce by Executive Order 13026 on November 16, 1996. Since that time, there have been several decontrols of encryption items and technology. The result of these actions has been the progressive decontrol of "retail" or "mass market" encryption technology. Currently, retail encryption products and technology can be exported to western countries , and to non-governmental end-users in other countries through a license exemption that requires notification of the transaction. Licenses for encryption products and technology continue to be required for countries covered by anti-terrorism (AT) controls. Stealth design incorporates materials, shapes, and structures into a functional system to protect it against electronic detection. Stealth technology falls into two categories. Certain stealth materials can deflect an incoming radar signal to neutral space thus preventing the radar receiver from "seeing" the object. Conversely, other materials may absorb incoming radar signals preventing them from reflecting back to the receiver. Stealth related commodities are sensitive from an export control perspective because some materials and processes involved have civil applications that make it difficult to control dissemination and retain U.S. leadership in this technology. Concerns over the potential export of this material led the Department of State to reclassify certain stealth-related technology as munitions in the 1990s. Congress has debated the issues of how strictly to control exports of commercial communications satellites and whether monitoring of foreign launch operations has been effective in preventing disclosures of missile secrets. In 1998, the Cox Committee found that U.S. satellite manufacturers provided missile design information and skills to China through the improper transfer of launch failure analysis. Exports of satellites were licensed by the Department of Commerce from late 1996 until March 1999. In October 1998, Congress returned the authority, effective March 15, 1999, to license exports of commercial communications satellites to the Department of State which had traditionally licensed missile technology exports. The satellite industry claims that this transfer has led to licensing delays and lost sales resulting from regulatory uncertainty, and they have lobbied to reverse export controls to Commerce. Satellites launched for commercial communication purposes may contain embedded sensitive technology such as positioning thrusters, signal encryption, mating and separation mechanisms, and multiple satellite/reentry vehicle systems. As stand-alone items, these technologies are controlled under the U.S. Munitions List. The Foreign Relations Authorization Act of 2010-11 ( H.R. 2410 ), passed by the House on June 10, 2009, contained a provision that would grant the President flexibility to transfer commercial satellite and satellite components from the USML back to the CCL with the approval of the congressional committees of jurisdiction. This category covers manufacturing technology such as lathes and other manufacturing equipment used to produce parts for missiles, aircraft engines and arms. This capital equipment is increasingly sophisticated, employing advanced computer software and circuitry. The industry has been vocal in claiming that its competitive position has been hampered by the lack of multilateral controls over sales of this equipment, especially the lack of consensus on controls regarding China. On July 21, 2009, the BIS Office of Technology Evaluation released a critical technology assessment of 5-axis simultaneously controlled machine tools which found foreign availability for certain of these products in China and Taiwan and recommended their decontrol to these destinations. "Hot section" technology is used in the development, production and overhaul of jet aircraft both military and commercial. Technology developed principally by the Department of Defense is controlled by the U.S. Munitions List. However, technology actually incorporated in commercial aircraft is regulated by the Department of Commerce and falls under a separate foreign policy-based control category. During debates on EAA legislation in the 106 th Congress, several senators raised concerns about the possible decontrol of this technology and sought a "carve-out" of hot section and other sensitive technologies that would prevent such items from being decontrolled. The civilian aviation industry has long been concerned that the Directorate of Defense Trade Controls (DDTC), the agency within the Department of State that controls defense goods and technology, has been increasingly asserting jurisdiction over civilian aircraft parts and components. Section 17(c) of the EAA states, in part, that "standard equipment certified by the Federal Aviation Administration (FAA), in civil aircraft and is an integral part of such aircraft, and which is to be exported to a country other than a controlled country, shall be subject to export controls exclusively under this act. Any such product shall not be subject to controls under Section 38(b)(2) [licensing requirements] of the AECA." In the aftermath of the QRS-11 case, in which DDTC asserted jurisdiction over a non-FAA component of a commercial standby instrument system (CSIS) under the jurisdiction of Commerce, commercial suppliers have complained that in order not to run afoul of the ITAR, they must submit commodity jurisdiction for items they believe are covered by 17(c). On September 24, 2007, Representative Manzullo introduced legislation ( H.R. 3633 ) to clarify that civil aircraft equipment, parts, component, or technology eligible for export airworthiness approval under Federal Aviation Administration regulations are to be subject only to controls under the EAA. After negotiations with Congress and industry, DDTC released a new rulemaking clarifying the interpretation of Section 17(c) of the EAA. Under the regulation, Commerce will have jurisdiction over parts and components of civil aircraft when such components are standard equipment, covered by a civil aircraft type certificate issued by the Federal Aviation Administration, and is an integral part of the aircraft. For such parts and components not considered significant military equipment (SME), this means that suppliers will no longer have to submit the part or component for a commodity jurisdiction determination. Exports of technology, know-how, and non-encryption source code is "deemed" to have been exported when it is released to a foreign national within the United States. Such knowledge transfers are regulated by the Export Administration Regulations, which require that a license must be obtained by a U.S. entity to transfer technology to a foreign national in the United States if the same transfer to the home country of the foreign national would require a license. Deemed exports are not expressly mentioned in the 1979 EAA. House versions of EAA in the 107 th Congress sought to explicitly define deemed exports as exports falling under the jurisdiction of the act. Processing deemed export license applications has become a larger part of BIS activity. In FY2007, BIS reviewed 1,056 deemed export licenses (5.4% of the total licenses submitted to BIS) and reports that nearly 57% of deemed licenses reviewed were for Chinese nationals. In March 2005, BIS established a rule-making procedure in response to an Inspector General's (IG) report, which recommended that BIS alter the standard governing which foreign nationals are subject to export controls. Currently, foreign nationals are subject to export controls requirements based on their country of citizenship or permanent residency; however, the IG recommended that country of birth should be the standard used. According to the IG, foreign nationals from controlled destinations could access technology without scrutiny if they first establish permanent residency in a third country, and foreign nationals from controlled destinations often have dual nationalities. However, Under Secretary of Commerce David McCormick announced in December 2005 that deemed export controls would continue to be based on country of citizenship or permanent residency, not place of birth. In December 2007, BIS released the report of the Deemed Export Advisory Commission (DEAC), which was commissioned in September 2006 to conduct an independent assessment of the deemed export regulatory regime. The Commission recommended the establishment of a "trusted entity" program for academia and industrial entities to qualify for a streamlined deemed export application process. The Commission proposed an evaluation of an applicant's probable loyalties that would include consideration of an applicant's country of birth, prior country of residence, current citizenship, and an examination of a person's prior and present activities to determine eligibility for a deemed export license. The Commission also recommended streamlining certain terminology in the deemed export regulations and the establishment of an outside panel of experts to conduct an annual "sunset" review of technologies on the Commerce Control List. The DEAC recommendations were highly criticized by industry representatives and the research community with one group summing up the proposals as "unadministerable for the government and difficult-to-impossible to comply with for industry." BIS published a notice of inquiry in May 2008 seeking comment on the scope of technologies on the Commerce Control List subject to deemed export controls and on the criteria used to assess country affiliation for foreign nationals. While this inquiry has yet to result in a formal rulemaking, another DEAC recommendation, the Emerging Technologies and Research Advisory Committee (ETRAC) has begun to meet and has been grappling with these issues. A principal theme in debates on export administration legislation is the tension between commercial and national security concerns. These concerns are not mutually exclusive, and thus it is often difficult to characterize opposing camps. For example, nearly everyone favors reform of the current system, yet no one considers themselves opposed to national security. Generally, however, many who favor reform of the current export control accept the business perspective that such reform would assist U.S. business to compete in the global marketplace. Others view the issue more from a national security perspective. To this group, reform should be concerned less with the abilities of U.S. industry to export and more with effective controls placed on potential exports to countries that threaten the security of the United States, terrorists, violators of human rights, and proliferators of weapons of mass destruction. From these different perspectives, controversies arise regarding the controllability of technology, the effectiveness of multilateral regimes, the bureaucratic structure of the licensing process and the impact of export controls on the U.S. economy. The foreign availability and mass market provisions of EAA reauthorization legislation, and the underlying concept of the controllability of technology, have proved controversial in the EAA debate. Industry groups that have taken an active position on legislation to replace the 1979 EAA have considered the adoption of these provisions as a key benefit of potential EAA legislation. The foreign availability and mass market concepts are integral to their contention that the flow of technology cannot be effectively controlled, and that U.S. dominance of cutting-edge technology can no longer be assumed. According to their arguments, unilateral controls will not stop other countries from obtaining advanced technology. Advocates of this viewpoint claim that "countries of concern" will simply obtain this technology from other nations. Adherents to this view regard current multilateral controls on dual-use articles as ineffectual. From this perspective, only American business suffers from the unilateral nature of U.S. export controls. In the process, foreign business wins new markets or gains an incentive to enter new markets. According to the industry position, unilateral export controls are also becoming increasingly unworkable as the economy undergoes globalization. The current export control system is predicated on goods being manufactured or assembled in one country. In many industries, however, component parts are manufactured worldwide and are considered commodities. If these parts are not available from one source on a timely basis, they can be obtained elsewhere. Purchasing managers at Daimler Chrysler Aerospace, for example, reportedly have been instructed to reduce dependence on American components for defense and space technology products because of delays associated with American licensing procedures. Other participants in the export control debate are concerned about the mass market and foreign availability arguments advanced by industry proponents. Critics charge that the mass market standard would effectively nullify the whole U.S. control regime by decontrolling any item that met the criteria under the law. They assert that virtually any product, including dual-use items used for proliferation purposes, could qualify for mass market status. Similarly, as one non-proliferation advocate testified regarding EAA legislation in the 106 th Congress, the foreign availability criterion would allow the sale of "anything a controlled country can purchase from a rogue buyer." A related argument made by industry is that national security is enhanced by robust export industries. This argument is predicated on the changing nature of defense procurement, research and development. During the Cold War, the formative period of the current export control regime, the military conducted considerably technical research on its own and provided funds for research and development. Now that situation is largely reversed. The military now purchases many items 'off-the-shelf' and relies to a greater extent on commercial applications. Industry argues that it is in the national security to sell current technology to generate funds to develop future technology. If American firms are competitively hindered because of export controls, the argument goes, foreign firms will gain market share, increase profits, invest more in R&D, shrink and possibly surpass our technological lead. These circumstances, in turn, potential could affect the quality of the technology available for national security purposes. Thus, industry argues it needs a streamlined export process, one that will not needlessly impede exports. Critics of industry's national security position reject this argument. They maintain that the United States does not promote its national security by selling advanced technology to potentially hostile states. This technology, if sold to a regime of dubious stability, could be used against the United States or allies in the future. Proponents of this argument point to the case of Iraq, which received U.S. weaponry in the 1980s when Saddam Hussein was considered a useful counterweight to Iran. Subsequently, this technology was used against Kuwait and allied forces in the Persian Gulf War. Reliance on the civilian sector for R&D, they claim, is a policy decision brought about by declining defense budgets in the 1990s. Some further argue that R&D that advances defense capabilities should be funded within the Defense Department if it is necessary to maintain controls on technology to certain nations. Industry groups and some other observers have used the rapid rise in computing power as an illustration both of the uncontrollable nature of technology and the inability of the export control system to account for such innovation. According to one national security analyst, attempting to control computing power is not "feasible or effective." He maintains that the restraint of computer trade is self-defeating because it cedes markets and profits that could be used for R&D. Increasing computing speeds combined with networking advances have blurred the distinction between super-computers and commodity computers. Microprocessors that individually comply with export regulations can be linked together to create servers with MTOPS capabilities that breach export thresholds. If enough processors are linked together, they can create a parallel processing system with capabilities that approach those of a super-computer. The Defense Science Board noted that the ability to cluster commodity computers in order to multiply computing power erodes the ability to restrict access to high-performance computing, even if high-performance stand-alone machines can be controlled. Other observers believe the United States can restrict access to the highest computer technology by limiting exports. They maintain that American-made computers are perceived as superior, and thus carry greater cachet than products from other nations. They note that the purchase of an American-made computer product also buys superior networking and service, often at a better price. Control advocates maintain that these distinctions are significant, that qualitative differences are important. In addition, networking a parallel processing system, as those without access to advanced computing technology must do to increase computing capability, presents additional challenges distinct from those faced by engineers of commodity computers. One policy that has been attempted to monitor and verify the end-use of controlled goods is the post-shipment verification requirement (PSV) on the export of HPCs mandated by Sec 1213 of NDAA98 (see above). This section requires that a PSV be made for computers destined for computers controlled to tier III destinations, including China, Russia, India, Pakistan, Israel and other nations in areas of regional instability. Lawmakers have been especially concerned with exports of HPCs to the People's Republic of China. The GAO has reported that China has restricted access to facilities that contain U.S. HPC exports. It has also found that BIS has made limited efforts to monitor or to verify compliance with the terms and conditions specified by the export license. Reportedly, the difficulty in monitoring the end-use of HPC exports in China has been exacerbated by the close ties that Chinese state owned enterprises have with the Chinese military. The United States participates in several multilateral export control regimes. The principal multilateral regime related to dual-use goods and technology is the Wassenaar Arrangement (WA) on Dual-Use Goods and Munitions. The WA was created in 1996 and is the successor organization to the Coordinated Committee (CoCom), the Cold War era dual-use control regime that ended in 1994. The WA dual-use control list is generally consistent with U.S. CCL items subject to national security controls. The United States also participates in four proliferation related control regimes: the Australia Group (chemical and biological weapons and precursors); the Missile Technology Control Regime, and the Nuclear Suppliers Group. Generally, these groups are characterized by national discretion, a common control list, and regular reporting requirements. Each group has formulated a common control list and member nations control the exports of those goods under their own national laws, a policy know as national discretion. Unlike CoCom, however, these organizations do not perform a review function prior to the grant of a national export license. The regime's members do pledge disclosure of export licensing decisions, and pledge consultation on sensitive export licenses. Some groups adhere to a "no undercut" provision—that is, a member state will not license the sale of an item in which a license has been denied by another state. However, these groups operate by consensus and are hampered by limited institutional structures. Some observers contend that the Wassenaar Arrangement, in particular, is ineffective because it relies on consensus of member states. The necessity for consensus, critics charge, results in a level of control acceptable to all. Its minimal reporting requirements mandate notification only that an item has been sold, thus preventing effective pre-export consultation among member states. Industry representatives stress the necessity of effective multilateral controls. They argue that export controls are effective only if they are adhered to by all states capable of exporting a given technology. For example, the machine tool industry has been at the forefront in criticizing the unilateral nature of our export policies, especially concerning exports to China. It notes that there is no consensus among Wassenaar Arrangement countries on the proper limits of technology transfer to China. (Indeed, no country is explicitly targeted by Wassenaar.) Stringent domestic controls combined with minimal multilateral constraints only damage American companies, according to industry spokesmen. They fault the U.S. for having an overly rigorous licensing policy towards China, without noticeably pursuing a strategy to convince our allies to follow our lead. Proponents of tighter export restrictions note that America traditionally has taken the lead in export controls and non-proliferation efforts. These efforts included the original EAA, adopted in 1949, and the establishment of CoCom. They argue that efforts to strengthen CoCom's successor regime, the Wassenaar Arrangement, cannot succeed if Washington itself is loosening export restrictions. Thus, the United States must take the lead in order to convince other nations to follow the U.S. example. Adherents of this viewpoint argue that the successful negotiating strategy in these multilateral fora is to adopt controls first and then persuade other countries to follow suit. Hence in their view, an export control strategy pegged solely on the policies of other nations, negotiated by consensus, is ineffectual and harmful to national security. Both industry spokesmen and advocates of heightened export controls agree that the multilateral controls need to be strengthened. Yet, to do this requires consensus on which goods and which countries represent a threat. There does seem to be agreement among western nations to restrict dual-use items to a limited number of 'countries of concern,' yet consensus breaks down with regard to other states, notably China. The export control dilemma in this context becomes clear. Without consensus on a particular target country, the question becomes whether the United States should impose controls unilaterally. One then needs to determine either: which non-proliferation or other foreign policy goals are sufficiently important to offset possibly damaging American business, and possibly costing American jobs; or how large an economic benefit would justify risking important national security goals. Debate over export controls has often focused on China. The dilemma that encapsulates U.S. export control policy to China is how to benefit from the potentially vast Chinese market and low Chinese production costs while minimizing the risk to U.S. security interests of exporting sensitive dual-use technologies to China. Some representatives of the business community have argued that U.S. export control policy toward China is too stringent. They claim such controls have hampered technology transfers to China in the past few years while the controls of U.S. allies have not. They reported that Chinese companies will not ask U.S. companies to bid on sales because of the delays associated with the U.S. licensing process. As one industry spokesman has testified: "The result has been that the Chinese are denied nothing in terms of high technology, but U.S. firms have lost out in a crucial market. This serves neither our commercial nor our strategic interests." However, other analysts and several Members of Congress have expressed grave concerns about China's dual-use technology acquisitions. They cite findings of the Cox Commission that China evaded existing export controls to illegally obtain missile design and satellite technology and that China has circumvented end-user controls on high-performance computers. According to this view, the Commission's findings show the need for both tightened controls and greater enforcement of export controls against China. In addition, China has been implicated in several nuclear, missile, and chemical proliferation activities. On June 19, 2007, BIS published the final rule entitled "Revisions and Clarification of Export and Re-export Controls for the People's Republic of China" (72 Fed. Reg. 33646). The final rule is composed of three parts: a new licensing requirement for certain products for military end-use in China, a validated end-user (VEU) program, and a requirement to obtain an end-user statement for certain licensed products. The proposed rule has been driven by the concern that the export of commercial technology to certain end-users is undermining the arms embargo that the United States and others maintain against China. Others, including industry, have questioned the scope and efficacy of these new controls. The new licensing policy has two distinct components: the establishment of new military end-use controls for the PRC and a revised License Review Policy for national security controlled items destined for the PRC. The aspect that has received the most attention is the establishment of new military end-use controls on 20 product categories consisting of 31 export control classification numbers (ECCN). Currently, these items are controlled primarily for anti-terrorism reasons, thus a license is required only for exports to countries determined to be state sponsors of terrorism (Cuba, Iran, North Korea, Sudan, Syria). Under the new rule, BIS will require a license for the export, reexport, or in country transfer of these items if the exporter knows, has reason to know, or is informed by BIS that the item is or may be intended for military end-uses in the PRC. The final rule also revises the long-standing licensing policy for National Security controlled items destined for the PRC contained in the EAR, Part 742.4(b)(7). It clarifies that there is a presumption of denial for license applications to export, reexport, or transfer items that would make a direct and significant contribution to the PRC's military capabilities in certain key weapons systems. The second component of the Final Rule also increases the exemption threshold for obtaining End-Use Statements (EUS) from the Ministry of Foreign Commerce (MOFCOM) of the PRC. The PRC requires that MOFCOM issue an EUS before BIS can conduct a pre-license check or post-shipment verification for an export. A U.S. exporter must request that the importer obtain the EUS for a license application because the BIS inspection is often a statutory or regulatory pre-requisite for approving some applications. The rule increases the amount of the value of the license exempted from the EUS requirement from $5,000 to $50,000 for most goods to the PRC. However, it expands the EUS requirement to cover all license applications to the PRC reaching this threshold. Previously, EUS were required only for items under national security controls. The VEU is the third component of the China Rule. The VEU establishes a method by which trusted PRC civilian end-users can be nominated for the program, and, if approved by BIS, the eligible end-users may receive items eligible under the program without a license. The rule sets up an applications process by which an end-user can be nominated for the program. In approving a candidate for VEU status, the ERC will evaluate the entity's exclusive engagement in civilian end-use activities, its compliance record with U.S. export controls, its capability to comply with the recordkeeping requirements of the VEU authorization, agreement to on-site review prior to approval and subsequently to ensure adherence to VEU conditions, and its relationship with U.S. and foreign companies. On September 11, 2007, China's Minister of Foreign Commerce (MoFCom) announced that any company seeking VEU status would need authorization from MoFCom before allowing plant or records inspections. Not all items on the CCL are eligible for export under this program. Items controlled for crime control or missile technology by the EAR do not qualify for export under this program due to statutory reasons. In addition, not all items that are eligible for export under this program can be exported to all validated end-users. The approved VEU application will be accompanied by a list of items that can be exported to the end-user, and this list can be expanded or contracted by the ERC. Once approved , the VEU can import approved items from any exporter, not just the nominee. According to BIS, the proposal would streamline licensing for certain companies for whom exporters routinely request and receive licenses for the same product over time. Thus, resources that currently process these routine applications could be diverted to staff more problematic license applications. On October 2, 2007, BIS announced the expansion of the VEU program to eligible companies in India, and General Electric India was named as the first eligible company on June 17, 2009. On October 19, 2007, BIS announced the first five VEU companies: Applied Materials China, National Semiconductor, Boeing Hexcel AVIC I Joint Venture, Semiconductor Manufacturing International Corporation (SMIC), and Shanghai Hua Hong NEC Corporation (HHNEC). BIS reported that these companies had imported licensed goods valued at $54.3 million in 2006. In January 2008, the Wisconsin Project on Nuclear Arms Control charged in a report that two of the entities, AVIC I and HHNEC, present diversion risks through their corporate affiliations with government-owned companies that do business with the Chinese military. The Wisconsin Project also contend that some of these entities' affiliates have run afoul of U.S. proliferation sanctions and export control laws. Then BIS Undersecretary Mario Mancuso responded to the report by maintaining that the companies had a "demonstrable history of using U.S. technology in the past...We know a lot about these companies and know a lot about how they use the technologies they are authorized to receive through VEU. These technologies were previously available to these companies by license, and [the VEU] judgment was based on data, not conjecture." Controversy regarding the VEU has not abated. A GAO study of September 2008 recommended the suspension of the VEU program with China because BIS has not been able to reach a VEU-specific inspection agreement with China for conducting on-site reviews of validated end-users. Nor has the agency developed criteria for selecting candidates for on-sites, or the procedures for conducting the on-site review itself, according to GAO. Commerce notes that it has conducted checks under the pre-existing 2004 end-use verification understanding (EUVU). However, checks conducted under this system require the aforementioned MoFCom end-use statement, running counter to the trade facilitation rationale of the program, and if the companies do not voluntarily seek an EUS from MoFCom, then an inspection cannot take place. On January 13, 2009, BIS announced full implementation of the VEU to China "with agreement on procedures to ensure the program's secure and efficient operation." More recently, at a June 4, 2009, House Energy and Commerce Committee hearing, Representative Markey cited information from the Wisconsin Project claiming that another VEU approved entity, Aviza Technology China, shared an address with a state-owned firm that was sanctioned by the State Department in December 2006 for illicit sales to Iran and Syria. As noted earlier, the Bureau of Industry and Security (BIS) within the Department of Commerce (DOC) is responsible for regulating dual-use exports. However, other agencies also provide input into the licensing process. BIS consults with other members of the national security community on license applications and commodity classifications. The Defense Technology Security Agency in the Department of Defense conducts national security reviews for license applications referred from Commerce and State. The Department of Energy also reviews dual-use license applications referred by BIS for nuclear uses and nuclear end-users, and it and the Nuclear Regulatory Commission license exportation of nuclear materials. In addition, the Directorate of Defense Trade Controls (DDTC) at the State Department administers the International Traffic in Arms Regulations. Through the U.S. Munitions List, DDTC controls the export of weapons and military technology. Industry leaders identify several problems with the existing licensing system. First, overlapping jurisdiction between the Commerce and State Departments with regard to certain dual-use products makes it unclear where the exporters need to apply for licenses. Second, extended time periods required for license approval compromise the reliability of U.S. suppliers and make it hard for manufacturers and customers to plan ahead. Third, the licensing system does not reflect advances in technology, foreign availability of dual-use items, and the economic impact of export controls on the industrial base. Finally, there is no opportunity for judicial review of licensing decisions. Others consider foreign availability and economic impact to be important considerations, yet secondary to national security. Export administration officials claim that they conduct thorough, fair, and expeditious license reviews. Time is required to check proposed export items against lists of controlled items, check end users and end uses against lists of suspect recipients, and coordinate with several government agencies. Officials say they must be able to "stop the clock" to obtain additional information and investigate certain issues on a case-by-case basis to insure that sensitive technologies do not find their way into the wrong hands. Some analysts who see national security as the primary purpose of the export control regime question whether BIS belongs in the Department of Commerce. They claim that DOC's mission is mostly one of promoting exports and generally serving commercial interests. This, in some eyes, may create an institutional bias towards the granting of export licenses and skew the process against national security goals. Other analysts point to the full and equal participation of other agencies, particularly the Department of Defense, in the current structure to argue that such bias is unlikely to prevail.
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The 111th Congress may consider legislation to renew, modify, or reauthorize the Export Administration Act (EAA). On July 31, 2009, Representative Sherman introduced the Export Control Improvements Act (H.R. 3515), co-sponsored by Representative Manzullo and Representative A. Smith, that contains provisions on export controls enforcement, integration of export control data in the AES, and diversion control. The House Foreign Affairs Committee is also reportedly working to produce as comprehensive rewrite of the EAA. As part of the Administration's export control review, Defense Secretary Robert M. Gates has proposed creating a unified export control structure merging the dual-use and munitions export control regimes, some aspects of which may require legislative consent. Through the EAA, Congress delegates to the executive branch its express constitutional authority to regulate foreign commerce by controlling exports. The EAA provides the statutory authority for export controls on sensitive dual-use goods and technologies: items that have both civilian and military applications, including those items that can contribute to the proliferation of nuclear, biological, and chemical weaponry. The EAA, which originally expired in 1989, periodically has been reauthorized for short periods of time, with the last incremental extension expiring in August 2001. At other times and currently, the export licensing system created under the authority of EAA has been continued by the invocation of the International Emergency Economic Powers Act (IEEPA). EAA confers upon the President the power to control exports for national security, foreign policy or short supply purposes. It also authorizes the President to establish export licensing mechanisms for items detailed on the Commerce Control List (CCL), and it provides some guidance and places certain limits on that authority. The CCL currently provides detailed specifications about dual-use items including equipment, materials, software, and technology (including data and know-how) likely requiring some type of export license from the Commerce Department's Bureau of Industry and Security (BIS). BIS administers the Export Administration Regulations (EAR), which, in addition to the CCL, describe licensing policy and procedures such as commodity classification, licensing, and interagency dispute resolution procedures. In debates on export administration legislation, parties often fall into two camps: those who primarily want to liberalize controls in order to promote exports, and those who believe that further liberalization may compromise national security goals. While it is widely agreed that exports of some goods and technologies can adversely affect U.S. national security and foreign policy, some believe that current export controls can be detrimental to U.S. businesses and to the U.S. economy. According to this view, the resultant loss of competitiveness, market share, and jobs can harm the U.S. economy, and that harm to particular U.S. industries and to the economy itself can negatively impact U.S. security. Others believe that security concerns must be paramount in the U.S. export control system and that export controls can be an effective method to thwart proliferators, terrorist states, and countries that can threaten U.S. national security interests. Controversies have arisen with regard to particular exports such as high performance computers, encryption technology, stealth materials, satellites, machine tools, "hot-section" aerospace technology, and the issue of "deemed exports." The competing perspectives on export controls have clearly been manifested in the debate over foreign availability and the control of technology, the efficacy of multilateral control regimes, the licensing process and organization of the export control system, and the economic effects of U.S. export controls.
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On September 14, 2012, the President reported to Congress, "consistent with" the War Powers Resolution, that on September 12, 2012, he ordered deployed to Libya "a security force from the U.S. Africa Command" to "support the security of U.S. personnel in Libya." This action was taken in response to the attack on the U.S. "diplomatic post in Benghazi, Libya" that had killed four America citizens, including U.S. Ambassador John Christopher Stevens. The President added on September 13, 2012, that "an additional security force arrived in Yemen in response to security threats there." He further stated that: "Although these security forces are equipped for combat, these movements have been undertaken solely for the purpose of protecting American citizens and property." These security forces will remain in Libya and in Yemen, he noted, "until the security situation becomes such that they are no longer needed." On June 15, 2012, President reported to Congress "consistent with" the War Powers Resolution, a consolidated report regarding various deployments of U.S. Armed Forces equipped for combat. In the efforts in support of U.S. counterterrorism (CT) objectives against al-Qa'ida, the Taliban, and associated forces, he noted that U.S. forces were engaged in Afghanistan in the above effort were "approximately 90,000." With regard to other counter-terrorism operations, the President stated that the United States had deployed "U.S. combat-equipped forces to assist in enhancing the CT capabilities of our friends and allies including special operations and other forces for sensitive operations in various locations around the world. He noted that the "U.S. military has taken direct action in Somalia against members of al-Qa'ida, including those who are also members of al-Shabaab, who are engaged in efforts to carry out terrorist attacks against the United States and our interests." The President further stated that the U.S. military had been "working closely with the Yemini government to operationally and ultimately eliminate the terrorist threat posed by al-Qa-ida in the Arabian Peninsula (AQAP), the most active and dangerous affiliate of al-Qa'ida today." He added that these "joint efforts have resulted in direct action against a limited number of AQAP operatives and senior leaders in that country who posed a terrorist threat to the United States and our interests." The President noted that he would direct "additional measures against al-Qa'ida, the Taliban, and associated forces to protect U.S. citizens and interests." Further information on such matters is provided in a "classified annex to this report." Other military operations reported by the President include the deployment of U.S. combat-equipped military personnel to Uganda "to serve as advisors to regional forces that are working to apprehend or remove Joseph Kony and other senior Lord's Resistance Army (LRA) leaders from the battlefield and to protect local populations." The total number of U.S. military personnel deployed for this mission is "approximately 90," and elements of these U.S. forces have been sent to "forward locations in the LRA-affected areas of the Republic of South Sudan, the Democratic Republic of the Congo, and the Central African Republic." These U.S. forces "will not engage LRA forces except in self-defense." The President also reported that presently the United States was contributing "approximately 817 military personnel: to the NATO-led Kosovo Force (KFOR) in Kosovo." He also reported that the United States remained prepared to engage in "maritime interception operations" intended to stop the "movement, arming, and financing of certain international terrorist groups," as well as stopping "proliferation by sea of weapons of mass destruction and related materials." Additional details about these efforts are included in "the classified annex" to the President's report. Under the Constitution, war powers are divided. Congress has the power to declare war and raise and support the Armed Forces (Article I, Section 8), while the President is Commander in Chief (Article II, Section 2). It is generally agreed that the Commander in Chief role gives the President power to repel attacks against the United States and makes him responsible for leading the Armed Forces. During the Korean and Vietnam wars, the United States found itself involved for many years in undeclared wars. Many Members of Congress became concerned with the erosion of congressional authority to decide when the United States should become involved in a war or the use of Armed Forces that might lead to war. On November 7, 1973, Congress passed the War Powers Resolution ( P.L. 93-148 ) over the veto of President Nixon. The War Powers Resolution (WPR) states that the President's powers as Commander in Chief to introduce U.S. forces into hostilities or imminent hostilities are exercised only pursuant to (1) a declaration of war; (2) specific statutory authorization; or (3) a national emergency created by an attack on the United States or its forces. It requires the President in every possible instance to consult with Congress before introducing American Armed Forces into hostilities or imminent hostilities unless there has been a declaration of war or other specific congressional authorization. It also requires the President to report to Congress any introduction of forces into hostilities or imminent hostilities, Section 4(a)(1); into foreign territory while equipped for combat, Section 4(a)(2); or in numbers which substantially enlarge U.S. forces equipped for combat already in a foreign nation, Section 4(a)(3). Once a report is submitted "or required to be submitted" under Section 4(a)(1), Congress must authorize the use of forces within 60 to 90 days or the forces must be withdrawn. (For detailed background, see CRS Report R41199, The War Powers Resolution: After Thirty-Six Years , by [author name scrubbed] , and CRS Report RL31133, Declarations of War and Authorizations for the Use of Military Force: Historical Background and Legal Implications , by [author name scrubbed] and [author name scrubbed].) It is important to note that since the War Powers Resolution's enactment over President Nixon's veto in 1973, every President has taken the position that it is an unconstitutional infringement by Congress on the President's authority as Commander in Chief. The courts have not directly addressed this question. U.N. Security Council resolutions provide authority for U.S. action under international law. Whether congressional authorization is required under domestic law depends on the types of U.N. action and is governed by the Constitution and the U.N. Participation Act (P.L. 79-264, as amended), as well as by the War Powers Resolution. Section 8(b) of the War Powers Resolution exempts only participation in headquarters operations of joint military commands established prior to 1973. For armed actions under Articles 42 and 43 of the U.N. Charter, Section 6 of the U.N. Participation Act authorizes the President to negotiate special agreements with the Security Council, subject to the approval of Congress, providing for the numbers and types of Armed Forces and facilities to be made available to the Security Council. Once the agreements have been concluded, further congressional authorization is not necessary, but no such agreements have been concluded. Some Members have sought to encourage negotiation of military agreements under Article 43 of the U.N. Charter. Questions include whether congressional approval is required only for an initial agreement on providing peacekeeping forces in general, or for each agreement to provide forces in specific situations, and how such approvals would relate to the War Powers Resolution. Section 7 of the U.N. Participation Act authorizes the detail of up to 1,000 personnel to serve in any noncombatant capacity for certain U.N. peaceful settlement activities. The United States has provided personnel to several U.N. peacekeeping missions, such as observers to the U.N. Truce Supervision Organization in Palestine. In these instances, controversy over the need for congressional authorization has not occurred because the action appeared to fall within the authorization in Section 7 of the Participation Act. Controversy has arisen when forces have been deployed in larger numbers or as possible combatants. In the 103 rd Congress, Members used several vehicles in seeking some control over future peacekeeping actions wherever they might occur. Both the Defense Appropriations Act for FY1994, P.L. 103-139 (§8153), and for FY1995, P.L. 103-335 (§8103), stated the sense of Congress that funds should not be used for U.N. peacekeeping or peace enforcement operations unless the President consulted with Congress at least 15 days in advance whenever possible. Section 1502 of the Defense Authorization for FY1994, P.L. 103-160 , required the President to submit by April 1, 1994, a report on multinational peacekeeping including the requirement of congressional approval for participation and the applicability of the War Powers Resolution and the U.N. Participation Act. Along similar lines, the conference report accompanying the Department of State Appropriations Act for FY1994, H.R. 2519 ( P.L. 103-121 , signed October 27, 1993), called for the Secretary of State to notify both Appropriations Committees 15 days in advance, where practicable, of a vote by the U.N. Security Council to establish any new or expanded peacekeeping mission. The Foreign Relations Authorization Act, P.L. 103-236 , signed April 30, 1994, established new requirements for consultation with Congress on U.S. participation in U.N. peacekeeping operations. Section 407 required monthly consultations on the status of peacekeeping operations and advance reports on resolutions that would authorize a new U.N. peacekeeping operation. It also required 15 days' advance notice of any U.S. assistance to support U.N. peacekeeping operations and a quarterly report on all assistance that had been provided to the U.N. for peacekeeping operations. To permit presidential flexibility, conferees explained, the quarterly report need not include temporary duty assignments of U.S. personnel in support of peacekeeping operations of less than 20 personnel in any one case. The following discussion provides background on major cases of U.S. military involvement in overseas operations in recent years that have raised War Powers questions. The issue of war powers and whether congressional authorization is necessary for U.S. participation in U.N. action was also raised by efforts to halt fighting in the former territory of Yugoslavia, particularly in Bosnia. The United States participated without congressional authorization in airlifts into Sarajevo, naval monitoring of sanctions, aerial enforcement of a "no-fly zone," and aerial enforcement of safe havens. Because some of the U.S. action has been taken within a NATO framework, action in Bosnia has raised the broader issue of whether action under NATO is exempt from the requirements of the War Powers Resolution or its standard for the exercise of war powers under the Constitution. Article 11 of the North Atlantic Treaty states that its provisions are to be carried out by the parties "in accordance with their respective constitutional processes," implying some role for Congress in the event of war. Section 8(a) of the War Powers Resolution states that authority to introduce U.S. forces into hostilities is not to be inferred from any treaty, ratified before or after 1973, unless implementing legislation specifically authorizes such introduction and says it is intended to constitute an authorization within the meaning of the War Powers Resolution. Section 8(b) states that nothing in the Resolution should be construed to require further authorization for U.S. participation in the headquarters operations of military commands established before 1973, such as NATO headquarters operations. On August 13, 1992, the U.N. Security Council adopted Resolution 770 calling on all nations to take "all measures necessary" to facilitate the delivery of humanitarian assistance to Sarajevo. On August 11, 1992, the Senate passed S.Res. 330 urging the President to work for such a resolution and pledging funds for participation, but saying that no U.S. military personnel should be introduced into hostilities without clearly defined objectives. On the same day, the House passed H.Res. 554 urging the Security Council to authorize measures, including the use of force, to ensure humanitarian relief. Thus, both chambers of Congress supported action but not by legislation authorizing the use of U.S. forces. For details of congressional actions relating to Bosnia from 1993 through 1995, see CRS Report R41199, T he War Powers Resolution: After Thirty-Six Years , by [author name scrubbed]. In late 1995, the issue of war powers and Bosnia was raised again as President Clinton sent more than 20,000 American combat troops to Bosnia as part of a NATO-led peacekeeping force. In December 1995, Congress considered and voted on a number of bills and resolutions, but the House and Senate could not come to consensus on any single measure. Subsequently, President Clinton in December 1996 agreed to provide up to 8,500 ground troops to participate in a NATO-led follow-on force in Bosnia termed the Stabilization Force (SFOR). On March 18, 1998, the House defeated by a vote of 193-225, H.Con.Res. 227 , a resolution directing the President, pursuant to Section 5(c) of the War Powers Resolution, to remove United States Armed Forces from the Republic of Bosnia and Herzegovina ( H.Rept. 105-442 ). (For additional information, see CRS Report RL32392, Bosnia and Herzegovina: Issues for U.S. Policy , by [author name scrubbed]; CRS Report RL32282, Bosnia and Kosovo: U.S. Military Operations , by [author name scrubbed]; and CRS Report R41199, The War Powers Resolution: After Thirty-Six Years , by [author name scrubbed] .) The issue of presidential authority to deploy forces in the absence of congressional authorization, under the War Powers Resolution, or otherwise, became an issue of significant controversy in late March 1999 when President Clinton ordered U.S. military forces to participate in a NATO-led military operation in Kosovo. This action has become the focus of an ongoing policy debate over the purpose and scope of U.S. military involvement in Kosovo. The President's action to commit forces to the NATO Kosovo operation also led to a suit in Federal District Court for the District of Columbia by some Members of Congress seeking a judicial finding that the President was violating the War Powers Resolution and the Constitution by using military forces in Yugoslavia in the absence of authorization from the Congress. The Kosovo controversy began in earnest when on March 26, 1999, President Clinton notified the Congress "consistent with the War Powers Resolution," that on March 24, 1999, U.S. military forces, at his direction and in coalition with NATO allies, had commenced air strikes against Yugoslavia in response to the Yugoslav government's campaign of violence and repression against the ethnic Albanian population in Kosovo. Prior to the President's action, the Senate, on March 23, 1999, had passed, by a vote of 58-41, S.Con.Res. 21 , a nonbinding resolution expressing the sense of the Congress that the President was authorized to conduct "military air operations and missile strikes in cooperation with our NATO allies against the Federal Republic of Yugoslavia (Serbia and Montenegro)." Subsequently, the House voted on a number of measures relating to U.S. participation in the NATO operation in Kosovo. On April 28, 1999, the House of Representatives passed H.R. 1569 , by a vote of 249-180. This bill would prohibit the use of funds appropriated to the Defense Department from being used for the deployment of "ground elements" of the U.S. Armed Forces in the Federal Republic of Yugoslavia unless that deployment is specifically authorized by law. On that same day the House defeated H.Con.Res. 82 , by a vote of 139-290. This resolution would have directed the President, pursuant to Section 5(c) of the War Powers Resolution, to remove U.S. Armed Forces from their positions in connection with the present operations against the Federal Republic of Yugoslavia. On April 28, 1999, the House also defeated H.J.Res. 44 , by a vote of 2-427. This joint resolution would have declared a state of war between the United States and the "Government of the Federal Republic of Yugoslavia." The House on that same day also defeated, on a 213-213 tie vote, S.Con.Res. 21 , the Senate resolution passed on March 23, 1999, that supported military air operations and missile strikes against Yugoslavia. On April 30, 1999, Representative Tom Campbell and 17 other Members of the House filed suit in Federal District Court for the District of Columbia seeking a ruling requiring the President to obtain authorization from Congress before continuing the air war, or taking other military action against Yugoslavia. The Senate, on May 4, 1999, by a vote of 78-22, tabled S.J.Res. 20 , a joint resolution, sponsored by Senator John McCain, that would authorize the President "to use all necessary force and other means, in concert with United States allies, to accomplish United States and North Atlantic Treaty Organization objectives in the Federal Republic of Yugoslavia (Serbia and Montenegro)." The House, meanwhile, on May 6, 1999, by a vote of 117-301, defeated an amendment by Representative Istook to H.R. 1664 , the FY1999 defense supplemental appropriations bill, that would have prohibited the expenditure of funds in the bill to implement any plan to use U.S. ground forces to invade Yugoslavia, except in time of war. Congress, meanwhile, on May 20, 1999, cleared for the President's signature H.R. 1141 , an emergency supplemental appropriations bill for FY1999, that provided billions in funding for the existing U.S. Kosovo operation. On May 25, 1999, the 60 th day had passed since the President notified Congress of his actions regarding U.S. participation in military operations in Kosovo. Representative Campbell, and those who joined his suit, noted to the Federal Court that this was a clear violation of the language of the War Powers Resolution stipulating a withdrawal of U.S. forces from the area of hostilities occur after 60 days in the absence of congressional authorization to continue, or a presidential request to Congress for an extra 30-day period to safely withdraw. The President did not seek such a 30-day extension, noting instead that the War Powers Resolution is constitutionally defective. On June 8, 1999, Federal District Judge Paul L. Friedman dismissed the suit of Representative Campbell and others that sought to have the court rule that President Clinton was in violation of the War Powers Resolution and the Constitution by conducting military activities in Yugoslavia without having received prior authorization from Congress. The judge ruled that Representative Campbell and others lacked legal standing to bring the suit ( Campbell v. Clinton , 52 F. Supp. 2d 34 (D.D.C. 1999)). Representative Campbell appealed the ruling on June 24, 1999, to the U.S. Court of Appeals for the District of Columbia. The appeals court agreed to hear the case. On February 18, 2000, the appeals court affirmed the opinion of the District Court that Representative Campbell and his co-plaintiffs lacked standing to sue the President. (Campbell v. Clinton, 203 F.3d 19 (D.C. Cir. 2000)). On May 18, 2000, Representative Campbell and 30 other Members of Congress appealed this decision to the United States Supreme Court. On October 2, 2000, the United States Supreme Court, without comment, refused to hear the appeal of Representative Campbell thereby letting stand the holding of the U.S. Court of Appeals. (Campbell v. Clinton, cert. denied , 531U.S. 815 October 2, 2000). On May 18, 2000, the Senate defeated, by a vote of 47-53, an amendment to S. 2521 , the Senate's version of the Military Construction Appropriations Act, FY2001, that would have, among other things, terminated funding for the continued deployment of U.S. ground combat troops in Kosovo after July 1, 2001, unless the President sought and received congressional authorization to keep U.S. troops in Kosovo. (For detailed discussion of major issues, see CRS Report RL31053, Kosovo and U.S. Policy: Background to Independence , by [author name scrubbed] and [author name scrubbed], and CRS Report RL30352, War Powers Litigation Initiated by Members of Congress Since the Enactment of the War Powers Resolution , by [author name scrubbed].) During the week of October 3, 1994, Iraq began sending two additional divisions to join regular forces in southern Iraq, close to the border of Kuwait. On October 8, President Clinton responded by sending about 30,000 additional U.S. forces and additional combat planes to join the forces already in the Gulf area. He said the United States would honor its commitment to defend Kuwait and enforce U.N. resolutions on Iraq. Congress recessed on October 8 until November 29, 1994, so it did not discuss the issue of congressional authorization. On October 28, President Clinton reported to Congress that by October 15 there were clear indications that Iraq had redeployed its forces to their original location. On November 7, the Defense Department announced 7,000 of the U.S. forces would be withdrawn before Christmas. Earlier, three continuing situations in Iraq since the end of Desert Storm brought about the use of U.S. forces and thus raised war powers issues. The first situation resulted from the Iraqi government's repression of Kurdish and Shiite groups. U.N. Security Council Resolution 688 of April 5, 1991, condemned the repression of the Iraqi civilian population and appealed for contributions to humanitarian relief efforts. The second situation stemmed from the U.N. cease-fire resolution of April 3, 1991, Security Council Resolution 687, which called for Iraq to accept the destruction or removal of chemical and biological weapons, and international control of its nuclear materials. The third situation was related to both of the earlier ones. On August 26, 1992, the United States, Britain, and France began a "no-fly" zone, banning Iraqi fixed wing and helicopter flights south of the 32 nd parallel and creating a limited security zone in the south, where Shiite groups are concentrated. After violations of the no-fly zones and various other actions by Iraq, on January 13, 1993, the outgoing Bush Administration announced that aircraft from the United States and coalition partners had attacked missile bases in southern Iraq and that the United States was deploying a battalion task force to Kuwait to underline the United States' continuing commitment to Kuwait's independence. On January 6, 1993, the United States gave Iraq an ultimatum to remove newly deployed missiles in the no-fly zone. On January 19, 1993, President George H. W. Bush reported to Congress that U.S. aircraft on December 27, 1992, had shot down an Iraqi aircraft that had entered the no-fly zone and had undertaken further military actions on January 13, 17, and 18. President Clinton said on January 21, 1993, that the United States would adhere to the policy toward Iraq set by the former Bush Administration, and on January 22, 23, April 9 and 18, June 19, and August 19, 1993, U.S. aircraft fired at targets in Iraq after pilots detected Iraqi radar or anti-aircraft fire directed at them. A number of such incidents occurred while planes patrolled the no-fly zone. On June 6, 1994, President Clinton reported that over the previous two years, the northern no-fly zone had deterred Iraq from a military offensive in the northern zone. Iraqi forces had responded to the no-fly zone in the south, he reported, by continuing to use land-based artillery to shell marsh villages. In addition, Iraq was conducting a large search and destroy operation and razing and burning marsh villages, in violation of U.N. Security Council Resolution 688. Until Iraq fully complied with all relevant U.N. Security Council resolutions, he reported, the United States would maintain sanctions and other measures designed to achieve compliance. A war powers issue for years was whether the use of U.S. force in Iraq in the period after the early 1991 Desert Storm conflict had been authorized by Congress. P.L. 102-1 authorized the President to use U.S. Armed Forces pursuant to U.N. Security Council Resolution 678 to achieve implementation of previous Security Council Resolutions; Security Council Resolution 687 was adopted after this. On August 2, 1991, the Senate adopted an amendment to the Defense Authorization bill for FY1992 supporting the use of all necessary means to achieve the goals of Resolution 687. Senator Dole said the amendment was not intended to authorize the use of force by the President, and that in his view in the current circumstances the President required no specific authorization from Congress. As enacted, Section 1095 of P.L. 102-190 states the sense of Congress that it supports the use of all necessary means to achieve the goals of Security Council Resolution 687 as being consistent with the Authorization for Use of Military Force Against Iraq Resolution. The bill (§1096) also included an amendment by Senator Pell supporting the use of all necessary means to protect Iraq's Kurdish minority, consistent with relevant U.N. resolutions and authorities contained in P.L. 102-1 . In addition to these continuing situations, on June 28, 1993, President Clinton reported to Congress that on June 26, U.S. naval forces had launched a Tomahawk cruise missile strike on the Iraqi Intelligence Service's main command and control complex in Baghdad and that the military action was completed. He said the Iraqi Intelligence Service had planned the failed attempt to assassinate former President Bush during his visit to Kuwait in April 1993. On September 5, 1996, President Clinton reported to Congress on U.S. military actions in Iraq to obtain compliance with U.N. Security Council Resolutions, especially in light of attacks by Iraqi military forces against the Kurdish-controlled city of Irbil. U.S. actions ordered by the President included extending the no-fly zone in southern Iraq from 32 to 33 degrees north latitude, and cruise missile attacks from B-52H bombers and ships in the USS Carl Vinson Battle Group against fixed, surface-to-air missile sites, command and control centers, and air defense control facilities south of the 33 rd parallel in Iraq. Except for the report of June 28, 1993, Presidents Bush and Clinton did not cite the War Powers Resolution in their reports related to military activities in Iraq in the period after the 1991 Gulf War. Rather, they submitted them "consistent with" P.L. 102-1 , which required the President to submit a report to the Congress at least once every 60 days on the status of efforts to obtain compliance by Iraq with the U.N. Security Council resolution adopted in response to the Iraq aggression. Starting in 1998 and through the end of the Clinton Administration, Iraq's refusal to permit U.N. weapons inspection teams access to various Iraqi sites, and Iraqi threats to U.S. aircraft policing the "no-fly zones" resulted in U.S. military action on numerous occasions against Iraqi military forces and targets in the "no-fly zones." President Clinton chose to report these actions under the requirements of P.L. 102-1 , rather than the War Powers Resolution. In early February 2001, President George W. Bush authorized U.S. aircraft to attack Iraqi radar installations in southern Iraq believed to threaten allied forces enforcing the "no-fly zone." Additional bombings of Iraqi sites were authorized and took place from the summer of 2001 into March 2003. Such actions, in the past, were reported under P.L. 102-1 . Congress provided authorization for future military action, under specified conditions, through passage of P.L. 107-243 signed into law on October 16, 2002. In a report to Congress on January 20, 2003, pursuant to P.L. 107-243 , President Bush stated that information required to be reported regarding actions taken against Iraq required by Section 3 of P.L. 102-1 would in the future be included in the reports required by P.L. 107-243 . On March 19, 2003, President Bush directed U.S. Armed Forces to commence combat operations against Iraq to enforce its disarmament. Since he announced the end of major combat operations against Iraq on May 1, 2003, the President has made periodic reports on the current situation in Iraq "consistent with" P.L. 107-243 , which have become the equivalent of reports to Congress envisioned by the War Powers Resolution. For a recent example of these reports to Congress see House Document 108-231, 108 th Congress, 2 nd session, submitted November 4, 2004. (For related information, see CRS Report RL31701, Iraq: U.S. Military Operations , by [author name scrubbed], and CRS Report RL31339, Iraq: Post-Saddam Governance and Security , by [author name scrubbed].) On July 3, 1993, Haitian military leader Raoul Cedras and deposed President Jean-Bertrand Aristide signed an agreement at Governors Island providing for the restoration of President Aristide on October 30. The United Nations and Organization of American States took responsibility for verifying compliance. Because the Haitian authorities did not comply with the agreement, on October 13, 1993, the U.N. Security Council voted to restore sanctions against Haiti. On October 20, President Clinton submitted a report "consistent with the War Powers Resolution" that U.S. ships had begun to enforce a U.N. embargo. Some Members of Congress complained that Congress had not been consulted about nor authorized the action. On October 18, 1993, Senator Dole said he would offer an amendment to the FY1994 Defense Appropriations bill ( H.R. 3116 ) which would require congressional authorization for all deployments into Haitian waters and airspace unless the President made specified certifications. Congressional leaders and Administration officials negotiated the terms of the amendment. As enacted, Section 8147 of P.L. 103-139 stated the sense that funds should not be obligated or expended for U.S. military operations in Haiti unless the operations were (1) authorized in advance by Congress, (2) necessary to protect or evacuate U.S. citizens, (3) vital to the national security and there was not sufficient time to receive congressional authorization, or (4) the President submitted a report in advance that the intended deployment met certain criteria. On May 6, 1994, the U.N. Security Council adopted Resolution 917 calling for measures to tighten the embargo. On June 10, 1994, President Clinton announced steps being taken to intensify the pressure on Haiti's military leaders that included assisting the Dominican Republic to seal its border with Haiti, using U.S. naval patrol boats to detain ships suspected of violating the sanctions, a ban on commercial air traffic, and sanctions on financial transactions. As conditions in Haiti worsened, President Clinton stated he would not rule out the use of force, and gradually the use of force appeared certain. Many Members continued to contend congressional authorization was necessary for any invasion of Haiti. On July 31, the U.N. Security Council authorized a multinational force to use "all necessary means to facilitate the departure from Haiti of the military leadership ... on the understanding that the cost of implementing this temporary operation will be borne by the participating Member States" (Resolution 940, 1994). On August 3, the Senate adopted an amendment to the Department of Veterans Affairs appropriation, H.R. 4624 , by a vote of 100-0 expressing its sense that the Security Council Resolution did not constitute authorization for the deployment of U.S. forces in Haiti under the Constitution or the War Powers Resolution, but the amendment was not agreed to in conference. President Clinton said the same day that he would welcome the support of Congress but did not agree that he was constitutionally mandated to obtain it. On September 15, 1994, in an address to the nation, President Clinton said he had called up the military reserve and ordered two aircraft carriers into the region. His message to the military dictators was to leave now or the United States would force them from power. The first phase of military action would remove the dictators from power and restore Haiti's democratically elected government. The second phase would involve a much smaller force joining with forces from other U.N. members which would leave Haiti after 1995 elections were held and a new government installed. While the Defense Department continued to prepare for an invasion within days, on September 16 President Clinton sent to Haiti a negotiating team of former President Jimmy Carter, former Joint Chiefs of Staff Chairman Colin Powell, and Senate Armed Services Committee Chairman Sam Nunn. Again addressing the nation on September 18, President Clinton announced that the military leaders had agreed to step down by October 15, and agreed to the immediate introduction of troops from the 15,000-member international coalition beginning September 19. He said the agreement was only possible because of the credible and imminent threat of multinational force. He emphasized the mission still had risks and there remained possibilities of violence directed at U.S. troops, but the agreement minimized those risks. He also said that under U.N. Security Council resolution 940, a 25-nation international coalition would soon go to Haiti to begin the task of restoring democratic government. Also on September 18, President Clinton reported to Congress on the objectives in accordance with the sense expressed in Section 8147 (c) of P.L. 103-139 , the FY1994 Defense Appropriations Act. U.S. forces entered Haiti on September 19, 1994. On September 21, President Clinton reported "consistent with the War Powers Resolution" the deployment of 1,500 troops, to be increased by several thousand. (At the peak in September there were about 21,000 U.S. forces in Haiti.) He said the U.S. presence would not be open-ended but would be replaced after a period of months by a U.N. peacekeeping force, although some U.S. forces would participate in and be present for the duration of the U.N. mission. The forces were involved in the first hostilities on September 24, when U.S. Marines killed 10 armed Haitian resisters in a firefight. On October 3, 1994, the House Foreign Affairs Committee reported H.J.Res. 416 authorizing the forces in Haiti until March 1, 1995, and providing procedures for a joint resolution to withdraw the forces. On October 6, the House adopted an amended text introduced by Representative Ron Dellums. As passed, H.J.Res. 416 stated the sense of the Congress that the President should have sought congressional approval before deploying U.S. forces to Haiti, supported a prompt and orderly withdrawal as soon as possible, and required a monthly report on Haiti as well as other reports. This same language was also adopted by the Senate on October 6 as S.J.Res. 229 , and on October 7 the House passed S.J.Res. 229 . President Clinton signed it on October 25, 1994 ( P.L. 103-423 ). After the U.S. forces began to disarm Haitian forces and President Aristide returned on October 15, 1994, the United States began to withdraw some forces. On March 31, 1995, U.N. peacekeeping forces assumed responsibility for missions previously conducted by U.S. military forces. By September 21, 1995, President Clinton reported the United States had 2,400 military personnel in Haiti as participants in the U.N. Mission in Haiti (UNMIH), and 260 U.S. military personnel assigned to the U.S. Support Group Haiti. On December 5, 1997, President Clinton stated that he intended to keep some military personnel in Haiti, even though United Nations peacekeeping forces were withdrawing. The Pentagon stated that U.S. military personnel in Haiti would be about 500, consisting mainly of engineering and medical units, with a combat element responsible for protecting the U.S. contingent. On March 2, 2004, the President reported to Congress "consistent with the War Powers Resolution" that, on February 29, he had sent about "200 additional U.S. combat-equipped, military personnel from the U.S. Joint Forces Command" to Port-au-Prince, Haiti, for a variety of purposes, including preparing the way for a U.N. Multinational Interim Force, and otherwise supporting U.N. Security Council Resolution 1529 (2004). For further information on Haiti, see CRS Report RL32294, Haiti: Developments and U.S. Policy Since 1991 and Current Congressional Concerns , by [author name scrubbed] and [author name scrubbed]. In Somalia, the participation of U.S. military forces in a U.N. operation to protect humanitarian assistance, which began in December 1992, became increasingly controversial as fighting and casualties increased and objectives appeared to be expanding. On October 7, 1993, President Clinton announced that all U.S. forces would be withdrawn by March 31, 1994, and most forces left by that date. The remaining 58 Marines, who had remained to protect U.S. diplomats, were withdrawn September 15, 1994. A major issue for Congress was whether to authorize U.S. action in Somalia. On February 4, 1993, the Senate passed S.J.Res. 45 to authorize the President to use U.S. Armed Forces pursuant to U.N. Security Council Resolution 794. S.J.Res. 45 stated it was intended to constitute the specific statutory authorization under Section 5(b) of the War Powers Resolution. On May 25, 1993, the House amended and passed S.J.Res. 45 . The amendment authorized U.S. forces to remain for one year. S.J.Res. 45 was then sent to the Senate for its concurrence, but the measure did not reach the floor. As sporadic fighting resulted in the deaths of Somali and U.N. forces, including Americans, controversy over the operation intensified. On September 9, 1993, the Senate adopted an amendment to S. 1298 , the Defense Authorization Bill, expressing the sense of Congress that the President by November 15, 1993, should seek and receive congressional authorization for the continued deployment of U.S. forces to Somalia. It asked that the President consult with Congress and report the goals, objectives, and anticipated jurisdiction of the U.S. mission in Somalia by October 15, 1993. On September 29, the House adopted a similar amendment to its bill, H.R. 2401 . On October 7, the President consulted with congressional leaders from both parties for over two hours on Somalia policy and also announced that U.S. forces would be withdrawn by March 31, 1994. On October 15, 1993, the Senate adopted an amendment by Senator Byrd to H.R. 3116 , the Defense Department Appropriations Act for FY1994, cutting off funds for U.S. military operations in Somalia after March 31, 1994, unless the President obtained further spending authority from Congress. The Senate approved the use of military operations only for the protection of American military personnel and bases and for helping maintain the flow of relief aid by giving the U.N. forces security and logistical support. The amendment, which became Section 8151 of P.L. 103-139 , required U.S. forces in Somalia to remain under the command and control of U.S. commanders. In addition, on November 9, 1993, the House adopted H.Con.Res. 170 , using Section 5(c) of the War Powers Resolution to direct the President to remove forces from Somalia by March 31, 1994; sponsors stated it was a non-binding measure, and the Senate did not act on the measure. The Defense Appropriations Act for FY1995 ( P.L. 103-335 , signed September 30, 1994) prohibited the use of funds for the continuous presence of U.S. forces in Somalia, except for the protection of U.S. personnel, after September 30, 1994. On November 4, the U.N. Security Council decided to end the U.N. mission in Somalia by March 31, 1995. On March 3, 1995, U.S. forces completed their assistance to United Nations forces evacuating Somalia. On March 21, 2011, the President submitted to Congress, "consistent with the War Powers Resolution," a report stating that at "approximately 3:00 p.m. Eastern Daylight Time, on March 19, 2011," he had directed U.S. military forces to commence "operations to assist an international effort authorized by the United Nations (U.N.) Security Council and undertaken with the support of European allies and Arab partners, to prevent a humanitarian catastrophe and address the threat posed to international peace and security by the crisis in Libya." He further stated that U.S. military forces, "under the command of Commander, U.S. Africa Command, began a series of strikes against air defense systems and military airfields for the purposes of preparing a no-fly zone." These actions were part of "the multilateral response authorized under U.N. Security Council Resolution 1973," and the President added that "these strikes will be limited in their nature, duration, and scope. Their purpose is to support an international coalition as it takes all necessary measures to enforce the terms of U.N. Security Council Resolution 1973. These limited U.S. actions will set the stage for further action by other coalition partners." The President noted that United Nations Security Council Resolution 1973 authorized Member States, under Chapter VII of the U.N. Charter, to take all necessary measures to protect civilians and civilian populated areas under threat of attack in Libya, including the establishment and enforcement of a "no-fly zone" in the airspace of Libya. United States military efforts are discrete and focused on employing unique U.S. military capabilities to set the conditions for our European allies and Arab partners to carry out the measures authorized by the U.N. Security Council Resolution. The President stated further that the "United States has not deployed ground forces into Libya. United States forces are conducting a limited and well-defined mission in support of international efforts to protect civilians and prevent a humanitarian disaster." Accordingly, he added, "U.S. forces have targeted the Qadhafi regime's air defense systems, command and control structures, and other capabilities of Qadhafi's armed forces used to attack civilians and civilian populated areas." It was the intent of the United States, he said, to "seek a rapid, but responsible, transition of operations to coalition, regional, or international organizations that are postured to continue activities as may be necessary to realize the objectives of U.N. Security Council Resolutions 1970 and 1973." The President said that the actions he had directed were "in the national security and foreign policy interests of the United States." He took them, the President stated, "pursuant to my constitutional authority to conduct U.S. foreign relations and as Commander in Chief and Chief Executive." On April 1, 2011, the Office of Legal Counsel (OLC) of the U.S. Justice Department issued a memorandum opinion entitled "Authority to use Military Force in Libya" (made public on April 7, 2011), which detailed the advice provided to the Attorney General before President Obama commenced U.S. military operations in Libya. This opinion set out the legal reasoning behind the conclusions reached by OLC that the President's use of military force in Libya was constitutional because he "could reasonably determine that such use of force was in the national interest." It was also the opinion of OLC that "prior congressional approval was not constitutionally required to use military force in the limited operations under consideration." The full text of this opinion is found in the opinions section of the OLC webpage: http://www.justice.gov/olc/memoranda-opinions.html . The Office of Legal Counsel opinion of April 1, 2011, on Military Force in Libya cites a number of previous opinions of OLC, and various Supreme Court cases, as providing the framework for its analysis and conclusions. Among these previous OLC opinions cited that address presidential authority to use U.S. Armed Forces overseas are the following: "Authorization for Continuing Hostilities in Kosovo," December 19, 2000, in 24 Op. OLC (2000); "Proposed Bosnia Deployment," November 30, 1995, in 19 Op. OLC (1995); "Deployment of United States Armed Forces into Haiti," September 27, 1994, in 18 Op. OLC (1994); "Authority to use United States Military Forces in Somalia," December 4, 1992, in 16 Op. OLC (1992); and "Presidential Power to Use the Armed Forces Abroad Without Statutory Authorization" February 12, 1980, in 4A Op. OLC (1980). Having reviewed its prior opinions and Supreme Court holdings on cases deemed germane, the Office of Legal Counsel stated that determining the President's legal authority to direct military force in Libya turns on two questions: first, whether United States operations in Libya would serve sufficiently important national interests to permit the President's action as Commander in Chief and Chief Executive and pursuant to his authority to conduct U.S. foreign relations; and second, whether the military operations that the President anticipated ordering would be sufficiently extensive in "nature, scope, and duration" to constitute a "war" requiring prior specific congressional approval under the Declaration of War Clause. Given this predicate, the OLC concluded that: "In our view, the combination of at least two national interests that the President reasonably determined were at stake here—preserving regional stability and supporting the UNSC's [United Nations Security Council] credibility and effectiveness—provided a sufficient basis for the President's exercise of his constitutional authority to order the use of military force." The OLC also concluded that "we do not believe that anticipated United States operations in Libya amounted to a 'war' in the constitutional sense necessitating congressional approval under the Declaration of War Clause." Thus, the Office of Legal Counsel stated, "Accordingly, we conclude that President Obama could rely on his constitutional power to safeguard the national interest by directing the anticipated military operations in Libya—which were limited in their nature, scope, and duration—without prior congressional authorization." On May 20, 2011, President Obama sent a letter to the leaders of the Congress, on the 60 th day since he had initiated the use of U.S. military personnel to support a "no-fly zone" over Libya, and to "prevent a humanitarian catastrophe" by protecting "the people of Libya from the Qaddafi regime." He noted that since April 4 the United States had "transferred responsibility for the military operations in Libya to the North Atlantic Treaty Organization (NATO) and the U.S. involvement has assumed a supporting role in the coalition's efforts." The President further stated that since April 4, U.S. participation in this endeavor had "consisted of: (1) non-kinetic support to the NATO –led operation, including intelligence, logistical support, and search and rescue assistance; (2) aircraft that have assisted in the suppression and destruction of air defenses in support of the no-fly zone; and (3) since April 23, precision strikes by unmanned aerial vehicles against a limited set of clearly defined targets in support of the NATO-led coalition's efforts." President Obama stated that despite the fact that the United States was "no longer in the lead" of the operation in Libya, "U.S. support for the NATO-based coalition" remained "crucial to assuring the success of the international efforts to protect civilians from the actions of the Qaddafi regime." He further stated that "Congressional action in support of the mission would underline the U.S. commitment to this remarkable international effort." In this regard, the President expressly stated his "support for the bipartisan resolution drafted by Senators Kerry, McCain, Levin, Feinstein, Graham, and Lieberman," which he believed would "confirm that the Congress supports the U.S. mission in Libya and that both branches are united in their commitment to supporting the aspirations of the Libyan people for political reform and self-government." It would also, he concluded, "demonstrate a unity of purpose among the political branches on this important national security matter." On June 3, 2011, the House defeated, by a vote of 148 yeas to 265 nays, H.Con.Res. 51 , which said that "pursuant to section 5(c) of the War Powers Resolution … Congress directs the President to remove the United States Armed Forces from Libya by not later than the date that is 15 days after the date of the adoption of this concurrent resolution." On June 3, 2011, the House passed, by a vote of 268 yeas to 145 nays, H.Res. 292 , expressing the opinion of the House, among other things, that "the President shall not deploy, establish or maintain the presence of units and members of the United States Armed Forces on the ground in Libya," except to rescue a member of the Armed Forces from imminent danger, and that the President shall within 14 days after passage of this resolution provide a report to the House detailing information about Operation Odyssey Dawn and Operation Unified Protector, and a report answering a number of questions detailing U.S. security interests and objectives, and the activities of United States Armed Forces, in Libya since March 19, 2011. H.Res. 292 also made the following findings: (1) that the President "has not sought, and Congress has not provided, authorization for the introduction or continued involvement of the United States Armed Forces in Libya," and (2) that "Congress has the constitutional prerogative to withhold funding for any unauthorized use of the United States Armed Forces, including for unauthorized activities regarding Libya." On June 15, 2011, the Obama Administration submitted a 32-page unclassified report, together with a classified annex, that described U.S. actions in Libya to that date. On page 25 of that report was a "Legal Analysis" consisting of one long paragraph summarizing the Administration's view of what the President's authority was to take the actions he had taken in Libya, and his rationale for not having to obtain congressional authorization to do so. This paragraph from the report states: Given the important U.S. interests served by U.S. military operations in Libya and the limited nature, scope and duration of the anticipated actions, the President had constitutional authority, as Commander in Chief and Chief Executive and pursuant to his foreign affairs powers, to direct such limited military operations abroad. The President is of the view that the current U.S. military operations in Libya are consistent with the War Powers Resolution and do not under that law require further congressional authorization, because U.S. military operations are distinct from the kind of "hostilities" contemplated by the Resolution's 60 day termination provision. U.S. forces are playing a constrained and supporting role in a multinational coalition, whose operations are both legitimated by and limited to the terms of a United Nations Security Council Resolution that authorizes the use of force solely to protect civilians and civilian populated areas under attack or threat of attack and to enforce a no-fly zone and an arms embargo. U.S. operations do not involve sustained fighting or active exchanges of fire with hostile forces, nor do they involve the presence of U.S. ground troops, U.S. casualties or a serious threat thereof, or any significant chance of escalation into a conflict characterized by these factors. Regarding the prospect of receiving congressional support for the President's action in Libya, the report of June 15, 2011, also stated on page 25 that: The Administration has repeatedly indicated its strong support for the bipartisan resolution drafted by Senators McCain, Kerry, Lieberman, Levin, Feinstein, Graham, and Chambliss that would confirm that both branches are united in their commitment to supporting the aspirations of the Libyan people for political reform and self-government. On June 24, 2011, the House of Representatives, by a vote of 123 yeas to 295 nays, defeated H.J.Res. 68 , which would have authorized the limited use of the United States Armed Forces in support of the NATO mission in Libya. Subsequently, on June 24, 2011, the House of Representatives, by a vote of 180 yeas to 238 nays, defeated H.R. 2278 , which would have limited the use of funds appropriated to the Department of Defense for United States Armed Forces in support of North Atlantic Treaty Organization Operation Unified Protector with respect to Libya, unless otherwise specifically authorized by law. Presidents have submitted 132 reports to Congress as a result of the War Powers Resolution. Of these, President Ford submitted 4, President Carter 1, President Reagan 14, President George H. W. Bush 7, President Clinton 60, President George W. Bush 39, and President Barack Obama 11. For a summary of the 111 reports submitted by the Presidents from 1975-2009, see CRS Report R41199, The War Powers Resolution: After Thirty-Six Years , by [author name scrubbed] . The following is a brief summary of reports submitted by President Bush George W. Bush from January 2004-December 2008, and by President Barack Obama since January 2009. The reports are submitted to the Speaker of the House in a formal communication (the President pro tempore of the Senate also receives a copy of each report), and they are subsequently published on the U.S. government printing office website under House Documents. The full texts of these presidential reports may be found at http://www.gpoaccess.gov/serialset/cdocuments/index.html . More recent copies of these presidential reports may be found in the Daily Compilation of Presidential Documents at http://www.gpo.gov/fdsys/browse/collection.action?collectionCode=CDOC . They are also found in Public Papers section of the American Presidency Project at http://www.presidency.ucsb.edu/ws/#axzz1dzdN7PmM . (112) On January 22, 2004, the President reported to Congress "consistent with the War Powers Resolution" that the United States was continuing to deploy combat equipped military personnel in Bosnia and Herzegovina in support of NATO's Stabilization Force (SFOR) and its peacekeeping efforts in this country. About 1,800 U.S. personnel are participating. (113) On February 25, 2004, the President reported to Congress "consistent with the War Powers Resolution" that, on February 23, he had sent a combat-equipped "security force" of about "55 U.S. military personnel from the U.S. Joint Forces Command" to Port-au-Prince, Haiti, to augment the U.S. Embassy security forces there and to protect American citizens and property in light of the instability created by the armed rebellion in Haiti. (114) On March 2, 2004, the President reported to Congress "consistent with the War Powers Resolution" that on February 29 he had sent about "200 additional U.S. combat-equipped, military personnel from the U.S. Joint Forces Command" to Port-au-Prince, Haiti, for a variety of purposes, including preparing the way for a U.N. Multinational Interim Force, and otherwise supporting U.N. Security Council Resolution 1529 (2004). (115) On March 20, 2004, the President sent to Congress "consistent with the War Powers Resolution," a consolidated report giving details of multiple ongoing United States military deployments and operations "in support of the global war on terrorism (including in Afghanistan)," as well as operations in Bosnia and Herzegovina, Kosovo, and Haiti. In this report, the President noted that U.S. anti-terror related activities were underway in Georgia, Djibouti, Kenya, Ethiopia, Yemen, and Eritrea. He further noted that U.S. combat-equipped military personnel continued to be deployed in Kosovo as part of the NATO-led KFOR (1,900 personnel); in Bosnia and Herzegovina as part of the NATO-led SFOR (about 1,100 personnel); and approximately 1,800 military personnel were deployed in Haiti as part of the U.N. Multinational Interim Force. (116) On November 4, 2004, the President sent to Congress, "consistent with the War Powers Resolution," a consolidated report giving details of multiple ongoing United States military deployments and operations "in support of the global war on terrorism." These deployments, support or military operations include activities in Afghanistan, Djibouti, as well as Kenya, Ethiopia, Eritrea, Bosnia and Herzegovina, and Kosovo. In this report, the President noted that U.S. anti-terror related activities were underway in Djibouti, Kenya, Ethiopia, Yemen, and Eritrea. He further noted that U.S. combat-equipped military personnel continued to be deployed in Kosovo as part of the NATO-led KFOR (1,800 personnel); and in Bosnia and Herzegovina as part of the NATO-led SFOR (about 1,000 personnel). Meanwhile, he stated that the United States continues to deploy more than 135,000 military personnel in Iraq. (117) On May 20, 2005, the President sent to Congress "consistent with the War Powers Resolution," a consolidated report giving details of multiple ongoing United States military deployments and operations "in support of the global war on terrorism," as well as operations in Iraq, where currently about 139,000 U.S. military personnel are stationed. U.S. forces are also deployed in Kenya, Ethiopia, Yemen, Eritrea, and Djibouti assisting in "enhancing counter-terrorism capabilities" of these nations. The President further noted that U.S. combat-equipped military personnel continued to be deployed in Kosovo as part of the NATO-led KFOR (1,700 personnel). Approximately 235 U.S. personnel are also deployed in Bosnia and Herzegovina as part of the NATO Headquarters-Sarajevo who assist in defense reform and perform operational tasks, such as counter-terrorism and supporting the International Criminal Court for the Former Yugoslavia. (118) On December 7, 2005, the President sent to Congress "consistent" with the War Powers Resolution, a consolidated report giving details of multiple ongoing United States military deployments and operations "in support of the global war on terrorism," and in support of the Multinational Force in Iraq, where about 160,000 U.S. military personnel are deployed. U.S. forces are also deployed in the Horn of Africa region—Kenya, Ethiopia, Yemen, and Djibouti—assisting in "enhancing counter-terrorism capabilities" of these nations. The President further noted that U.S. combat-equipped military personnel continued to be deployed in Kosovo as part of the NATO-led KFOR (1,700 personnel). Approximately 220 U.S. personnel are also deployed in Bosnia and Herzegovina as part of the NATO Headquarters-Sarajevo who assist in defense reform and perform operational tasks, such as "counter-terrorism and supporting the International Criminal Court for the Former Yugoslavia." (119) On June 15, 2006, the President sent to Congress "consistent" with the War Powers Resolution, a consolidated report giving details of multiple ongoing United States military deployments and operations "in support of the war on terror," and in Kosovo, Bosnia and Herzegovina, and as part of the Multinational Force (MNF) in Iraq. Presently, about 131,000 military personnel were deployed in Iraq. U.S. forces were also deployed in the Horn of Africa region, and in Djibouti to support necessary operations against al-Qaida and other international terrorists operating in the region. U.S. military personnel continue to support the NATO-led Kosovo Force (KFOR). The current U.S. contribution to KFOR is about 1,700 military personnel. The NATO Headquarters-Sarajevo was established in November 22, 2004, as a successor to its stabilization operations in Bosnia-Herzegovina to continue to assist in implementing the peace agreement. Approximately 250 U.S. personnel are assigned to the NATO Headquarters-Sarajevo who assist in defense reform and perform operational tasks, such as "counter-terrorism and supporting the International Criminal Court for the Former Yugoslavia." (120) On July 18, 2006, the President reported to Congress "consistent" with the War Powers Resolution, that in response to the security threat posed in Lebanon to "U.S. Embassy personnel and citizens and designated third country personnel," he had deployed combat-equipped military helicopters and military personnel to Beirut to assist in the departure of the persons under threat from Lebanon. The President noted that additional combat-equipped U.S. military forces may be deployed "to Lebanon, Cyprus and other locations, as necessary." to assist further departures of persons from Lebanon and to provide security. He further stated that once the threat to U.S. citizens and property has ended, the U.S. military forces would redeploy. (121) On December 15, 2006, the President sent to Congress "consistent" with the War Powers Resolution, a consolidated report giving details of multiple ongoing United States military deployments and operations "in support of the war on terror," in Kosovo, Bosnia and Herzegovina, and as part of the Multinational Force (MNF) in Iraq. Presently, about 134,000 military personnel are deployed in Iraq. U.S. forces were also deployed in the Horn of Africa region, and in Djibouti to support necessary operations against al-Qaida and other international terrorists operating in the region, including Yemen. U.S. military personnel continue to support the NATO-led Kosovo Force (KFOR). The current U.S. contribution to KFOR is about 1,700 military personnel. The NATO Headquarters-Sarajevo was established in November 22, 2004, as a successor to its stabilization operations in Bosnia-Herzegovina to continue to assist in implementing the peace agreement. Approximately 100 U.S. personnel are assigned to the NATO Headquarters-Sarajevo to assist in defense reform and perform operational tasks, such as "counter-terrorism and supporting the International Criminal Court for the Former Yugoslavia." (122) On June 15, 2007, the President sent to Congress "consistent" with the War Powers Resolution, a consolidated report giving details of ongoing United States military deployments and operations "in support of the war on terror," and in support of the NATO-led Kosovo Force (KFOR). The President reported that various U.S. "combat-equipped and combat-support forces" were deployed to "a number of locations in the Central, Pacific, European (KFOR), and Southern Command areas of operation" and were engaged in combat operations against al-Qaida terrorists and their supporters. The United States is currently "pursuing and engaging remnant al-Qaida and Taliban fighters in Afghanistan." U.S. forces in Afghanistan currently total approximately 25,945. Of this total, "approximately 14,340 are assigned to the International Security Assistance Force (ISAF) in Afghanistan." The U.S. military continues to support peacekeeping operations in Kosovo, specifically the NATO-led Kosovo Force (KFOR). Currently, the U.S. contribution to KFOR in Kosovo is approximately 1,584 military personnel. (123) On December 14, 2007, the President sent to Congress "consistent with the War Powers Resolution," a consolidated report giving details of ongoing United States military deployments and operations "in support of the war on terror," and in support of the NATO-led Kosovo Force (KFOR). The President reported that various U.S. "combat-equipped and combat-support forces" were deployed to "a number of locations in the Central, Pacific, European, and Southern Command areas of operation" and were engaged in combat operations against al-Qaida terrorists and their supporters. The United States is currently "pursuing and engaging remnant al-Qaida and Taliban fighters in Afghanistan." U.S. forces in Afghanistan currently total approximately 25,900. Of this total, "approximately 15,180 are assigned to the International Security Assistance Force (ISAF) in Afghanistan." The U.S. military continues to support peacekeeping operations in Kosovo, specifically the NATO-led Kosovo Force (KFOR). Currently, the U.S. contribution to KFOR in Kosovo is approximately 1,498 military personnel. (124) On June 13, 2008, the President sent to Congress "consistent with the War Powers Resolution," a consolidated report giving details of ongoing United States military deployments and operations "in support of the war on terror," and in support of the NATO-led Kosovo Force (KFOR). The President reported that various U.S. "combat-equipped and combat-support forces" were deployed to "a number of locations in the Central, Pacific, European, and Southern Command areas of operation" and were engaged in combat operations against al-Qaida terrorists and their supporters. The United States is currently "pursuing and engaging remnant al-Qaida and Taliban fighters in Afghanistan." U.S. forces in Afghanistan currently total approximately 31,122. Of this total, "approximately 14,275 are assigned to the International Security Assistance Force (ISAF) in Afghanistan." The U.S. military continues to support peacekeeping operations in Kosovo, specifically the NATO-led Kosovo Force (KFOR). Currently, the U.S. contribution to KFOR in Kosovo is about 1,500 military personnel. (125) On December 16, 2008, the President sent to Congress "consistent with the War Powers Resolution," a consolidated report giving details of ongoing United States military deployments and operations "in support of the war on terror," and in support of the NATO-led Kosovo Force (KFOR). The President reported that various U.S. "combat-equipped and combat-support forces" were deployed to "a number of locations in the Central, Pacific, European, Southern, and Africa Command areas of operation" and were engaged in combat operations against al-Qaida and their supporters. The United States is "actively pursuing and engaging remnant al-Qaida and Taliban fighters in Afghanistan." U.S. forces in Afghanistan total approximately 31,000. Of this total, "approximately 13,000 are assigned to the International Security Assistance Force (ISAF) in Afghanistan." The U.S. military continues to support peacekeeping operations in Kosovo, specifically the NATO-led Kosovo Force (KFOR). The current U.S. contribution to KFOR in Kosovo is about 1,500 military personnel. (126) On June 15, 2009, the President sent to Congress "consistent with the War Powers Resolution," a supplemental consolidated report, giving details of "ongoing contingency operations overseas." The report noted that the total number of U.S. forces in Afghanistan was "approximately 58,000," of which approximately 20,000 are assigned to the International Security Assistance Force (ISAF) in Afghanistan." The United States continues to pursue and engage "remaining al-Qa'ida and Taliban forces in Afghanistan." The U.S. also continues to deploy military forces in support of the Multinational Force (MNF) in Iraq. The current U.S. contribution to this effort is "approximately 138,000 U.S. military personnel." U.S. military operations continue in Kosovo, as part of the NATO-led Kosovo Force (KFOR). Presently the United States contributes approximately 1,400 U.S. military personnel to KFOR. In addition, the United States continues to deploy "U.S. combat-equipped forces to help enhance the counterterrorism capabilities of our friends and allies" not only in the Horn of Africa region, but globally through "maritime interception operations on the high seas" aimed at blocking the "movement, arming and financing of international terrorists." (127) On December 16, 2009, the President sent to Congress "consistent with the War Powers Resolution," a consolidated report, giving details of "global deployments of U.S. Armed Forces equipped for combat." The report detailed "ongoing U.S. contingency operations overseas." The report noted that the total number of U.S. forces in Afghanistan was "approximately 68,000," of which approximately 34,000 are assigned to the International Security Assistance Force (ISAF) in Afghanistan. The United States continues to pursue and engage "remaining al-Qa'ida and Taliban forces in Afghanistan." The United States has deployed "various combat-equipped forces to a number of locations in the Central, Pacific, European, Southern and African Command areas of operation" in support of anti-terrorist and anti-al-Qa'ida actions. The United States also continues to deploy military forces in Iraq to "maintain security and stability" there. These Iraqi operations continue pursuant to the terms of a bilateral agreement between the United States and Iraq, which entered into force on January 1, 2009. The current U.S. force level in Iraq is "approximately 116,000 U.S. military personnel." U.S. military operations continue in Kosovo, as part of the NATO-led Kosovo Force (KFOR). Presently the United States contributes approximately 1,475 U.S. military personnel to KFOR. In addition, the United States continues to deploy "U.S. combat-equipped forces to assist in enhancing the counterterrorism capabilities of our friends and allies" not only in the Horn of Africa region, but globally through "maritime interception operations on the high seas" aimed at blocking the "movement, arming and financing of international terrorists." (128) On June 15, 2010, the President sent to Congress "consistent with the War Powers Resolution," a consolidated report, giving details of "deployments of U.S. Armed Forces equipped for combat." The report noted that the total number of U.S. forces in Afghanistan was "approximately 87,000," of which over 62,000 are assigned to the International Security Assistance Force (ISAF) in Afghanistan. The United States continues combat operations "against al-Qa'ida terrorists and their Taliban supporters" in Afghanistan. The United States has deployed "combat-equipped forces to a number of locations in the U.S. Central, Pacific, European, Southern and African Command areas of operation" in support of anti-terrorist and anti-al-Qa'ida actions. The United States also continues to deploy military forces in Iraq to "maintain security and stability" there. These Iraqi operations continue pursuant to the terms of a bilateral agreement between the United States and Iraq, which entered into force on January 1, 2009. The current U.S. force level in Iraq is "approximately 95,000 U.S. military personnel." U.S. military operations continue in Kosovo, as part of the NATO-led Kosovo Force (KFOR). Presently, the United States contributes approximately 1,074 U.S. military personnel to KFOR. In addition, the United States continues to "conduct maritime interception operations on the high seas" directed at "stopping the movement, arming and financing of international terrorist groups." (129) On December 15, 2010, the President submitted to Congress "consistent with the War Powers Resolution," a consolidated report, detailing "deployments of U.S. Armed Forces equipped for combat." The report noted that the total number of U.S. forces in Afghanistan was "approximately 97,500," of which over 81,500 were assigned to the International Security Assistance Force (ISAF) in Afghanistan. The United States is continuing combat operations "against al-Qa'ida terrorists and their Taliban supporters" in Afghanistan. The United States has deployed "combat-equipped forces to a number of locations in the U.S. Central, Pacific, European, Southern and African Command areas of operation" in support of anti-terrorist and anti-al-Qa'ida actions. In addition, the United States continues to conduct "maritime interception operations on the high seas in the areas of responsibility of the geographic combatant commands" directed at "stopping the movement, arming and financing of international terrorist groups." The United States also continues to deploy military forces in Iraq in support of Iraqi efforts to "maintain security and stability" there. These Iraqi operations continue pursuant to the terms of a bilateral agreement between the United States and Iraq, which entered into force on January 1, 2009. The current U.S. force level in Iraq is "approximately 48,400 U.S. military personnel." U.S. military operations also continue in Kosovo, as part of the NATO-led Kosovo Force (KFOR). The United States currently contributes approximately 808 U.S. military personnel to KFOR. (130) On June 15, 2011, the President sent to Congress, "consistent with the War Powers Resolution," a supplemental consolidated report, giving details of "global deployments of U.S. Armed Forces equipped for combat." The report detailed ongoing U.S. contingency operations overseas. The report noted that the total number of U.S. forces in Afghanistan was "approximately 99,000," of which approximately 83,000 are assigned to the International Security Assistance Force (ISAF) in Afghanistan. The United States continues to pursue and engage "remaining al-Qa'ida and Taliban fighters in Afghanistan." The United States has deployed various "combat-equipped forces" to a number of locations in the Central, Pacific, European, Southern and African Command areas of operation" in support of anti-terrorist and anti-al-Qa'ida actions. This includes the deployment of U.S. military forces globally to assist in enhancing the counterterrorism capabilities of our friends and allies through maritime interception operations on the high seas "aimed at stopping the movement, arming and financing of certain international terrorist groups." A combat-equipped security force of about "40 U.S. military personnel from the U.S. Central Command" was deployed to Cairo, Egypt, on January 31, 2011, for the sole purpose of "protecting American citizens and property." That force remains at the U.S. Embassy in Cairo. The United States also continues to deploy military forces in Iraq to help it "maintain security and stability" there. These Iraqi operations continue pursuant to the terms of a bilateral agreement between the United States and Iraq, which entered into force on January 1, 2009. The current U.S. force level in Iraq is approximately 45,000 U.S. military personnel. In Libya, since April 4, 2011, the United States has transferred responsibility for military operations there to NATO, and U.S. involvement "has assumed a supporting role in the coalition's efforts." U.S. support in Libya has been limited to "intelligence, logistical support, and search and rescue assistance." The U.S. military aircraft have also been used to assist in the "suppression and destruction of air defenses in support of the no-fly zone" over Libya. Since April 23, 2011, the United States has supported the coalition effort in Libya through use of "unmanned aerial vehicles against a limited set of clearly defined targets" there. Except in the case of operations to "rescue the crew of a U.S. aircraft" on March 21, 2011, "the United States has deployed no ground forces to Libya." U.S. military operations continue in Kosovo, as part of the NATO-led Kosovo Force (KFOR). Presently the United States contributes approximately 800 U.S. military personnel to KFOR. (131) On March 21, 2011, the President submitted to Congress "consistent with the War Powers Resolution," a report stating that at "approximately 3:00 p.m. Eastern Daylight Time, on March 19, 2011," he had directed U.S. military forces to commence "operations to assist an international effort authorized by the United Nations (U.N.) Security Council and undertaken with the support of European allies and Arab partners, to prevent a humanitarian catastrophe and address the threat posed to international peace and security by the crisis in Libya." He further stated that U.S. military forces, "under the command of Commander, U.S. Africa Command, began a series of strikes against air defense systems and military airfields for the purposes of preparing a no-fly zone." These actions were part of "the multilateral response authorized under U.N. Security Council Resolution 1973," and the President added that "these strikes will be limited in their nature, duration, and scope. Their purpose is to support an international coalition as it takes all necessary measures to enforce the terms of U.N. Security Council Resolution 1973. These limited U.S. actions will set the stage for further action by other coalition partners." The President noted that United Nations Security Council Resolution 1973 authorized Member States, under Chapter VII of the U.N. Charter, to take all necessary measures to protect civilians and civilian populated areas under threat of attack in Libya, including the establishment and enforcement of a "no-fly zone" in the airspace of Libya. United States military efforts are discrete and focused on employing unique U.S. military capabilities to set the conditions for our European allies and Arab partners to carry out the measures authorized by the U.N. Security Council Resolution. The President stated further that the "United States has not deployed ground forces into Libya. United States forces are conducting a limited and well-defined mission in support of international efforts to protect civilians and prevent a humanitarian disaster." Accordingly, he added, "U.S. forces have targeted the Qadhafi regime's air defense systems, command and control structures, and other capabilities of Qadhafi's armed forces used to attack civilians and civilian populated areas." It was the intent of the United States, he said, to "seek a rapid, but responsible, transition of operations to coalition, regional, or international organizations that are postured to continue activities as may be necessary to realize the objectives of U.N. Security Council Resolutions 1970 and 1973." The President said that the actions he had directed were "in the national security and foreign policy interests of the United States." He took them, the President stated, "pursuant to my constitutional authority to conduct U.S. foreign relations and as Commander in Chief and Chief Executive." (132) On October 14, 2011, the President submitted to Congress, "consistent with the War Powers Resolution," a report stating that "he had authorized a small number of combat-equipped U.S. forces to deploy to central Africa to provide assistance to regional forces that are working toward the removal of Joseph Kony," leader of the Lord's Resistance Army (LRA), from the battlefield. For over two decades the LRA has murdered, kidnapped, and raped tens of thousands of men, women, and children throughout central Africa, and has continued to commit atrocities in South Sudan, the Democratic Republic of the Congo, and the Central African Republic. The U.S. Armed Forces, the President noted, would be a "significant contribution toward counter-LRA efforts in central Africa." The President stated that on "October 12, 2011, the initial team of U.S. military personnel with appropriate combat equipment deployed to Uganda." In the "next month, additional forces will deploy, including a second combat-equipped team and associated headquarters, communications, and logistics personnel." The President further stated that the "total number of U.S. military personnel deploying for this mission is approximately 100. These forces will act as advisors to partner forces that have the goals of removing from the battlefield Joseph Kony and other senior leadership of the LRA." U.S. forces "will provide information, advice, and assistance to select partner nation forces." With the approval of the respective host nations, "elements of these U.S. forces will deploy into Uganda, South Sudan, the Central African Republic, and the Democratic Republic of the Congo. The support provided by U.S. forces will enhance regional efforts against the LRA." The President emphasized that even though the "U.S. forces are combat-equipped, they will only be providing information, advice, and assistance to partner nation forces, and they will not themselves engage LRA forces unless necessary for self-defense. All appropriate precautions have been taken to ensure the safety of U.S. military personnel during their deployment." The President took note in his report that Congress had previously "expressed support for increased, comprehensive U.S. efforts to help mitigate and eliminate the threat posed by the LRA to civilians and regional stability" through the passage of the Lord's Resistance Army Disarmament and Northern Uganda Recovery Act of 2009, P.L. 111-172 , enacted May 24, 2010. (133) On December 15, 2011, the President submitted to Congress, "consistent with the War Powers Resolution," a supplemental consolidated report, giving details of "deployments of U.S. Armed Forces equipped for combat." The report detailed ongoing U.S. contingency operations overseas. The report noted that the total number of U.S. forces in Afghanistan was "approximately 93,000," of which approximately 78,000 are assigned to the International Security Assistance Force (ISAF) in Afghanistan. The United States continues to pursue and engage "remaining al-Qa'ida and Taliban fighters in Afghanistan." The United States has deployed various "combat-equipped forces" to a number of locations in the Central, Pacific, European, Southern and African Command areas of operation in support of anti-terrorist and anti-al-Qa'ida actions. This includes the deployment of U.S. military forces globally: "including special operations and other forces" for "sensitive operations" in various places, as well as forces to assist in enhancing the counterterrorism capabilities of our friends and allies. U.S. forces also have engaged in maritime interception operations on the high seas "aimed at stopping the movement, arming and financing of certain international terrorist groups." The United States continued to deploy military forces in Iraq to help it "maintain security and stability" there. These Iraqi operations were undertaken pursuant to the terms of a bilateral agreement between the United States and Iraq, which entered into force on January 1, 2009. The U.S. force level in Iraq on October 28, 2011, was "36,001 U.S. military personnel." The United States was committed to withdraw U.S. forces from Iraq by December 31, 2011. [This occurred, as scheduled, after this report was submitted]. In Libya, after April 4, 2011, the United States transferred responsibility for military operations there to NATO, and U.S. involvement "assumed a supporting role in the coalition's efforts." U.S. support in Libya was limited to "intelligence, logistical support, and search and rescue assistance." The U.S. military aircraft were also used to assist in the "suppression and destruction of air defenses in support of the no-fly zone" over Libya. After April 23, 2011, the United States supported the coalition effort in Libya through use of "unmanned aerial vehicles against a limited set of clearly defined targets" there. Except in the case of operations to "rescue the crew of a U.S. aircraft" on March 21, 2011, and deploying 16 U.S. military personnel to aid in re-establishing the U.S. Embassy in Tripoli in September 2011, "the U.S. deployed no ground forces to Libya." On October 27, 2011, the United Nations terminated the "no-fly zone" effective October 31, 2011. NATO terminated its mission during this same time. U.S. military operations continue in Kosovo, as part of the NATO-led Kosovo Force (KFOR). Presently the United States contributes approximately 800 U.S. military personnel to KFOR. (134) On January 26, 2012, the President submitted to Congress, "consistent with the War Powers Resolution," a report detailing a successful U.S. Special Operations Forces operation in Somalia of January 24, 2012 to rescue Ms. Jessica Buchanan, a U.S. citizen who had been kidnapped by a group linked to Somali pirates and financiers. This operation was undertaken "by a small number of joint combat-equipped U.S. forces" following receipt of reliable intelligence establishing her location in Somalia. A Danish national Poul Hagen Thisted, kidnapped with Ms. Buchanan, was also rescued with her. (135) On June 15, 2012, the President reported to Congress, "consistent with" the War Powers Resolution, a consolidated report regarding various deployments of U.S. Armed Forces equipped for combat. In the efforts in support of U.S. counterterrorism (CT) objectives against al-Qa'ida, the Taliban, and associated forces, he noted that U.S. forces were engaged in Afghanistan in the above effort were "approximately 90,000." With regard to other counter-terrorism operations, the President stated that the United States had deployed "U.S. combat-equipped forces to assist in enhancing the CT capabilities of our friends and allies including special operations and other forces for sensitive operations in various locations around the world. He noted that the "U.S. military has taken direct action in Somalia against members of al-Qa'ida, including those who are also members of al-Shabaab, who are engaged in efforts to carry out terrorist attacks against the United States and our interests." The President further stated that the U.S. military had been "working closely with the Yemini government to operationally and ultimately eliminate the terrorist threat posed by al-Qa-ida in the Arabian Peninsula (AQAP), the most active and dangerous affiliate of al-Qa'ida today." He added that these "joint efforts have resulted in direct action against a limited number of AQAP operatives and senior leaders in that country who posed a terrorist threat to the United States and our interests." The President noted that he would direct "additional measures against al-Qa'ida, the Taliban, and associated forces to protect U.S. citizens and interests." Further information on such matters is provided in a "classified annex to this report." Other military operations reported by the President include the deployment of U.S. combat-equipped military personnel to Uganda "to serve as advisors to regional forces that are working to apprehend or remove Joseph Kony and other senior Lord's Resistance Army (LRA) leaders from the battlefield and to protect local populations." The total number of U.S. military personnel deployed for this mission is "approximately 90," and elements of these U.S. forces have been sent to "forward locations in the LRA-affected areas of the Republic of South Sudan, the Democratic Republic of the Congo, and the Central African Republic." These U.S. forces "will not engage LRA forces except in self-defense." The President also reported that presently the United States was contributing "approximately 817 military personnel: to the NATO-led Kosovo Force (KFOR) in Kosovo." He also reported that the United States remained prepared to engage in "maritime interception operations" intended to stop the "movement, arming, and financing of certain international terrorist groups," as well as stopping "proliferation by sea of weapons of mass destruction and related materials." Additional details about these efforts are included in "the classified annex" to the President's report. (136) On September 14, 2012, the President reported to Congress, "consistent with" the War Powers Resolution, that on September 12, 2012, he ordered deployed to Libya "a security force from the U.S. Africa Command" to "support the security of U.S. personnel in Libya." This action was taken in response to the attack on the U.S. "diplomatic post in Benghazi, Libya" that had killed four America citizens, including U.S. Ambassador John Christopher Stevens. The President added on September 13, 2012, that "an additional security force arrived in Yemen in response to security threats there." He further stated that: "Although these security forces are equipped for combat, these movements have been undertaken solely for the purpose of protecting American citizens and property." These security forces will remain in Libya and in Yemen, he noted, "until the security situation becomes such that they are no longer needed." Section 3 of the War Powers Resolution requires the President "in every possible instance" to consult with Congress before introducing U.S. Armed Forces into situations of hostilities and imminent hostilities, and to continue consultations as long as the Armed Forces remain. A review of instances involving the use of Armed Forces since passage of the Resolution, noted in this report, indicates there has been very little consultation with Congress under the Resolution when consultation is defined to mean seeking advice prior to a decision to introduce troops. Presidents have met with congressional leaders after the decision to deploy was made but before commencement of operations. One problem is the interpretation of when consultation is required. The War Powers Resolution established different criteria for consultation than for reporting. Consultation is required only before introducing Armed Forces into "hostilities or into situations where imminent involvement in hostilities is clearly indicated by the circumstances," the circumstances triggering the time limit. A second problem is the meaning of the term consultation. The executive branch has often taken the view that the consultation requirement has been fulfilled when from the viewpoint of some Members of Congress it has not. The House report on the War Powers Resolution said, "consultation in this provision means that a decision is pending on a problem and that Members of Congress are being asked by the President for their advice and opinions and, in appropriate circumstances, their approval of action contemplated." A third problem is who represents Congress for consultation purposes. The House version specifically called for consultation between the President and the leadership and appropriate committees. This was changed to less specific wording in final House-Senate conference committee version, to provide some flexibility. Some critics of the existing statute have introduced proposals to specify a consultation group. But Congress has yet to act on such a proposal. An immediate issue for Congress when the President introduces troops into situations of potential hostilities is whether to invoke Section 4(a)(1) of the War Powers Resolution and trigger a durational limit for the action unless Congress authorizes the forces to remain. If Congress concurs in a President's action, application of the Resolution may be desirable either to legitimize the action and strengthen it by making clear congressional support for the measure or to establish the precedent that the Resolution does apply in such a situation. On the other hand, some may believe it is preferable to leave the President more flexibility of action than is possible under the Resolution. Or some may not wish to have a formal vote on either the issue of applying the Resolution or the merits of utilizing Armed Forces in that case. If Congress does not concur in an action taken by a President, the Resolution offers a way to terminate it. A longer-term issue is whether the War Powers Resolution is working or should be amended. Some contend that it has been effective in moderating the President's response to crisis situations because of his awareness that certain actions would trigger its reporting and legislative veto provisions. Or they suggest that it could be effective if the President would comply fully or Congress would invoke its provisions. Others believe it is not accomplishing its objectives and suggest various changes. Some have proposed that the Resolution return to the original Senate-passed version, which would enumerate circumstances in which the President needed no congressional authorization for use of Armed Forces (namely to respond to or forestall an armed attack against the United States or its forces or to protect U.S. citizens while evacuating them) but prohibit any other use or any permissible use for more than 30 days unless authorized by Congress. Others would replace the automatic requirement for withdrawal of troops after 60 days with expedited procedures for a joint resolution authorizing the action or requiring disengagement. Still others would repeal the Resolution on grounds that it restricts the President's effectiveness in foreign policy or is unconstitutional. Several Members have suggested establishing a consultative group to meet with the President when military action is being considered. Senators Byrd, Nunn, Warner, and Mitchell introduced S.J.Res. 323 in 1988 and S. 2 in 1989 to establish a permanent consultation group of 18 Members consisting of the leadership and the ranking and minority Members of the Committees on Foreign Relations, Armed Services, and Intelligence. The bill would permit an initial consultative process to be limited to a core group of six Members—the majority and minority leaders of both chambers plus the Speaker of the House and President pro tempore of the Senate. On October 28, 1993, House Foreign Affairs Chairman Lee Hamilton introduced H.R. 3405 to establish a congressional consultative group equivalent to the National Security Council. No action was taken on this proposal. Thus far, however, executive branch officials and congressional leaders, who themselves have varying opinions, have been unable to find mutually acceptable changes in the War Powers Resolution. President Clinton, in Presidential Decision Directive 25 signed May 3, 1994, supported legislation to amend the Resolution along the lines of the Mitchell, Nunn, Byrd, and Warner proposal of 1989, to establish a consultative mechanism and also eliminate the 60-day withdrawal provisions. Although many agreed on the consultation group, supporters of the legislation contended the time limit had been the main flaw in the War Powers Resolution, whereas opponents contended the time limit provided the teeth of the Resolution. The difficulty of reaching consensus in Congress on what action to take is reflected in the fact that in the 104 th Congress, only one measure, S. 5 , introduced January 4, 1995, by then Majority Leader Dole was the subject of a hearing. S. 5 , if enacted, would have repealed most of the existing War Powers Resolution. An effort to repeal most of the War Powers Resolution in the House on June 7, 1995, through an amendment to the Foreign Assistance and State Department Authorization Act for FY1996-97 ( H.R. 1561 ) by Representative Hyde, failed (201-217). Other than these instances, no other War Powers related legislation was even considered during the 104 th Congress. On March 18, 1998, the House defeated H.Con.Res. 227 , a resolution that would have directed the President, pursuant to Section 5(c) of the War Powers Resolution, to remove United States Armed Forces from the Republic of Bosnia and Herzegovina ( H.Rept. 105-442 ). It was the hope of Representative Tom Campbell, its sponsor, that passage of the resolution could lead to a court case that would address the constitutionality of the War Powers Resolution. On March 31, 1998, the House passed a Supplemental Appropriations bill ( H.R. 3579 ) that would ban use of funds for conduct of offensive operations against Iraq, unless such operations were specifically authorized by law. This provision was dropped in the conference with the Senate. On June 24, 1998, the House passed H.R. 4103 , the Defense Department Appropriations bill for FY1999, with a provision by Representative Skaggs that banned the use of funds appropriated or otherwise made available by this act "to initiate or conduct offensive military operations by United States Armed Forces except in accordance with the war powers clause of the Constitution (Article 1, Section 8), which vests in Congress the power to declare and authorize war and to take certain specified, related actions." The Skaggs provision was stricken by the House-Senate conference committee on H.R. 4103 . No further War Powers-related actions were taken by Congress by the adjournment of the 105 th Congress. During the 106 th Congress, efforts were made to force the President to seek congressional authority for military operations in Kosovo, leading to votes in the House and Senate on that issue. Subsequently, Representative Tom Campbell and others sued the President in Federal Court in an effort to clarify congressional-executive authority in this area. A Federal District Court and an Appeals Court refused to decide the case on the merits, instead holding that the plaintiffs lacked standing to sue. On October 2, 2000, the United States Supreme Court let stand the holding of the U.S. Appeals Court. During the first session of the 107 th Congress, the Congress passed S.J.Res. 23 , on September 14, 2001, in the wake of the terrorist attacks against the World Trade Center in New York City, and the Pentagon building in Arlington, VA. This legislation, titled the "Authorization for Use of Military Force," passed the Senate by a vote of 98-0; the House of Representatives passed it by a vote of 420-1. This joint resolution authorizes the President "to use all necessary and appropriate force against those nations, organizations, or persons he determines planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001, or harbored such organizations or persons, in order to prevent any future acts of international terrorism against the United States by such nations, organizations or persons." Congress further declared in the joint resolution that "Consistent with section 8(a)(1) of the War Powers resolution," the above language is "intended to constitute specific statutory authorization within the meaning of section 5(b) the War Powers Resolution." S.J.Res. 23 further stated that "Nothing in this resolution supersedes any requirement of the War Powers Resolution." President George W. Bush signed S.J.Res. 23 into law on September 18, 2001 ( P.L. 107-40 , 115 Stat. 224). During the second session of the 107 th Congress, the Congress passed H.J.Res. 114 , the Authorization for the Use of Force Against Iraq Resolution of 2002 ( P.L. 107-243 ). On October 16, 2002, President Bush signed this legislation into law. This statute authorizes the President to use the Armed Forces of the United States as he determines to be necessary and appropriate in order to (1) defend the national security of the United States against the continuing threat posed by Iraq; and (2) enforce all relevant United Nations Security Council resolutions regarding Iraq. Prior to using force under this statute the President is required to communicate to Congress his determination that the use of diplomatic and other peaceful means will not "adequately protect the United States ... or ... lead to enforcement of all relevant United Nations Security Council resolutions" and that the use of force is "consistent" with the battle against terrorism. The statute also stipulates that it is "intended to constitute specific statutory authorization within the meaning of section 5(b) of the War Powers Resolution." It further requires the President to make periodic reports to Congress "on matters relevant to this joint resolution." Finally, the statute expresses Congress's "support" for the efforts of the President to obtain "prompt and decisive action by the Security Council" to enforce Iraq's compliance with all relevant Security Council resolutions. P.L. 107-243 clearly confers broad authority on the President to use force. The authority granted is not limited to the implementation of previously adopted Security Council resolutions concerning Iraq but includes "all relevant ... resolutions." Thus, it appears to incorporate resolutions concerning Iraq that may be adopted by the Security Council in the future as well as those already adopted. The authority also appears to extend beyond compelling Iraq's disarmament to implementing the full range of concerns expressed in those resolutions. The President's exercise of the authority granted is not dependent upon a finding that Iraq was complicit in the attacks of September 11, 2001. Moreover, the authority conferred can be used for the purpose of defending "the national security of the United States against the continuing threat posed by Iraq." On March 19, 2003, President Bush used the authority granted in P.L. 107-243 by launching a military attack against Iraq. The President continues to use that authority for ongoing military operations in Iraq.
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Two separate but closely related issues confront Congress each time the President introduces Armed Forces into a situation abroad that conceivably could lead to their involvement in hostilities. One issue concerns the division of war powers between the President and Congress, whether the use of Armed Forces falls within the purview of the congressional power to declare war and the War Powers Resolution (WPR). The other issue is whether or not Congress concurs in the wisdom of the action. This report does not deal with the substantive merits of using Armed Forces in specific cases, but rather with congressional authorization for military action, and the application and effectiveness of the WPR. The purpose of the WPR (P.L. 93-148, passed over President Nixon's veto on November 7, 1973) is to ensure that Congress and the President share in making decisions that may get the United States involved in hostilities. Compliance becomes an issue whenever the President introduces U.S. forces abroad in situations that might be construed as hostilities or imminent hostilities. Criteria for compliance include prior consultation with Congress, fulfillment of the reporting requirements, and congressional authorization. If the President has not complied fully, the issue becomes what action Congress should take to bring about compliance or to influence U.S. policy. A related issue has been congressional authorization of U.N. peacekeeping or other U.N.-sponsored actions. For over three decades, war powers and the War Powers Resolution have been an issue in U.S. military actions in Asia, the Middle East, Africa, Central America, and Europe. Presidents have submitted 136 reports to Congress as a result of the War Powers Resolution, although only one (the Mayaguez situation) cited Section 4(a)(1) or specifically stated that forces had been introduced into hostilities or imminent hostilities. Congress invoked the WPR in the Multinational Force in Lebanon Resolution (P.L. 98-119), which authorized the Marines to remain in Lebanon for 18 months. In addition, P.L. 102-1, enacted in January 1991, authorizing the use of U.S. Armed Forces in response to Iraqi aggression against Kuwait, stated that it constituted specific statutory authorization within the meaning of the WPR. On November 9, 1993, the House used a section of the WPR to state that U.S. forces should be withdrawn from Somalia by March 31, 1994; Congress had already taken this action in appropriations legislation. War powers have been at issue in former Yugoslavia/Bosnia/Kosovo, Iraq, and Haiti. Authorizing military actions in response to the terrorist attacks against the United States of September 11, 2001, through P.L. 107-40 directly involved war powers. The continued use of force to obtain Iraqi compliance with U.N. resolutions remained a war powers issue from the end of the Gulf War on February 28, 1991, until the enactment of P.L. 107-243 in October 2002, which explicitly authorized the President to use force against Iraq, an authority he exercised in March 2003, and continues to exercise for military operations in Iraq. Most recently, issues associated with presidential compliance with the War Powers Resolution have arisen over his use of U.S. military forces to support a U.N. sanctioned "no-fly zone" in Libya, without obtaining congressional authorization for such action. Debate continues on whether using the War Powers Resolution is effective as a means of assuring congressional participation in decisions that might get the United States involved in a significant military conflict. Proposals have been made to modify or repeal the resolution. None have been enacted to date. This report will be updated as events warrant.
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On June 18, 2008, the Food, Conservation, and Energy Act of 2008 ( P.L. 110-246 , the2008 farm bill) became law when the House and Senate voted to override President Bush's veto of H.R. 6124 . The U.S. Department of Agriculture (USDA) has begun the process of implementing the new law. This report describes the farm commodity programs in the 2008 farm bill for the major crops such as wheat, corn, cotton, rice and soybeans. It also discusses the important policy developments in the new law compared to prior law. For more details on the legislative history of the farm bill and a side-by-side summary of its provisions and changes, see CRS Report RL34696, The 2008 Farm Bill: Major Provisions and Legislative Action , by [author name scrubbed] et al. The economic argument for the farm commodity price and income support programs is that markets do not efficiently balance commodity supply with demand. Imbalances develop because consumers do not respond to price changes by buying proportionally smaller or larger quantities (food demand is price inelastic). Similarly, farmers do not respond to price changes by proportionally reducing or increasing production (supply is price inelastic). These imbalances may contribute to volatile farm income, which can result in inadequate (or exaggerated) resource adjustments by farmers. Moreover, the long time lag between planting and harvest may magnify imbalances because economic and yield conditions may change. The economic argument against the farm commodity programs is that, like any subsidy, the farm programs distort production, capitalize benefits to the owners of the resources, encourage concentration of production, and comparatively harm smaller domestic producers and farmers in lower-income foreign nations. The objectives of federal commodity programs are to stabilize and support farm incomes by shifting some of the risks to the federal government. These risks include short-term market price instability and longer-term capacity adjustments. The goals are to maintain the economic health of the nation's farm sector so that it can utilize its comparative advantages to be globally competitive in producing food and fiber. Federal law mandates support for a specific list of farm commodities. For most of these commodities, support began during 1930s Depression-era efforts to raise farm household income when commodity prices were low because of prolonged weak consumer demand. While initially intended to be a temporary effort, the commodity support programs survived, but have been modified away from supply control and management of commodity stocks into direct income support payments. Critics of commodity programs usually acknowledge the underlying economic conditions that make stability more difficult to achieve for agriculture than for some other sectors. However, they argue that (1) current programs are highly distorting of world production and trade, (2) the levels of subsidies are high and have become capitalized into land prices and rents that raise the cost of production and make the United States less competitive in global markets, and (3) the benefits are concentrated among a comparatively small number of commodities produced on a small number of large farms. When farm programs were first authorized in the 1930s, most of the 6 million farms in the United States were small and diversified. Policymakers reasoned that stabilizing farm incomes using price supports and supply controls would help a large part of the economy (25% of the population lived on farms) and assure abundant food supplies. In recent decades, the face of farming has changed. Farmers now comprise less than 2% of the population. Most agricultural production is concentrated in fewer, larger, and more specialized operations. About 8% of farms account for 75% of farm sales (these 175,000 farms had average sales over $1 million). Most of the country's 2 million farms are part-time, and many operators rely on off-farm jobs for most of their income. Supporters of commodity subsidy programs may not contradict the critics, but do point out that other nations have distorting subsidy programs and/or trade barriers that should be eliminated if the United States is to make reforms. Landowners are concerned about a loss of rents and wealth if land prices drop in response to a reduction in the subsidies. Similarly, rural communities are concerned about any large decline in the real estate tax base that supports local schools, roads, and other community services. While large farms receive most of the production-linked subsidy payments, recipients argue that lower input costs and marketing efficiencies make large farms efficient and small farms uneconomic in the production of bulk commodities. Therefore, targeting subsidies to small farms, recipients say, would encourage inefficient production. The authority for USDA to operate farm commodity programs comes from three permanent laws, as amended: the Agricultural Adjustment Act of 1938 (P.L. 75-430), the Agricultural Act of 1949 (P.L. 81-439), and the Commodity Credit Corporation (CCC) Charter Act of 1948 (P.L. 80-806). Congress typically alters these laws through multi-year omnibus farm bills to address current market conditions, budget constraints, or other concerns. If a new farm bill is not enacted when an old one expires, we would revert to the permanent laws mentioned above for the commodities programs. Under permanent law, eligible commodities would be supported at levels much higher than they are now, and many of the currently supported commodities might not be eligible. Since reverting to permanent law is incompatible with current national economic objectives, global trading rules, and federal budgetary policies, pressure builds at the end of one farm bill to enact another. The 2008 farm bill ( P.L. 110-246 ) contains the most recent version of the commodity price and income support programs. It supersedes the commodity programs of previous farm bills, and suspends the relevant price support provisions of permanent law. Federal support exists for about two dozen farm commodities representing nearly one-third of gross farm sales. Five crops (corn, cotton, wheat, rice, and soybeans) account for about 90% of these payments. About 66% of the payments go to 10% of recipients. The " covered commodities " are the primary crops eligible for support: wheat, corn, grain sorghum, barley, oats, upland cotton, rice, pulse crops (dry peas, lentils, small chickpeas, and large chickpeas), soybeans, and other oilseeds (including sunflower seed, rapeseed, canola, safflower, flaxseed, mustard seed, crambe, and sesame seed ) . Peanuts are supported similarly. Farmers receive constant "direct payments" tied to historical production (except pulse crops do not receive direct payments despite being a covered commodity). Farmers may also receive "counter-cyclical" and "marketing loan" payments that increase when market prices (or, in some cases, revenue) are low. " Loan commodities " include all of the " covered commodities " plus extra long staple cotton, wool, mohair , and honey . These commodities are eligible for the marketing loan program only. Dairy prices are indirectly supported through federal purchases of nonfat dry milk, butter, and cheese. Producers also receive a counter-cyclical "milk income loss contract" (MILC) payment when prices fall below a target price. See CRS Report RL34036, Dairy Policy and the 2008 Farm Bill , by [author name scrubbed]. Sugar support is indirect through import quotas and domestic marketing allotments. No direct payments are made to growers and processors. See CRS Report RL34103, Sugar Policy and the 2008 Farm Bill , by [author name scrubbed]. Meats, poultry, fruits, vegetables, nuts, hay, and nursery products (about two-thirds of farm sales) do not receive direct support or payments in the commodity title of the farm bill. The 2008 farm bill defines a producer (for purposes of farm program benefits) as an owner-operator, landlord, tenant, or sharecropper that shares in the risk of producing a crop and is entitled to a share of the crop produced on the farm. In addition, an individual must comply with certain conservation and planting flexibility rules. A term commonly used in federal regulations is "actively engaged in farming," which generally means providing significant contributions of capital (land or equipment) and labor and/or management, and receiving a share of the crop as compensation. Conservation rules include protecting wetlands, preventing erosion, and controlling weeds. Planting flexibility rules allow crops other than the program crop to be grown, but generally prohibit planting fruits or vegetables on subsidized acreage. Modern farming enterprises usually involve some combination of owned and rented land. Two types of rental arrangements are common: cash rent and share rent. Under cash rental contracts, the tenant pays a fixed cash rent to the landlord. The landlord receives the same rent, bears no risk in production, and thus is not eligible to receive program payments. The tenant bears all of the risk, takes all of the harvest, and receives all of the government subsidy. Under share rental contracts, the tenant usually supplies most of the labor and machinery, while the landlord supplies land and perhaps some machinery or management. Both the landlord and tenant bear risk in producing a crop and receive a portion of the harvest. Both are eligible to share in the government subsidy. Even though tenants might receive all of the government payments under cash rent arrangements, they might not keep all of the benefits if landlords demand higher rent. Economists widely agree that a large portion of government farm payments passes through to landlords, and that government payments raise the price of land. About 60% of acres enrolled in the government commodity programs are rented. The farm commodity price and income support provisions in the 2008 farm bill include three primary types of payments: Direct payments unrelated to production or prices; Counter-cyclical payments which are triggered when (a) prices are below statutorily-determined target prices, or (b) revenue for a commodity falls below a historical guaranteed level, and Marketing assistance loans that offer interim financing and, if prices fall below loan prices set in statute, additional income support, sometimes paid as loan deficiency payments (LDP) . The first two types of payments are subject to payment limits on the size of payments. All three types of payments may be subject to income eligibility limits, depending on the size of farm and non-farm income. The 2008 farm bill generally continues the farm commodity price and income support framework of the 2002 farm bill, with modifications. It continues the direct payment, counter-cyclical payment, and marketing loan programs for the 2008-2012 crop years, but adjusts target prices and loan rates for some commodities. The law also creates a pilot revenue-based counter-cyclical program ("ACRE") beginning with the 2009 crop year. It revises payment limitations by tightening some limits and relaxing others. The new law also has a pilot program for planting flexibility, new restrictions on base acres developed for residential use, and elimination of benefits to farms with fewer than 10 acres of program crops. For the 2008 crop year, the programs are essentially unchanged from the 2002 farm bill. Figure 1 illustrates the three types of commodity payments in relation to market prices. Of the counter-cyclical payments, only traditional price-triggered counter-cyclical payments are included in the figure. Using corn as an example, if market prices are above $2.35/bushel, neither counter-cyclical nor marketing loan benefits (e.g., LDP) would apply. If market prices are between $1.95 and $2.35/bushel, a counter-cyclical payment would accrue, but no LDP would be available. If market prices are below the loan rate of $1.95/bushel, the maximum counter-cyclical payment of $0.40/bushel is made, and an LDP would be available equal to the difference between the $1.95 loan rate and the market price. Regardless of market prices, however, the direct payment of $0.28/bushel is paid. An important consideration for the farm commodity programs is how they are classified for trade purposes. As a member of the World Trade Organization (WTO), the United States made agricultural policy commitments under the WTO's Agreement on Agriculture. All WTO members agree to submit annual notifications of their farm program outlays to the WTO, and these outlays are subject to specific limits. For the United States, its total spending limit for programs that are considered to be trade distorting is $19.1 billion per year. Other types of payments are not subject to limits if they are "decoupled" or not considered to be trade distorting. Direct payments (DP) are fixed annual payments based on historical production; they do not vary with current market prices or yields. Recent high commodity prices and high farm incomes have made it difficult for some to justify the annual outlays for direct payments, which amount to $5 billion per year. Eligible commodities include wheat, corn, grain sorghum, barley, oats, upland cotton, rice, peanuts, soybeans, and other oilseeds (including sunflower seed, rapeseed, canola, safflower, flaxseed, mustard seed, crambe, and sesame seed). A farm is eligible for direct payments in proportion to its "base acres" (which are a constant historical average of its planting history of a particular commodity). For many farms, base acres date to the 1980s, but for some farms base acres were updated in 2002. In addition to its base acreage, each farm has a "direct payment yield" for each commodity, which is also an unchanging historical average based on the farm's actual yields over the 1981-1985 period. A farmer is not obligated to grow the covered commodity to receive a direct payment for that commodity (e.g., a farm may plant soybeans on corn base acres, and receive the direct payment for corn). The rationale for this planting flexibility is to allow farmers to respond to market signals when choosing crops. Because direct payments are constant and allow planting flexibility, they are arguably less distorting of production than prior farm programs that had greater government intervention. Direct payments thus are thus known as "decoupled" payments, and the United States has classified them as "green box" when reporting agricultural subsidies to the WTO. Green box payments help countries comply with international trade agreements because they do not count against subsidy ceilings. However, because the planting flexibility rules still have restrictions on planting fruits and vegetables (discussed later in this report), the direct payment program may be subject to challenge as to whether it qualifies as a green box payment. This challenge was raised during the 2008 farm bill debate as a reason to revise the direct payment program or allow complete planting flexibility, but the program was not changed. In the 2008 farm bill, the direct payment rates per commodity remain the same as in the 2002 farm bill ( Table 1 ), but the overall formula to compute the payment contains a 2% reduction in direct payments for crop years 2009-2011. Conferees accomplished this by changing the ratio of base acres on which direct payments are made from 85% to 83.3%. The 85% ratio is restored for the 2012 crop year to maintain a higher baseline for the next farm bill. The law eliminates advance direct payments beginning in the 2012 crop year. This delays advance payment of 22% of the direct payment from the December before most crops are planted to the following October at or after harvest, and thus into a new fiscal year. This scores budget savings of about $1.1 billion in FY2012. Although farmers will have to wait longer, they will receive their full payment. Participants in the new ACRE counter-cyclical program will continue to receive direct payments, but their direct payment amount will be reduced by 20% as required by the 2008 farm bill. The traditional counter-cyclical payment (CCP) program makes automatic payments when market prices fall below target prices set in statute. Historically, the farm commodity programs have focused on price, but producers have cited insufficient government support during years with natural disasters when yields are low and prices are high. In those years, they have little to sell and thus do not benefit from high market prices, but do not receive counter-cyclical support either. In response to this criticism, the 2008 farm bill creates a revenue-based counter-cyclical program called the Average Crop Revenue Election (ACRE). The ACRE program is an alternative to the traditional price counter-cyclical program, and is based on statewide crop-specific revenue data. ACRE makes payments when actual revenues from a commodity are less than a market-based, moving average revenue guarantee. Eligible commodities for either counter-cyclical option include the covered commodities for the direct payment program (wheat, corn, grain sorghum, barley, oats, upland cotton, rice, peanuts, soybeans, and other oilseeds), plus four new pulse crops beginning in 2009 (dry peas, lentils, small chickpeas, and large chickpeas). Traditional counter-cyclical payments compensate for the difference between a crop's target price and a lower effective market price. When effective market prices exceed the target price, no payment is made. As with direct payments, traditional counter-cyclical payments are proportional to a farm's base acres and "counter-cyclical payment yield," and do not depend on current production. Although the counter-cyclical program payment rate formula depends on market prices, it does not require the farmer to produce any of the commodity. Thus it is partially decoupled; it is decoupled from yield and acreage, but not from market prices. The United States has classified them as "amber box" when reporting agricultural subsidies to the WTO, and thus they are limited in size together with other amber box subsidies. The 2008 farm bill continues the traditional price counter-cyclical program, although it adjusts target prices and adds new commodities ( Table 1 ). Six out of 10 ongoing commodities receive a target price increase (wheat, sorghum, barley, oats, soybeans, and minor oilseeds), one has a small decrease (cotton), three are unchanged (corn, rice, and peanuts), and four are new in 2009 (dry peas, lentils, small chickpeas, and large chickpeas). Some commodity groups argued that their support levels were not high enough relative to other commodities in the 2002 farm bill (e.g., wheat and soybeans). The decrease in the cotton target price is the only change in the 2008 crop year. The new crops are added in the 2009 crop year. None of the target price increases occur until the 2010 crop year. The 2008 farm bill generally makes counter-cyclical payments after the October 1 that falls after the end of the marketing year and eliminates advance counter-cyclical payments beginning with the 2011 crop year, both of which help score budget savings by delaying some payments compared to the 2002 farm bill. Participants in ACRE are ineligible for traditional counter-cyclical payments. Beginning with the 2009 crop year, farmers may choose either the traditional CCP or the new revenue-based ACRE option. Participants in ACRE will continue to receive direct payments, but at a 20% reduced rate. Participants will also continue to be eligible for nonrecourse marketing loans, but with a 30% lower loan rate. Producers who choose ACRE (whether in 2009, 2010, 2011, or 2012) may not revert to the traditional CCP for the remainder of the farm bill. The ACRE program is available for the same crops as traditional counter-cyclical payments, but is based on planted acres rather than base acres. If market prices are expected to be high, ACRE might be preferred by many farmers because the traditional counter-cyclical payments would be zero or small. Even under high prices, ACRE may help farmers manage downside systemic risks—that is, manage the risks that are inherent in the market and cannot be diversified away. And, as market price falls, ACRE may make payments when traditional counter-cyclical programs would not. ACRE is expected to perform better than traditional counter-cyclical programs under high-price environments, in states with larger yield increase since the 1980s, in states with more variable yields, and in states that are outside the primary growing regions of a particular commodity. To receive an ACRE payment, two triggers need to be met: First, the actual state revenue for a supported crop during the crop year must be less than the state-level revenue guarantee amount. Second, an individual farm's actual revenue for a supported crop must be less than the farm's benchmark revenue. The second trigger keeps farms from receiving payments when they did not have a sufficient loss, even if the state as a whole sustained a loss in revenue for the crop. The state-level revenue guarantee amount and the individual farm benchmark revenue are determined by the product of a guaranteed price with a guaranteed level of production. Benchmark or guaranteed yields at the state and farm levels are Olympic averages of the most recent five years. Price guarantees are averages of the higher of (a) the marketing year price or (b) the marketing loan rate as reduced under ACRE for the most recent two years. The revenue guarantee is 90% of the product of the average benchmark yield and the price guarantee. The 10% reduction allows for some variation in revenue before subsidy payments begin (similar to a deductible). Changes in the revenue guarantee are limited to plus or minus 10% from the previous year. If both triggers are met, an individual farm will receive an ACRE payment that is based on the state-level difference between actual revenue and the ACRE guarantee per acre, multiplied by a percentage (83.3% in crop years 2009-2011, or 85% in crop year 2012) of the farm's planted acreage, but pro-rated based on the individual farm's yield history compared to the state's yield history. The maximum payment rate is 25% of the ACRE guarantee. ACRE is modeled largely on the Average Crop Revenue (ACR) proposal in the Senate-passed version of the farm bill ( H.R. 2419 ), but is significantly modified. The House-passed farm bill ( H.R. 2419 ) offered a pilot revenue counter-cyclical program based on national-level revenues. The state-level plan will make payments more often than a national-level plan since a smaller area is more likely to fall below average production than a larger area. Because the revenue guarantee is a moving average and year-to-year changes are limited, the guarantee will lag changes in the market. If the market price declines over several years, this may lead to higher outlays than traditional CCP as the adjustment to the lower price level occurs. The Administration has criticized the ACRE program because its two-year price guarantee feature will incorporate the historically high recent market prices into the guarantee, and consequently allow possibly large payments to farmers if market prices decline from their currently record high levels. The Administration has argued that the Congressional Budget Office (CBO) score of this program, for purposes of estimating budgetary impacts of the legislation, does not reflect the magnitude of this possibility because market prices in the baseline are expected to remain high. In light of these concerns over the level of outlays, the Administration has indicated that it may not use the immediately preceding two crop years to set the revenue guarantee level for ACRE, as instructed in statute. This has caused debate between Congress and the Administration over congressional intent. The Administration wants to use prices from 2006 and 2007 when implementing ACRE for the 2009 crop year. This would set a lower revenue guarantee, and keep federal outlays lower. Members in Congress say the farm bill requires using prices from 2007 and 2008 for ACRE in 2009, and that those are the years that were used by CBO when scoring the farm bill. Because the Administration has not yet released regulations for the ACRE program, the final disposition of this dispute is not yet determined. Marketing loans are nonrecourse loans that farmers can obtain by pledging their harvested commodities as collateral. Traditionally, the loans provide interim financing by allowing farmers to receive some revenue for their crop when the loan is requested, while at the same time storing the commodity for later disposition when prices may be higher. As an alternative to taking out a loan, the loan deficiency payment (LDP) is a cash payment option that allows farmers to sell grain in response to market signals without putting their commodity under loan, while receiving the price benefits of the loan program. Marketing loans provide minimum price guarantees on the crop actually produced, unlike direct or counter-cyclical payments, which are tied to historical bases. They are not decoupled as they depend both on current production and market prices. The United States has classified them as "amber box" when reporting agricultural subsidies to the WTO. National-level loan prices are set by the farm bill ( Table 1 ), and are negotiated in the legislative process, rather than established based on formulas using historical market prices as was done in farm bills before 1990. USDA adjusts the national average loan rate to local (usually county) loan rates to reflect spatial difference in markets and transportation. Commodities eligible for marketing loans include all of the commodities that are eligible for direct and counter-cyclical payments, plus extra long staple (ELS) cotton, wool, mohair, and honey. However, ELS cotton is not eligible for loan deficiency payments. Sugar receives assistance through commodity loans, but under a separate provision with unrelated procedures. The 2008 farm bill continues the nonrecourse marketing loan program under the same framework as in the previous farm bill ( Table 1 ). The 2008 farm bill increases the loan rate for eight out of 20 commodities (wheat, barley, oats, minor oilseeds, graded wool, honey, cane sugar, beet sugar), decreases the loan rate for two commodities (dry peas, lentils), and adds one new pulse crop beginning with the 2009 crop year (large chickpeas). Loan rates for the 2008 crop year are the same as under the 2002 farm bill. Increases in loan rates do not occur until the 2010 crop year, while changes for the pulse crops occur in the 2009 crop year. Participants in the ACRE counter-cyclical program continue to be eligible for marketing loans and LDPs, but loan rates will be reduced by 30% as required in the farm bill. Beneficial interest generally refers to owning the commodity or having a stake in its disposition. Beneficial interest is lost when the commodity is sold. The Administration had recommended that the farm bill change the "beneficial interest" rule, but Congress did not change it. The rule allows farmers to lock in their LDP when market prices are low (usually at harvest), continue to own the commodity, and sell it at a future and possibly higher market price than when the LDP was determined. Policy makers said they wanted farmers to continue to have the flexibility to market their commodities in response to market signals and benefit from the program. Advocates for change pointed out that if farmers can sell their crop for more than the support price, then government support should be unnecessary. More generally, if farmers can sell their crop for more than the market price at the time that the LDP was determined, the LDP would not need to be as large. These advocates for change wanted the determination of the LDP to be tied to when a farmer loses beneficial interest. Although the beneficial interest rules remain the same, the loan repayment rate (also known as the posted county price, or PCP) used to determine the LDP is to be computed using a 30-day average of market prices, rather than the daily repayment rate of the 2002 and prior farm bills. Using a 30-day average for the repayment rates will lessen, but not eliminate, the market timing strategies that some farmers have used to maximize LDPs. Among the special marketing loan provisions for upland cotton (which continue the prior law policies of special import quotas and limited global import quotas), the 2008 farm bill also creates a new payment for domestic users of upland cotton. The payment is termed "economic adjustment assistance," and is only to be used to acquire, construct, modernize, develop, convert, or expand operations. Unlike the Step 2 cotton payment that was eliminated following a WTO ruling against the U.S. cotton program, the new cotton users payment is for upland cotton of domestic or foreign origin. The payment is 4 cents per pound from August 1, 2008, to July 31, 2012. Thereafter, the payment rate is 3 cents per pound. Two types of payment limits exist for the farm commodity programs. One sets the maximum amount of farm program payments that a person can receive per year. The other sets the maximum amount of income that an individual can earn and still remain eligible for program benefits (a means test). The farm commodity programs have had the first type of limit since 1970. The means test was added starting with the 2002 farm bill, and also is known as the adjusted gross income (AGI) limit. The 2008 farm bill makes several changes to payment limits, some by tightening the limits and others by relaxing them. Limits are tightened by (a) reducing the AGI limit, (b) eliminating the "three-entity rule," which allowed individuals to double their payments by having multiple ownership interests, and (c) requiring "direct attribution" of payments to a living person instead of to a corporation, general partnership, etc. Limits are relaxed by eliminating any limit on marketing loans. The new payment limit rules do not take effect until the 2009 crop year. The payment limits issue is controversial because it directly addresses questions about what size farms should be supported, whether payments should be proportional to production or limited per individual, and who should receive payments. The effect of payment limits varies across regions. The South and West have more large farms than the Upper Midwest or Northeast, and are more affected by payment limits. Cotton and rice farms are affected more often than corn, soybean, or wheat farms since the former group's subsidies per acre are higher. Supporters of payment limits use both economic and political arguments to justify tighter limits. Economically, they contend that large payments facilitate consolidation of farms into larger units, raise the price of land, and put smaller, family-sized farming operations at a disadvantage. Even though tighter limits would not redistribute benefits to smaller farms, they say that tighter limits could help indirectly by reducing incentives to expand, and could help small and beginning farmers buy and rent land. Politically, they believe that large payments undermine public support for farm subsidies and are costly. Newspapers have published stories critical of farm payments and how they are distributed to large farms, non-farmers, or landowners. Limits are increasingly appealing to urban lawmakers, and have advocates among smaller farms and social interest groups. Critics of payment limits (and thus supporters of higher limits or no limits) counter that all farms are in need of support, especially when market prices decline, and that larger farms should not be penalized for the economies of size and efficiencies they have achieved. They say that farm payments help U.S. agriculture compete in global markets, and that income testing is at odds with federal farm policies directed toward improving U.S. agriculture and its competitiveness. Under the 2008 farm bill, the annual limit on payments that are directly attributed to a person is $105,000 for direct and counter-cyclical payments combined. The payment limit has two parts: $40,000 for direct payments, and $65,000 for counter-cyclical payments. These amounts effectively can be doubled to a combined $210,000 for a sole proprietor's farm by having a spouse ( Table 2 ). These amounts are the same as in the 2002 farm bill. Corporations, partnerships, and trusts are eligible for payments, but the payments must be attributed to a living person by the fourth level of ownership. Payments for most commodities are combined toward a single limit, but a separate and equal payment limit applies to peanuts. Marketing loan gains and LDPs are unlimited in the 2008 farm bill, a change from prior law that had imposed a $75,000 limit but that could be avoided legally by using commodity certificates to repay marketing loans. Both the House- and Senate-passed bills chose to eliminate limits on marketing loans altogether in the 2008 farm bill, rather than apply payment limits to the use of commodity certificates. This was in response to concerns from cotton and rice growers who did not want tighter limits, and who were already opposing reductions in the AGI limit. Since commodity certificates now are viewed by many as unnecessary, the farm bill terminates authority to use certificates to repay marketing loans after the 2009 crop year. Because the 2008 farm bill eliminates any limit on marketing loans, it is difficult to compare the $210,000 limit of the 2008 farm bill with the $360,000 limit of the 2002 farm bill. The $360,000 limit was for three types of payments; the $210,000 limit is for only two types of payments. The 2008 farm bill continues the "spouse rule" that allows a husband and wife to be treated as separate persons to double a farm's payment limit. It repealed, however, the long-standing "three-entity rule," which allowed an alternative means of doubling by letting one person receive payments on up to three entities, with second and third entities being eligible for one-half of the limits (one whole plus two halves results in doubling). For the AGI limit, the 2008 farm bill allows a married couple to divide their income for the AGI test as if separate income tax returns had been filed. This effectively allows doubling if the income is divided in an exact manner (discussed below). When the three-entity rule was repealed, it was replaced with "direct attribution." Rather than tying payment limits to farm organization, which sometimes promoted the creation of entities for the purpose of doubling payment limits, the 2008 farm bill allows payments to various types of entities. But it now requires that the payments be attributed to a living person based on ownership shares in the entities. If a payment to a business entity cannot be allocated to a living person after four levels of ownership, the payment to the overall entity is reduced proportionately. Thus, individual people may receive payments on any number or ownership arrangement of farms (not limited to three entities), but the total amount of payments attributed to each living person may not exceed the statutory limits. The 2008 farm bill adopts a slightly different approach from the 2002 farm bill for the AGI limit. Formerly, the AGI limit had an exception if 75% of AGI was earned from farming sources. The 2008 farm bill eliminates the exception and creates two new measures of AGI: adjusted gross non-farm income, and adjusted gross farm income. First, if a three-year average of non-farm AGI exceeds $500,000, then no program benefits are allowed (direct, counter-cyclical, and marketing loan). Second, if a three-year average of farm AGI exceeds $750,000, then no direct payments are allowed (but counter-cyclical and marketing loan benefits are allowed for these higher-income farmers). Table 2 shows that program participants can have income from both sources, but the caps for each type are "hard" caps (that is, there are no exceptions to the cap as with "soft" caps, except that the cap on farm AGI applies only to direct payments). For example, if a full-time farmer has non-farm AGI over $500,000, his/her program payments are eliminated regardless of his/her farm income. Another example is that a taxpayer may have AGI between $750,000 and $1.25 million and still receive program benefits if the income is split in such a way as to remain below the caps on farm and non-farm income. Moreover, the 2008 farm bill adopts a Senate provision that allows the AGI of a married couple to be divided as if separate tax returns were filed. While this provision theoretically allows doubling of the AGI limits to $2.5 million for a married couple, the income needs to be legitimately allocated both between the spouses and by the types of income, likely by Social Security numbers or equivalent identifiers. Such doubling to $2.5 million would be more difficult than the $2.5 million AGI test of the 2002 farm bill. Reliable national data on the effect of payment limits are rare, especially for the payment limit or AGI levels specified in the 2008 farm bill. However, data developed since enactment of the 2002 farm bill provide some guidance on the general magnitude of the effects. According to the report of the Payment Limits Commission mandated by the 2002 farm bill, about 1% of producers receiving payments in 2000 were affected by the $40,000 limit on what now are called direct payments. This amounted to 12,300 producers across 42 states. The reduction was $83 million, or 1.6% of the value of payments, with California and Texas accounting for 36% of the reduction. Under the 2002 farm bill's AGI limit of $2.5 million, annual data suggest that only about 3,100 (0.15%) farmers had AGI over $2.5 million. Since not all of these farm taxpayers receive commodity subsidy payments and some likely would have qualified for the 75% farm income exception, USDA estimated that the 2002 farm bill's AGI cap affected only a few hundred farmers. Masked by these data is the fact that limits could be avoided, usually legally, by reorganizing a farm. In fact, one study in 2007 suggests that about 20% of rice farmers reorganized their business because of limits, despite only 1.2% appearing to be subject to the limit. The 2008 farm bill's elimination of the three-entity rule and application of direct attribution to living persons should lessen reorganization of farm businesses solely for purposes of avoiding payment limits. In terms of the 2008 farm bill, data are not yet available that are specific to the farm bill limits of $500,000 non-farm AGI and $750,000 farm AGI. During the debate over tighter limits, USDA data suggested that about 1.5% of farm operator households have AGI over $200,000 and received some farm program payments (1.1% of farm sole proprietorships, 2.5% of farm partnerships, and 9.7% of farm households involved in farming through a corporation). About 8.5% of rice farms and 9.3% of cotton farms have AGI over $200,000 and receive program payments. This compares to 5.5% for corn farms and only 1.3% for soybean farms. The farms potentially affected by the AGI limit are not necessarily large farms, nor necessarily above the AGI limit because of high farm income. Supporters of the AGI proposal say farmers are skilled at managing income taxes and can keep taxable farm income lower using tax incentives and rules. The portion of farmers affected by the relatively higher limits in the farm bill would be smaller than the percentages in the preceding paragraph. Besides the changes in payment limits agreed to by conferees and enacted in the 2008 farm bill, there have been five votes specifically or predominately focused on payment limits since 2002 (four in the Senate and one in the House). All of these amendments advocated further tightening of the limits. None resulted in the amendments being successfully enacted into law. However, three received a majority vote in the Senate, but they were either deleted during conference negotiations (as in the 2002 farm bill), or did not meet procedural hurdles requiring a 60-vote majority to avoid a filibuster (as in the 2008 farm bill). The Administration also proposed a major tightening of payment limits in its 2007 proposal for the farm bill. The Administration's plan for a $200,000 AGI cap colored the debate about payment limits throughout the 2008 farm bill's development. It became a lower limit of the range of possibilities (or a goal for some) when legislative compromises were proposed. Other bills to revise payment limits have been introduced by Senators Dorgan and Grassley during each Congress since 2002, but did not receive action. They did, however, became the foundation for the various Dorgan/Grassley floor amendments that are described below which did receive votes. Senator Klobuchar also proposed a tighter AGI limit in the Senate that received a floor vote. Representative Kind included payment limits as a major part of his floor amendment that was a substitute for the commodity title. Payment limit proposals receiving floor votes since 2002 and the Administration's 2007 plan are summarized blow. Grassley/Dorgan amendment to the 2008 Senate farm bill. An amendment by Senators Grassley and Dorgan ( S.Amdt. 3695 to H.R. 2419 ) to lower the limit on payments from $360,000 to $250,000 and apply the limits to all marketing loan options received a 56-43 vote. Despite having a majority, it did not receive the 60 votes necessary to avoid a filibuster. Klobuchar amendment to the 2008 Senate farm bill. An amendment by Senator Klobuchar ( S.Amdt. 3810 to H.R. 2419 ) to tighten the AGI limit to $250,000 unless more than 67% of AGI is farm income, and $750,000 with no exceptions, received a 48-47 vote. Despite receiving a majority, it did not have the 60 votes necessary to avoid a filibuster. Kind Amendment to the House 2007 farm bill. An amendment by Representative Kind ( H.Amdt. 700 to H.R. 2419 ) to generally revise the commodity programs, including tightening payment limits, failed by a vote of 117-309. The amendment would have tightened the AGI limit to a firm $250,000 cap for everyone and $125,000 unless 66% of AGI came from farming. USDA ' s 2007 farm bill proposal. The Administration's 2007 farm bill proposal would have denied payments to households with more than $200,000 of AGI, with no exception, redistributed the $360,000 limit across the payment types, and eliminated the three-entity rule. It was not incorporated in its entirety into any legislation. Budget reconciliation in 2005. When Congress debated farm bill changes as part of budget reconciliation in 2005, a floor amendment by Senator Grassley to tighten payment limits failed by a procedural vote of 46-53 ( S.Amdt. 2359 to S. 1932 , 109 th Congress). Dorgan amendment to the 2002 farm bill. The Senate-passed version of the 2002 farm bill contained tighter limits ( S.Amdt. 2826 to S. 1731 , 107 th Congress). The vote was 66-31 in favor of tighter limits, but those limits were rejected by the conference committee. The 2008 farm bill eliminates direct and counter-cyclical payments to farms with fewer than 10 base acres (combined across all crops). The exclusion, however, does not apply to farms owned by socially disadvantaged or limited-resource farmers and ranchers. Moreover, Congress intended for farmers to be able to aggregate land across multiple farms they operate before USDA enforces the restriction. The justification for the prohibition on small payments and/or small farms is a desire by some to stop payments to non-farmers. Some landowners with small holdings receive payments but are not full-time farmers; they receive most of their income from non-farm jobs and are sometimes called hobby farmers. Supporters of the 10-acre restriction do not want to include these farmers as program beneficiaries. However, the restriction does not address payments to the non-farm landowners of larger farms who may still qualify for payments. Moreover, implementing the new provision may reduce the number of recipients (and the constituency) of the farm programs and increase the size of the average payment, which may have negative connotations. Policy differences have arisen over congressional intent to allow farmers to combine parcels of land they farm before the 10-acre rule is enforced and the Administration's more restrictive interpretation of statute. The statute says: A producer on a farm may not receive ... payments if the sum of the base acres of the farm is 10 acres or less ... [but this provision] shall not apply to a farm owned by ... a socially disadvantaged farmer or rancher ... or a limited resource farmer or rancher. ( P.L. 110-246 , sec. 1101(d)) Strictly speaking, the statute does not mention aggregating or combining acreage. USDA chose to apply a direct interpretation of statute and does not give any weight to the conference report language that states: The Managers intend for the Department to allow for aggregation of farms for purposes of determining the suspension of payments on farms with 10 base acres or less. The Managers expect for the Department to review farms in this category on an annual basis rather than prohibiting payments to these farms for the life of the farm bill. ( H.Rept. 110-627 for H.R. 2419 , pp. 674-675). The Administration's regulation to implement this provision for the 2008 crop year has caused some farmers or landowners to be denied participation in the commodity programs. USDA adopted a strict interpretation of the statute and its regulations prohibited reconstitutions of farms under 10 acres unless the tracts were under the same ownership: [T]o be assured that producers on farms with base acres of 10 acres or less are prohibited from receiving payments ... [FSA] will not approve requests for farm combination reconstitutions of farms having base acres of 10 acres or less ... However, as an exception to the above rule, a farm with a total of 10 base acres or less may combine with another farm if one of the farms undergoes a change in land ownership [and the ownership of the two farms is identical]." Constituents have complained to Congress, and Members have written to USDA to say that USDA is not following congressional intent as explained in report language. Because of this implementation issue, both the House and Senate passed a bill, H.R. 6849 , to suspend enforcement of the 10-acre requirement for the 2008 crop year. A longer-term fix is being left to the 111 th Congress. H.R. 6849 passed both the Senate and the House by unanimous consent on September 29, 2008. The bill now awaits the President's signature. Specifically, the bill: Suspends the 10-acre requirement for the 2008 crop year. Farms with less than 10 acres would be able to receive payments as they have in prior years. Extends the enrollment period for the commodity program for the 2008 crop year beyond the original deadline of September 30, 2008. Extending the sign-up period for farms under 10 acres allows those who were denied participation during the summer of 2008 by USDA regulations to still enroll and receive benefits. The extension will go until the later of November 14, 2008, or 45 days after enactment. Offsets the $9 million cost to suspend the provision for one year by: Reducing mandatory funds provided in the 2008 farm bill for information technology upgrades that support the crop insurance program. Originally, $15 million per year was to be available for FY2008-FY2011 ($60 million in total); H.R. 6849 reduces the amount for FY2011 by $6 million. Making changes to the new permanent disaster program regarding (1) treating minor acreages and grazing land, and (2) establishing a minimum loss threshold that requires a physical loss of at least 10 percent of one crop on the farm to qualify for payments. The later change prevents payments due solely to price reductions. The changes are scored to save $3 million. Given the higher offsets required to make a more permanent correction to the 10-acre provision (possibly as much as $90 million over 10 years, as described in the next section), both chambers amended the original bill to the less expensive approach of a two-year suspension, and ultimately only a one-year suspension. Members have indicated that a longer-term fix will need to be addressed in the next Congress. The House Agriculture Committee reported an earlier version of H.R. 6849 on September 19, 2008. A similar bill, S. 3538 , was introduced in the Senate on September 23, 2008. These versions were nearly identical in suspending the 10-acre provision for two years, but differed primarily in their source of budgetary offsets. The House offset the $20 million cost of the two-year suspension entirely with reductions to the information technology account for crop insurance. The Senate bill did not have any offsets. The version of H.R. 6849 as introduced would have put congressional intent for aggregating farms into the statute. It would have added a third exception to the 10-acre requirement (in addition to exceptions for socially disadvantaged and limited-resource farmers): farms that add up to more than 10 acres when combined with other farms operated by the same person. When the 2008 farm bill was enacted, CBO estimated that the 10-acre restriction would save about $88 million over 10 years (FY2008-FY2017); this estimate was based on statutory language and not on report language. Because the approach in H.R. 6849 as introduced would greatly reduce the number of farms excluded by the 10-acre requirement, the savings would be much less—most likely nearly eliminating the $88 million 10-year savings. The effect of the 10-acre minimum requirement depends greatly on the definition of "farm" in USDA regulation and implementation practices. Farmers can "reconstitute" their farms into larger or smaller units based on various actions. Congress refers to aggregation in the report language for the 10-acre provision. How does the use of these terms affect the provision? The definition of "farm" to administer the commodity programs is different from other statistical or perceived definitions of farms. This may impact the policy differences between congressional intent and USDA's interpretation of statute. Under Farm Service Agency (FSA) regulations, a "farm" is one or more tracts of land considered to be a separate operation. Land in a farm does not need to be contiguous; however, a "tract"—a smaller unit—is a parcel of contiguous land under the same ownership. When multiple tracts are treated as one farm, the tracts must have the same operator and owner, except that tracts with different owners may be combined into one farm if all owners agree. Thus, one producer may be operating several "farms" if he/she is renting land from several landlords, or has purchased land in several tracts. It may be more common to combine farms that are under cash rental arrangements (where the operator receives all of the government payments), and less common to combine farms that are under share rental arrangements (where the landlord has a management role and receives some of the government payment). "Reconstitution" is the process of combining (or dividing) tracts or farms for purposes of the commodity programs . In general, FSA requires reconstitution when a farmer buys land and operates it; in this way the number if farms per operator is minimized. When a farmer adds land to an operation by rental arrangements, FSA may allow—but does not necessarily encourage—voluntary reconstitutions. "Aggregation" is a term not used by USDA; aggregation seems only to have been used by Congress in the report language for the 2008 farm bill. The intent of Congress seems to be that aggregation is either a synonym for reconstitution or another means of combining acreage without triggering a formal reconstitution. That is, it basically means the same thing as a reconstitution; but by not using the term "reconstitute," perhaps Congress is allowing USDA to create another means of combining farms for the single purpose of the 10-acre requirement without triggering a formal reconstitution. The number of base acres affected by the provision are expected to be comparatively small. The CBO budget estimate for this provision, based on the statute only, shows a savings up to $9 million per year, for about $37 million in savings over five years and $88 million over 10 years. This is less than 0.1% of the expected outlays for the commodity title. The following data illustrate differences in the number of farms based on two definitions. The number of "farms" as defined by FSA for the 2002 farm bill included 1.9 million "farms" with base acres. Some of these farms must have been combined into single operations, because the same database revealed only 1.3 million "producers" on those farms. Given the similarity of the 2002 and 2008 farm bills regarding base acreage, these numbers are unlikely to change very much. Under the more commonly known definition of farm used for the agriculture census ($1,000 of agricultural sales), there are 2.1 million farms. Not all of these farms have base acres or receive government payments. Only 531,000 farms in the census statistic received non-conservation farm payments in 2002. The 1.9 million farms with base acres in FSA's definition is much greater than the 531,000 farms in the census receiving government payments. This indicates aggregation of farms within FSA's database into actual operating farms. Of the 2.1 million census farms, 78,000 had harvested crop land of fewer than 10 acres. Some of these farms may be unsubsidized farms growing fruits and vegetables, thus giving credence to the hypothesis that few farms may be excluded if broader reconstitution is allowed for farms under 10 acres. As described previously, under the direct payment program farmers may plant crops other than the program crop and still receive direct payments—this is known as planting flexibility. They are prohibited, however, from planting fruits, vegetables, and wild rice on program crop base acres. Limited exceptions have allowed growers with a history of planting fruits and vegetables to continue to do so, but direct and counter-cyclical payments were reduced acre-for-acre of fruits and vegetables. The restriction on planting fruits and vegetables is a seemingly reasonable response to protect growers of unsubsidized fruits and vegetables who do not want competition from subsidized growers of program crops. The planting restriction on fruits and vegetables, however, jeopardizes the ability of the United States to classify direct payments as non-distorting, decoupled, or "green box" for WTO accounting. The WTO has determined that the restrictions are inconsistent with the rules of a minimally distorting subsidy. Another complication with the restriction on planting fruits and vegetables surfaced when soybeans became eligible for direct payments in the 2002 farm bill. This created a shortage of acres in some parts of the Midwest for growing fruits and vegetables for processing (canning and freezing). Some landlords stopped allowing fruits and vegetables to be grown in rotation in place of soybeans. Many growers and processors asked for flexibility to grow fruits and vegetables for processing on base acres without other penalties, in return for giving up payments on those acres while growing fruits and vegetables. Such proposals became known as "farm flex." The 2008 farm bill creates a pilot planting flexibility program for fruits and vegetables for processing, while continuing the overall restriction on planting fruits and vegetables on base acreage. The pilot program begins in 2009, and allows farmers in seven Midwestern states to plant base acres in cucumbers, green peas, lima beans, pumpkins, snap beans, sweet corn, and tomatoes grown for processing. Their base acres are temporarily reduced for the year (resulting in lower direct and counter-cyclical payments), but restored for the next crop year. The states include Minnesota (34,000 acres), Wisconsin (9,000 acres), Michigan (9,000 acres), Illinois (9,000 acres), Indiana (9,000 acres), Ohio (4,000 acres), and Iowa (1,000 acres). The 2008 farm bill continues the exceptions of prior law that allowed farms with a history of growing fruits and vegetables to plant them, but with a one-year reduction in direct and counter-cyclical payment acres. The pilot program is similar in that it reduces payments acres, but in the aggregate is in addition to the acreage allowed under the continuation of the exceptions. The additional planting flexibility of the pilot program addresses the subset of concerns in the Midwest, but it does not address concerns over WTO compliance. Restrictions on planting fruits and vegetables remain on acreage outside the pilot program, and for all fresh fruits and vegetables. The Administration had proposed eliminating the fruit and vegetable planting restriction completely. For more background, see CRS Report RL34019, Eliminating the Planting Restrictions on Fruits and Vegetables in the Farm Commodity Programs , by [author name scrubbed] and [author name scrubbed]. The 2008 farm bill adopts a Senate provision that eliminates base acres on land that has been subdivided into multiple residential units or other non-farming uses. Prior farm bills have eliminated base acres only for land developed for nonagricultural commercial or industrial use. This provision addresses the issue raised in media stories about the farm programs making payments to non-farmers or for land that is not in production. A Washington Post article in 2006 identified the practice of non-farm homeowners receiving farm commodity payments on what had become known as "cowboy starter kits," which were residential developments in Texas on land with rice base acres. Developments of houses had been built on several acres each, and the few acres that were not directly in the yard of the house retained their rice base acreage and still qualified for direct payments, even though there was no intention by the homeowners to farm or maintain the land for agriculture. The 2008 farm bill requires USDA to reconcile the social security numbers of program recipients with a Social Security database twice a year. The purpose is to assure that program beneficiaries are alive, and that estates do not continue to qualify beyond a reasonable period. USDA must also issue regulations describing how long a deceased person's estate may continue to qualify for program benefits. Prior to 2008, a USDA regulation already specified a two-year period for estates to qualify, unless excepted individually by the Secretary (7 C.F.R. 1400.206). The farm bill provision will require USDA to reissue and update the regulation, and presumably to increase enforcement. The provision was in response to a 2007 GAO report showing that some farm commodity programs continued to be paid to deceased farmers or their estates beyond the two-year regulation. Because spending on the farm commodity programs is a combination of fixed decoupled payments and market-driven counter-cyclical payments, outlays may be highly variable from year to year. Figure 2 shows that, from 1981 to 2007, commodity program outlays (including dairy and sugar, but excluding disaster payments) have ranged from a low of $3.3 billion in 1981 to a high of $27 billion in 2000. The average over the period was $11.1 billion per year. From 1981-1990, the average annual outlay was $11.4 billion; from 1991-2002, the average was $10.6 billion, and from 2003 to 2007 (roughly the years of the 2002 farm bill), the average was $11.7 billion. The CBO forecast for the 2008-2017 period is about $7.4 billion annually, well below the historical averages due to the record high commodity prices at the time that the 2008 farm bill was enacted. Compared to the baseline of continuing the provisions of the 2002 farm bill, the Congressional Budget Office (CBO) cost estimate (score) of the new provisions in Title I of the farm bill is a five-year savings of $1.726 billion and a 10-year savings of $1.658 billion. If the scores of these changes are added to the 2007 baseline of budget outlays used to write the farm bill, then CBO's expected cost of Title I is $41.628 billion for FY2008-2012 and $85.521 billion over 10 years ( Table 3 ). This includes the program crop commodities, dairy, and sugar. The 5- and 10-year savings that are scored for all of Title I are the net result of various provisions that both score savings or cost more than prior law. The largest savings is the result of a shift in the timing of direct payments. Making advance payments of a portion of direct payments is ended beginning with the 2012 crop year ( Table 3 ). This shifts about $1.1 billion of payments into a later fiscal year, which achieves savings in the budget window but does not reduce the total amount eventually paid to farmers. Other savings are scored by reducing the proportion of base acres on which direct payments are paid, reducing direct payments and marketing loan rates for participants in the new ACRE revenue counter-cyclical program, replacing some counter-cyclical payments with ACRE payments, eliminating advance counter-cyclical payments beginning in crop year 2011, and by tightening payment limits ( Table 3 ). Some of these savings are offset with costs of the new ACRE payments, economic assistance for cotton users, and higher target prices and loan rates for certain covered commodities, dairy, and sugar. CBO combines the effect of some of these provisions into a single score (e.g., raising counter-cyclical target prices and eliminating traditional counter-cyclical payments for ACRE participants). Thus, a provision-by-provision score is not possible.
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Farm commodity price and income support provisions in the Food, Conservation, and Energy Act of 2008 (P.L. 110-246, the 2008 farm bill) include three primary types of payments: Direct payments unrelated to production or prices; Counter-cyclical payments for a commodity that are triggered when (a) prices are below statutorily-determined target prices, or(b) revenue falls below a historical guaranteed level; and Marketing assistance loans that offer interim financing and, if prices fall below loan prices set in statute, additional income support. The farm commodity programs are the most visible part of the farm bill. In recent years, five crops (corn, wheat, cotton, rice, and soybeans) account for over 90% of government commodity payments to farmers. The 2008 farm bill generally continues the farm commodity price and income support framework of the 2002 farm bill, with modifications. It continues the direct payment, counter-cyclical payment, and marketing loan programs for the 2008-2012 crop years, but adjusts target prices and loan rates for some commodities. The law also creates a pilot revenue-based counter-cyclical program ("ACRE") beginning with the 2009 crop year. The new law also has a pilot program for planting flexibility, new restrictions on base acres developed for residential use, and elimination of benefits to farms with fewer than 10 acres of program crops. For the 2008 crop year, the programs are essentially unchanged from the 2002 farm bill. Payment limits both determine eligibility and set a maximum amount of commodity payments per person. The 2008 farm bill revises payment limitations for the commodity programs by tightening some limits and relaxing others. Limits are tightened by (1) reducing the adjusted gross income (AGI) limit to $500,000 of non-farm AGI and $750,000 of farm AGI, (2) eliminating the "three-entity rule," which allowed individuals to double their payments by having multiple ownership interests (doubling by having a spouse continues), and (3) requiring "direct attribution" of payments to a living person. Limits are relaxed by eliminating any limit on the marketing loan program. The new rules do not take effect until the 2009 crop year. Implementation has been problematic in two ways. First, the Administration did not allow farmers to combine land before enforcing the 10-acre restriction, an allowance Congress mentioned only in report language. Consequently, Congress passed H.R. 6849 to suspend enforcement of the 10-acre provision for one year and offset the cost with reductions in computer technology outlays and changes to the new permanent disaster program. The bill awaits the President's signature. The second implementation issue is that USDA is considering using prices from crop years 2006 and 2007 for setting the 2009 ACRE revenue guarantee, rather than the immediate past two years of 2007 and 2008, as Congress intended. The regulations, however, have not yet been released.
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Over the past decade, global health has become a priority in U.S. foreign policy, and U.S. appropriations for global health-related efforts have more than tripled. Neglected tropical diseases (NTDs) have become an important part of these efforts. Congressional appropriations for NTDs have grown from $15 million in FY2006 to $100 million in FY2014. The Administration requested $86.5 million to support NTD programs in FY2015. Heightened congressional interest in combating NTDs has been reflected not only in higher appropriation levels but also in the development of caucuses on these issues. In October 2009, the House Malaria Caucus expanded its purview to include NTDs, and in September 2012, the Senate Malaria Caucus did the same. Tropical diseases encompass all diseases that occur solely, or principally, in the tropics. Of these, the World Health Organization (WHO) describes 17 as "neglected," since resources for curing, controlling, and researching improved treatments for these were limited until recently. The 17 NTDs are found mostly among the poorest people in 149 countries and territories ( Figure 1 ), primarily where access to clean water, sanitation, and health services is limited. Some NTDs are transmitted by people; others are spread by vectors like snails, flies, or mosquitoes; and several others proliferate in soil or water. Among the 17 NTDs, 7 account for roughly 90% of the global NTD burden ( Table 1 ). These are the three soil-transmitted helminths (intestinal worms), schistosomiasis (snail fever), lymphatic filariasis (elephantiasis), trachoma, and onchocerciasis (river blindness). Intestinal worms, or STH, account for roughly 80% of the seven most common NTDs ( Figure 2 ). NTD control efforts are grouped into two categories: those that require individual treatment and those that can be addressed by mass drug administration (MDA). Several NTDs can be addressed through MDA, when an entire community with known cases is treated irrespective of individual disease status. Of the 17 NTDs, 8 can be treated with MDA. These include the seven most common NTDs as well as foodborne trematode infections. Although the seven most common NTDs can be treated with MDA, complex transmission cycles complicate efforts to eliminate or eradicate them. STH, for example, is contracted through contact with or ingestion of worm eggs that lie in soil. The eggs are deposited in the soil through fecal matter and can remain there for several years. Access to adequate sanitation facilities is a critical component of interrupting the STH transmission cycle, as the STH medicines kill the adult worms, but not the eggs. Due to the limitations of drugs, WHO recommends a five-pronged strategy: mass drug administration innovative and intensified disease-management; vector control and pesticide management; safe-drinking water, basic sanitation and hygiene services, and education; and veterinary public-health services. Since WHO coined the phrase "neglected tropical diseases" in 2003, global efforts to address these ailments have accelerated. In 2007, WHO released the Global Plan to Combat Neglected Tropical Diseases , which outlined several goals and targets to reach by 2015 for global control, elimination, and eradication of NTDs ( Figure 3 ). In 2012, WHO released a report, widely known as the Roadmap , which highlighted progress in reaching the 2015 goals and established new ones for 2020. One year later, it released a report outlining progress in achieving the 2020 goals, as described in the Roadmap . According to the reports, guinea worm disease has been nearly eliminated and was endemic in only four countries by 2012: Chad, Ethiopia, Mali, and South Sudan. Nearly 97% of the 542 cases identified in 2012 occurred in South Sudan, where instability remains a key threat to eradication. Since the 2012 report was released, WHO has noted further progress in addressing guinea worm disease, with 148 cases reported in 2013 and only 10 cases reported from January 1, through April 30, 2014. WHO has also since noted progress in other areas. Annual sleeping sickness cases, for example, fell by more than 70% from 1995 through 2012 ( Figure 4 ). In January 2012, representatives from endemic countries, the private sector, and donor nations convened in London, England, to affirm their commitment to combatting NTDs. Participants signed the London Declaration on Neglected Tropical Diseases , which highlighted the role each signatory would play in reaching the 2020 goals outlined in the Roadmap . Appendix A lists donor commitments. These pledges included the following: $785 million (includes preexisting commitments) to strengthen drug distribution and program implementation; 1.4 billion drug treatments annually; access to drug compound libraries to identify new treatments; increased financial support for NTD programs (some of which amended previous commitments to ongoing efforts), such as: commitments by the governments of Bangladesh, Brazil, Mozambique, and Tanzania to devote political and financial resources to combat endemic NTDs. Annual donations of NTD treatments have continued to grow ( Figure 5 ). In 2013, donors provided nearly 1.35 billion NTD treatments, up from 995 million in 2011. Nonetheless, these treatments are expected to reach only 36% of those who need them, with some 1.4 billion people lacking access. Treatment access rates vary per disease and region. For example, roughly 37% of children with STH in need of deworming received treatment in 2012 ( Figure 6 ). Regional treatment rates ranged from 7% in the Middle East to 47% in Southeast Asia. Pharmaceutical companies have donated sufficient supplies of medicines for most NTDs, yet a $1.4 billion funding gap persists. Health analysts assert that an additional $200 million is needed annually between 2014 and 2020 to deliver the donated drugs and meet other programming costs. The $1.4 billion does not include additional resources needed for research and development (R&D) of new treatments, vaccines, and testing supplies. NTD experts maintain R&D is vital. Some observers are troubled by emerging evidence that hookworm, one of the STHs (that comprise 80% of all NTDs), may be developing resistance to existing medication. In addition, the international community cannot meet 2020 goals with existing tools ( Figure 7 ). There is an urgent need for additional drug treatments and vaccines for those NTDs that are difficult to treat, are costly to manage, and can have severe clinical outcomes if left untreated. These are Buruli ulcer, Chagas disease, human African trypanosomiasis, the leishmaniases, leprosy and yaws. Given the complexity of these diseases, patients must be seen at well-equipped health facilities by well-trained, specialized technicians; these types of facilities may not be available in many of the affected countries. Additionally, exposed populations need to be systematically screened because these diseases are generally asymptomatic during the periods when treatments would be most effective and carry the least dangerous side-effects. In addition to the above-mentioned diseases, dengue has become a growing global health problem. Dengue is the leading cause of serious illness and death among children in some Asian and Latin American countries. More than 2.5 billion people are now at risk of infection, close to 40% of the world's population. Of these, between 50 million and 100 million contract the disease annually. Before 1970, only nine countries had experienced severe dengue epidemics. The disease is now endemic in more than 100 countries. Dengue has been detected in a number of U.S. states and territories, including Florida, Texas, and Puerto Rico. There is no specific treatment or vaccine for dengue, which can lead to death if left untreated. Early detection and proper care can reduce fatality rates from about 20% to less than 1%. Congress has taken steps to encourage drug development for certain diseases; some NTDs are among them. Two pieces of legislation established a framework for incentivizing drugs for rare diseases or disorders: The Orphan Drug Act of 1983, P.L. 97-414 , followed by the Rare Diseases Act of 2002, P.L. 107-280 . These acts defined rare diseases or disorders as those that affect fewer than 200,000 individuals in the United States. This definition includes NTDs and other rare or orphan conditions. Through these programs, 26 drugs received a new drug approval (NDA) or a biologic license application in 2012. The FDA Amendments Act of 2007 ( P.L. 110-85 ) created a priority review voucher (PRV) to incentivize the development of drugs and biologic products for tropical diseases. The applicant would receive a voucher at the time of approval of certain tropical disease products that "offer major advances in treatment where no adequate therapy exists." This voucher would allow the applicant a priority review of another drug product. This voucher could be transferred (sold) to one other sponsor. The draft guidance issued by the FDA describes the diseases and conditions covered by the PRV. The act also permits the Secretary to designate other diseases by regulation, which could include "any infectious disease for which there is no significant market in developed nations and that disproportionately affects poor and marginalized populations.... " The list includes tropical diseases beyond the 17 NTDs, namely cholera, malaria, and tuberculosis (TB). At the same time, the act excludes some NTDs listed by WHO, including rabies, cysticercosis/taeniasis, and Chagas disease. A variety of U.S.-based institutions support global efforts to control NTDs. These institutions include the federal government, pharmaceutical companies, philanthropic organizations, and NGOs. Key U.S. government players include the U.S. Agency for International Development (USAID), U.S. Centers for Disease Control and Prevention (CDC), National Institutes of Health (NIH), and Department of Defense (DOD). NGOs include groups like the Carter Center and RTI International; philanthropic organizations include the Gates Foundation and the Sabin Vaccine Institute; and private companies include Merck, Johnson & Johnson and Pfizer. While each of these plays an important role in combating NTDs, this section focuses exclusively on the USAID-managed NTD Program. In 2006, the Bush Administration launched the Neglected Tropical Disease Control Program, the first U.S. effort to address a group of NTDs. The program was created in response to language in the FY2006 Foreign Operations Appropriations Act, which made available up to $15 million "to support an integrated response to the control of neglected diseases including intestinal parasites [STH], schistosomiasis, lymphatic filariasis, onchocerciasis, trachoma and leprosy." The language signaled congressional support for calls to integrate and expand access to drugs for the seven most common NTDs. Until that time, most countries and their implementing partners focused on tackling a single NTD. The NTD Program sought to document the feasibility of integrating treatment for several NTDs and expanding this strategy. At the outset, the NTD program aimed to support the provision of 160 million NTD treatments to 40 million people in 15 countries. In 2008, President George W. Bush reaffirmed his commitment to the program and proposed spending $350 million over six years (from FY2008 through FY2013) on expanding the program to 30 countries. During his first term, President Barack Obama named the NTD Program a priority. The Obama Administration announced several goals for addressing NTDs, including administer 1 billion NTD treatments, halve the prevalence of the seven most common NTDs by 2013, eliminate leprosy in all endemic countries and onchocerciasis in Latin America by 2016, and eliminate lymphatic filariasis globally by 2017. On May 8, 2014, the Obama Administration announced that it had administered its one billionth NTD treatment, reaching 465 million people and surpassing one of its goals. From FY2007 through FY2013, USAID spent more than $370 million on global NTD programs ( Figure 8 ). In FY2014, Congress appropriated $100 million for NTD programs and the Administration requests $86.5 million for NTD programs in FY2015. A map of the countries receiving USAID support for combating NTDs is in Appendix B . The international community has made substantial progress in combating select neglected tropical diseases. Some NTDs have been tackled more effectively than others. Guinea worm disease, for example, is on the cusp of eradication and with expanding mass drug administration campaigns, the prevalence of several NTDs is declining, particularly in Latin America. Despite these advancements, WHO cautions in the 2020 Roadmap that these diseases cannot be banished without expanding global access to clean water and sanitation, improving hygiene practices, strengthening local health capacity (veterinary as well as human), and intensifying case detection and management. The United States has played an important role in combating NTDs and will likely be a central player in global efforts to advance the 2020 NTD goals. The section below discusses a range of issues U.S. and international organizations may face as they attempt to reach the WHO 2020 goals, as well as those set by the Administration (see " U.S. Efforts to Tackle NTDs "). Some of the discussion includes an analysis of steps the 113 th Congress might consider. Transmission of most NTDs is facilitated by insufficient access to clean water, sanitation, and hygiene (WASH). An estimated 880 million children are carrying soil-transmitted helminths, for example, which are spread primarily through openly defecating on the ground. Eggs of these intestinal worms, which account for roughly 80% of NTDs, can persist in the environment for many years. Experts at the CDC assert that WASH should be a central component of any effective and sustainable approach to controlling NTDs. One estimate indicates that improved sanitation and water safety can reduce the prevalence rates of other NTDs as well, including schistosomiasis and blinding trachoma. Water and sanitation improvement are particularly important when addressing pathogens that cannot be eliminated by drugs alone, such as STH and schistosomiasis. Several experts urge greater investments in water and sanitation and see attainment of global water and sanitation goals as an important step towards eliminating NTDs. Through the Millennium Development Goals (MDGs), the international community sought to halve the share of people without access to clean water and basic sanitation by 2015. WHO estimated that between 2005 and 2015, it would cost $72 billion annually to implement and maintain enough water and sanitation schemes to meet global water and sanitation targets, of which $54 billion would need to be spent on maintaining the systems. In 2010, members of the Organization for Economic Cooperation and Development (OECD) committed $7.8 billion towards improving global access to clean drinking water and sanitation. U.S. and global investments in sanitation would need to increase significantly to meet this funding gap. Investments in WASH are considered important, as mass drug administration campaigns cannot be used in isolation to eliminate NTDs. The process of combating diseases by combining responses by practitioners across sectors, particularly those related to health, agriculture, water, construction, and waste disposal, is known as integrated vector management. Indeed, the United States was unable to control hookworm (an STH) within its own borders until the early 1900s, when an integrated vector management (IVM) approach was applied. Documents by the Administration maintain the NTD Program is part of a complete package of services the United States provides to improve the health of women and children across sectors. The Administration intends, for example, to expand the provision of drugs that treat STH in children within USAID-supported education programs. Similarly, the Obama Administration underscores the intersection between water and sanitation and categorizes it as a "cross-cutting area" under global health. Nonetheless, in reports to Congress on progress towards advancing global health (through congressional budget justifications, for example) the Administration provides little information about how water and sanitation programs advance global health efforts or how they are integrated within global health projects. The structure of the FY2013 Foreign Operations budgetary request suggests some separation between these activities. Requests for water programs are made across a variety of accounts, primarily Development Assistance (DA) and Economic Support Fund (ESF). In FY2013, for example, the Administration requested only 12% of water and sanitation funds through the Global Health Programs account and 76% through the DA and ESF accounts. These two accounts support a wide range of governance and economic development activities, which do not typically focus on health objectives. Despite the limitations of mass drug administration, the U.S. NTD Program focuses almost exclusively on MDA. Administration officials recognize the importance of a comprehensive NTD Program, but maintain that "the directive from Congress was to focus on mass drug administration. [G]iven the limited resources, [MDA] is the most efficient and cost-effective way to control [and] eliminate these diseases." The 113 th Congress might debate the merits of applying an intersectoral approach to the NTD Program. Broadening the U.S. approach may not necessarily entail raising spending, but could involve improving the integration of U.S. health and development programs. The 113 th Congress could, for example, request information on how key leaders at USAID (e.g., the Deputy of the Global Health Initiative and the Water Coordinator) coordinate their programs. Although pharmaceutical companies have donated sufficient supplies of NTD medicines, more than 60% of those in need of NTD treatment lack access to the drugs. Broader issues associated with weak health systems within endemic countries can affect the delivery of drugs and the effectiveness of NTD programs. Since many endemic countries are largely responsible for disseminating the donated medicines, human resource constraints and supply chain deficiencies inhibit supply of the drugs and leave many without access to treatment. Streamlining and simplifying treatments are becoming increasingly important. The international community is increasingly integrating treatments and services, particularly for multiple diseases that can be treated with one pill. Lymphatic filariasis and the three most common intestinal worms, for example, can be treated with the same medication. Health providers are partnering with schools to couple LF and STH treatment with school feeding programs. Some are concerned, however, that deworming treatment rates are declining among children who are not yet old enough to attend school ( Figure B-2 ). Weak veterinary and public health systems limit the ability of several affected countries to enhance NTD programs or maintain them after international support wanes. Many critics of "vertical" or "disease-specific" programs see the poor conditions of health systems in several developing countries as an outcome of the burgeoning investments in vertical disease programs. One argument is that disease-specific efforts divert investments from the very public health systems that are needed to support vertical programs. Supporters of disease-specific initiatives argue, on the other hand, that such activities facilitate dramatic, measurable progress. Advocates of this approach point to dramatic reductions in recent years of deaths associated with HIV/AIDS and malaria. The merits of vertical disease programs have been long debated in the global health community and evidence supports both sides of the debate. Despite support by health analysts and scientists for increasing drug and vaccines for NTDs, funding for pharmaceutical R&D is considered by many to be insufficient. To date, efforts to encourage private development of NTD vaccines and drugs have met tepid responses, due in part to the belief that there is no viable commercial market for these products. It is widely understood that NTDs affect primarily the poorest in developing countries, most of whom lack resources to afford drugs. Without guarantees of cost recovery, drug manufacturers appear reluctant to initiate the lengthy, and potentially costly, discovery process. Estimates indicate that the average time for a drug to reach approval in the United States ranges from 6 to 10 years. Some analysts question whether the PRV provides sufficient financial incentives for NTD products. To date, only two companies have received the voucher, Novartis (for the drug Coartem, which treats malaria) and Johnson and Johnson (for the drug Sirturo, which treats drug-resistant TB). Novartis failed to see any market return on its voucher as it used the voucher for a product whose new drug application failed to win FDA approval. Johnson & Johnson has not yet used its voucher, which it earned in 2012. Some market analysts believe that the utility of the voucher will remain uncertain until a PRV is sold and has a clear market value. It remains to be seen whether the PRV, on its own, will provide a strong enough incentive to encourage drug development. For example, in the development of Sirturo, Johnson and Johnson applied for a PRV as well as two other FDA development incentives. Congressional interest in this issue may focus on the strategic investments that could spur added drug treatments, vaccines, and diagnostic tools. For example, some might prioritize NTDs with serious clinical outcomes that are difficult to treat and manage (e.g., Buruli ulcer, Chagas disease, human African trypanosomiasis, the leishmaniases, leprosy and yaws). Others might focus on diseases that lack any drug treatment, such as dengue, or diseases that affect the greatest number of individuals, such as STH. Vaccines do not exist for NTDs except for rabies, and diagnostic measures are limited, so that vaccines could be prioritized. There is a case for developing diagnostic tools for diseases that are difficult to detect, such as Buruli ulcer. Finally, another potential investment could advance promising treatments that are already in development, such as a vaccine for certain filarial infections (onchocerciasis and lymphatic filariasis ). Appendix A. London Declaration: Table of Donor Commitments Appendix B. Map of USAID NTD Program
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The term "neglected tropical diseases" (NTDs) was coined by the World Health Organization (WHO) in 2003 to describe a set of diseases that are ancient, worsen poverty, and typically impair health and productivity while carrying low death rates. While the use of the term "NTDs" has helped to raise awareness about these long-standing health challenges, its use risks simplifying a complicated health challenge. Some of the diseases are treatable with drugs that can be administered by lay health workers irrespective of disease status, while others require diagnosis and can be treated only by trained health professionals who have access to appropriate equipment, electrical power, and refrigeration (to store the temperature-sensitive therapies). Neglected tropical diseases primarily plague the poorest people in developing countries. Changes in the environment and population flows, however, make industrialized countries, including the United States, increasingly vulnerable to some NTDs, particularly dengue haemorrhagic fever, which can cause death and has no cure. Health interventions to address the array of NTDs vary, but a common factor to an enduring solution to these illnesses is economic development. Industrialized countries, including the United States, have controlled these diseases in their territories by combining drug treatment with the construction and use of improved sanitation, modernization of agricultural practices, and utilization of improved water systems. The international community has made substantial progress in combating select NTDs, though some have been tackled more effectively than others. Guinea worm disease, for example, is on the cusp of eradication. More generally, expanding access to mass drug administration is contributing to decreases in prevalence of several NTDs, particularly across Latin America. Despite these advances, WHO cautions that these diseases cannot be banished without improving global access to clean water and sanitation, strengthening local health capacity (veterinary as well as human), and intensifying case detection and management. Making improvements in these areas will require long-term investments that are complex and may entail facing thorny issues such as addressing corruption, transferring ownership of health programs from donors to recipient countries, and evaluating the impact of political and economic policies on health programs (e.g., international lending requirements). The United States has played an important role in combating NTDs. Congressional interest in NTDs has been growing. Appropriations for NTD programs have steadily increased from $15 million in FY2006 to $100 million in FY2014. In May 2014, President Barack Obama announced that the U.S. Agency for International Development (USAID) had supported the delivery of the one billionth NTD treatment and had reached nearly half a billion people. The Administration requested $86.5 million to support NTD programs in FY2015. Between FY2006 and FY2012, U.S. funding has supported the delivery of nearly 585 NTD treatments, reaching 258 million people. This report discusses the prevalence of NTDs, U.S. and global actions to address them, and options the 113th Congress might consider. For additional background on NTDs, including photographs and discussions about transmission of NTDs, descriptions of activities to combat NTDs by other agencies, and additional policy issues, see CRS Report R41607, Neglected Tropical Diseases: Background, Responses, and Issues for Congress.
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The Caribbean, encompassing 16 independent nations and 13 overseas territories, is a region of almost 42 million people that includes some of the hemisphere's richest and poorest nations. Although many of these nations have similar characteristics, the region as a whole is more commonly distinguished for its diversity. The region consists of 13 island nations from the Bahamas in the north to Trinidad and Tobago in the south; Belize, which is geographically located in Central America; and the two nations of Guyana and Suriname, located on the north central coast of South America. The largest nations in terms of land area are Guyana and Suriname, while those with the largest populations are Cuba, the Dominican Republic, and Haiti. The island nations of the Eastern Caribbean are among the smallest countries in the world. (See Tables 1 and 2 and Figure 1 .) Ethnically, a majority of the regional's population is of African heritage, descendants of slaves brought to the West Indies in the 17 th to 19 th centuries to work on sugar plantations. Three nations—Guyana, Trinidad and Tobago, and Suriname—have large populations of East Indian heritage, descendants of indentured servants who were brought to the West Indies in the 19 th and early 20 th centuries. Small minorities of ethnic Chinese are also found in several Caribbean nations and a Javanese population is found in Suriname. Both Cuba and the Dominican Republic have large populations of Spanish descent, but in both countries, people of mixed African-Spanish heritage make up the majority of the population. Descendants of indigenous Caribbean peoples, the Arawak and Carib Indians, constitute small minorities in several Caribbean island nations, while Guyana and Suriname have minorities of several Amerindian tribes. Belize, in addition to having a small Garifuna (mixed African and Amerindian heritage) population, also has a significant indigenous Mayan population. Many countries in the region share a common British colonial heritage, while Cuba and the Dominican Republic were Spanish colonies, Haiti was French, and Suriname was Dutch. Stemming from its diverse colonial history, the region includes 12 predominantly English-speaking nations. In several nations, however, more than one language is spoken, and in several countries, a common patois or dialect is spoken. Haiti has two official languages: Creole, the common language spoken by most of the population; and French, which is spoken only by about 10% of the population. In several of the English-speaking Caribbean nations, a French patois is also spoken, evidence of a historical era when British and France vied for colonial control in the region. Politically, all Caribbean nations, with the exception of communist Cuba, have elected democratic governments. Although Haiti and the Dominican Republic achieved independence in the 19 th century and Cuba became independent in 1902, the remaining Caribbean nations did not gain full political independence until the second half of the 20 th century. Four of these gained independence in the 1960s, six in the 1970s, and three in the 1980s, with St. Kitts and Nevis the most recent in 1983. Most of the former British colonies have parliamentary forms of government. Guyana, the Dominican Republic, Haiti, and Suriname are republics headed by presidents. As noted above, the region also includes 13 overseas territories, consisting of six British, three French, two Dutch, and two U.S. territories (see Table 1 ). Regular free and fair elections have been the norm in most Caribbean nations for many years, with the exception of Cuba and Haiti. In 2006, Haiti ultimately held successful elections in February that had been postponed several times in 2005; Guyana held successful elections in August without the political violence that some observers had expected; and St. Lucia held successful elections in December that led to a change in government. To date in 2007, the Bahamas held parliamentary elections in early May that led to a change of government; Jamaica has elections scheduled for September 3 (postponed from August 27 because of Hurricane Dean); and elections in Trinidad and Tobago are due by October. (See Table 3 for a listing of leaders and elections for head of government.) Although many Caribbean nations have maintained long democratic traditions, they are not immune from terrorist and other threats to their political stability. In 1981, the government of Eugenia Charles in Dominica was threatened by a bizarre coup plot involving foreign mercenaries. Grenada, under the socialist-oriented government of Maurice Bishop, experienced a break from the democratic norm after it assumed power in a nearly bloodless coup in 1979 and installed a people's revolutionary government. After the violent overthrow and murder of Bishop in 1983, the United States intervened to restore order and end the Cuban presence on the island. In 1990, the government of Trinidad and Tobago was endangered by a coup attempt by a radical Muslim sect, the Afro-Trinidadian based Jamaat al Muslimeen, led by Yasin Abu Bakr. In 1993, stability on St. Kitts was threatened following violent protests after disputed elections; order was restored with the assistance of security forces from neighboring states. More recently, in early June 2007, one Trinidadian and three Guyanese nationals were arrested in Trinidad and Tobago in a foiled plot to blow up a fuel pipeline and tanks at New York's John F. Kennedy International Airport. A fourth suspect, a U.S. citizen of Guyanese origin, was arrested in the United States. The plot focused U.S. and international attention on the potential security threat of Muslim extremists from the Caribbean region. As noted above, the Caribbean region is home to some of the richest and poorest nations in the hemisphere, with varying levels of social development. Based on per capita income levels, the World Bank categorizes two Caribbean countries—Antigua Barbuda and the Bahamas—as high income, eight as upper middle income, five as lower middle income, and one—Haiti—as low income. Most of the English-speaking countries have high literacy rates and relatively low infant mortality rates. Haiti has the lowest adult literacy rate in the Caribbean, estimated at 52%, and the highest infant morality rate, measured at 74 per 100,000 live births, while Cuba by far has the lowest infant mortality rate in the region. The United Nations Development Program issues an annual report on human development, with a composite human development index (HDI) that ranks countries based on life expectancy, adult literacy, educational enrollment, and per capita income. In 2006, based on their HDI rank, six Caribbean nations—Barbados, Cuba, St. Kitts and Nevis, the Bahamas, Trinidad and Tobago, and Antigua and Barbuda—were categorized as having "high development," while nine others, ranging from Dominica to Jamaica, were categorized as having "medium development." The only Caribbean nation ranked as having "low development" was Haiti. Many Caribbean nations experienced an economic slump in 2001-2002 due to downturns in the tourism and agriculture sectors, although most economies in the region have rebounded since 2003. In 2006, all Caribbean nations experienced economic growth, with English-speaking nations and Suriname averaging 6.8% growth for the year. Among the strongest Caribbean economic performers in 2006 were Trinidad and Tobago, with 12% growth, Antigua and Barbuda, with 11% growth, and the Dominican Republic, with 10% growth. Grenada's economy, which experienced an economic decline of over 7% in 2004 because of the damage from Hurricane Ivan, rebounded in 2005 and 2006, with growth rates of 13.2% and 7% respectively. The weakest economic performers in recent years have been Guyana, which experienced a 3% decline in 2005 because of high oil prices and floods, and just a 1.3% increase in 2006; and Haiti, hard hit by floods in 2004 caused by Tropical Storm Jeanne, which experienced a 3.5% economic decline in 2005, and only experienced modest growth of 1.8% in 2005 and 2.5% in 2006. In terms of regional integration, 14 of the region's independent nations belong to the Caribbean Community (CARICOM), with the exception of the Dominican Republic (which has observer status) and Cuba. CARICOM was formed in 1973 to spur regional integration. CARICOM, which often has been criticized for acting too slowly, is trying to prepare itself for hemispheric integration by moving ahead with its own regional integration. In April 2005, CARICOM members established the Caribbean Court of Justice (CCJ), headquartered in Port-of-Spain in Trinidad and Tobago, that will serve as the region's final court of appeal and replace the Privy Council based in London. To date, however, only Barbados and Guyana have accepted the CCJ as their final court of appeal. In 2006, 12 out of 14 CARICOM nations signed an accord for a CARICOM Single Market (CSM) to further the process of regional economic integration. Eastern Caribbean nations were enticed to join in part by a decision to establish a regional Development Fund and Development Agency for poorer or disadvantaged countries. Under the accord, governments have agreed to provide for the free movement of goods, services, capital, and labor. The goal is to have a CARICOM Single Market and Economy (CSME) by the end of 2008, which is to include a single currency and the harmonization of economic policy. Some observers maintain that while there has been some progress under the CSM, a number of governments are lagging behind in facilitating the free movement of labor and capital. Trinidad and Tobago's Central Bank governor has pointed the difficulty of moving ahead with a common monetary or macroeconomic policy given the differences in the region's economies. The Cricket World Cup games held in nine Caribbean nations in March and April 2007—including Grenada, St. Vincent, and Trinidad and Tobago—spurred some movement toward regional integration. In preparation for the event, CARICOM established a travel and security initiative dubbed the Single Domestic Space, allowing visitors to obtain one visa to travel to 10 English-speaking Caribbean countries, with the need to pass through security checks only at their first point of entry. In addition to CARICOM, six Eastern Caribbean nations are members of the Organization of Eastern Caribbean States (OECS), the subregional organization designed to stimulate economic integration and foreign policy harmonization. The six OECS nations also share a common currency, the Eastern Caribbean dollar, with monetary policy managed by the Eastern Caribbean Central Bank. The Caribbean Development Bank (CDB), headquartered in Barbados, promotes economic development and regional integration. On September 3, 2007 , Jamaica is scheduled to hold parliamentary elections that were postponed from August 27 because of recovery efforts after Hurricane Dean. The ruling People's National Party (PNP), headed by Prime Minister Portia Simpson Miller, is competing against the opposition Jamaican Labour Party (JLP), led by Bruce Golding, in a race that is expected to be close. From August 17-19, 2007 , Hurricane Dean caused damage in several Caribbean nations, with about a dozen deaths attributed to the storm. In the eastern Caribbean, Dominica St. Lucia, and the French islands of Guadeloupe and Martinique reported extensive damage to the agricultural sectors. Jamaica was hard hit by the storm, which caused flooding in several parishes, made many roads impassable, caused power outages, and significantly damaged the agricultural sector. U.S. Ambassador to Jamaica Brenda LaGrange declared a disaster due to the hurricane, and the U.S. Agency for International Development's Office of Foreign Disaster Assistance (USAID/OFDA) provided $125,000 for emergency relief supplies. A USAID assessment team is determining whether Jamaica needs additional assistance. On June 19-21, 2007 , the Caribbean Community (CARICOM) held a conference in Washington D.C. in which Caribbean leaders held meetings with President Bush and several Members of Congress, and a series of meetings at the Inter-American Development Bank, the Organization of American States, and the World Bank, with forums for the diaspora, the private sector, and development experts. A joint statement issued by President Bush and Caribbean leaders pledged cooperation in several areas, including a strengthening of existing trade arrangements. President Bush announced that he would work with Congress to extend and update the Caribbean Basin Trade Promotion Act (CBTPA). See the joint statement at http://www.state.gov/p/wha/rls/prsrl/07/q2/86952.htm . On June 2, 2007 , the Department of Justice announced that four individuals—one U.S. citizen of Guyanese origin, two Guyanese nationals, and one Trinidadian national—were being charged in a plot to attack John F. Kennedy International airport by planting explosives in the airport's major jet-fuel supply tanks and pipeline. The plot allegedly tapped into "an international network of Muslim extremists from the United States, Guyana, and Trinidad and Tobago." The three foreign nationals were arrested in Trinidad and Tobago. On June 9, 2007 , the Departments of Homeland Security and State announced that there would be some flexibility in the passport requirement for U.S. citizens traveling by air to the Caribbean, as well as Canada and Mexico, that went into effect on January 23, 2007. A backlog of passport applications resulted in a policy change through the end of September 2007 whereby individuals who have applied but have not yet received their passports are able to travel with a government-issued photo and official proof of their passport application. On May 2, 2007 , the Bahamas held parliamentary elections in which the opposition conservative Free National Movement (FNM), led by former Prime Minister Hubert Ingraham, defeated the ruling center-left Progressive Liberal Party (PLP), led by Prime Minister Perry Christie. The FNM captured 23 seats while the PLP won the remaining 18 seats in the House of Assembly. On July 31, 2007 , the House passed, by a vote of 371to 55, H.R. 176 (Lee), the Shirley A. Chisholm United States-Caribbean Educational Exchange Act of 2007, which would authorize assistance to the countries of the Caribbean to fund educational development and exchange programs. On July 24, 2007 , the House Western Hemisphere Subcommittee of the Committee on Foreign Affairs held a hearing on U.S. deportees in Latin America and the Caribbean. On June 18, 2007 , the House passed H.Con.Res. 148 (Lee) by voice vote, which recognizes the significance of National Caribbean-American Heritage Month. ●On June 15, 2007 , the House passed, by a vote of 379 to 25, H.Amdt 291 to the FY2008 Department of Homeland Security Appropriations Act, H.R. 2638 , that would prohibit any funds in the bill from implementing a passport requirement plan under section 7209 of the Intelligence Reform and Terrorism Prevention Act of 2004 before June 1, 2009. The House subsequently approved H.R. 2638 with the provision, and the Senate approved its version July 26, 2007, with a provision that would delay the implementation of a passport requirement plan to no earlier than June 1, 2009. On June 11, 2007 , the House passed H.Res. 418 (Engel), by a vote of 386-0, which recognizes and welcomes the delegation of Presidents, Prime Ministers, and Foreign Ministers from the Caribbean to Washington DC, and commends CARICOM for holding the conference on the Caribbean. U.S. interests in the Caribbean are diverse, and include economic, political, and security concerns. During the Cold War, security concerns tended to eclipse other policy interests, and focused on the potential threat in the region from the Soviet Union and Cuba. In the aftermath of the Cold War, other U.S. policy interests emerged from the shadow of the East-West conflict in the Caribbean and U.S. policy priorities shifted from one emphasizing security concerns to a new focus on strengthened economic relations through trade and investment. With the September 2001 terrorist attacks in the United States, security concerns have re-emerged as a major U.S. interest in the Caribbean. The Administration describes the Caribbean as America's "third border," with events in the region having a direct impact on the homeland security of the United States. It describes Caribbean nations as "vital partners on security, trade, health, the environment, education, regional democracy, and other hemispheric issues." The United States has close relations with most Caribbean nations, with the exception of Cuba under Fidel Castro. The U.S.-Caribbean relationship is characterized by extensive economic linkages, cooperation on counternarcotics efforts and security, and a sizeable U.S. foreign assistance program supporting a variety of projects to strengthen democracy, promote economic growth and development, alleviate poverty, and combat the AIDS epidemic in the region. The region has had preferential treatment of its exports to the U.S. market since the early 1980s, and U.S. efforts are now focused on helping the region prepare for hemispheric free trade. Despite close U.S. relations with most Caribbean nations, at times there has been tension in the relationship. For example, relations between CARICOM nations and the United States became strained in the aftermath of the departure of Haitian President Jean Bertrand Aristide from power in February 2004. CARICOM nations called for an investigation into the circumstances surrounding Aristide's departure, and Haiti's participation in CARICOM was suspended. After Haiti held elections in February 2006 leading to the inauguration of Rene Préval as president, CARICOM subsequently reinstated Haiti's participation in CARICOM at their July 2006 summit. In another example, Caribbean nations generally maintain good relations with Cuba and Venezuela, and resent U.S. expressions of concern about these relations. Many Caribbean nations are participating in a Venezuelan program known as PetroCaribe that offers oil on discounted terms depending on the price of oil. The United States has provided considerable amounts of foreign assistance to the Caribbean over the past 25 years. U.S. assistance to the region in the 1980s amounted to about $3.2 billion, with most concentrated in Jamaica, the Dominican Republic, and Haiti. An aid program for the Eastern Caribbean also provided considerable assistance, especially in the aftermath of the 1983 U.S.-led military intervention in Grenada. In the 1990s, U.S. assistance to Caribbean nations declined to about $2 billion, or an annual average of $205 million. Haiti was the largest regional recipient of assistance during this period, receiving about $1.1 billion in assistance or 54% of the total. Jamaica was the second largest U.S. aid recipient in the 1990s, receiving about $507 million, almost 25% of the total, while the Dominican Republic received about $352 million, about 17% of the total. Eastern Caribbean nations received about $178 million in assistance, almost 9% of the total. The bulk of U.S. assistance was economic assistance, including Development Assistance (DA), Economic Support Funds (ESF), and P.L. 480 food aid. Military assistance to the region amounted to less than $60 million during the 1990s. From FY2000 through FY2007, U.S. aid to the Caribbean region amounted to about $1.9 billion, with increases reflecting increased HIV/AIDS assistance to the region (especially to Guyana and Haiti), disaster and reconstruction assistance in the aftermath of several hurricanes and tropical storms in 2004, and increased support for Haiti following the departure of President Jean-Bertrand Aristide from power. As in the 1990s, the bulk of assistance to the region consisted of economic assistance. With regard to hurricane disaster assistance, Congress appropriated $100 million in October 2004 in emergency assistance for Caribbean nations ( P.L. 108-324 ), with $42 million for Grenada, $38 million for Haiti, $18 million for Jamaica, and $2 million for other countries affected by the storms. Overall assistance to the Caribbean amounted to $393 million in FY2005, $336 million in FY2006, and an estimated $346 million in FY2007 (see Table 4 ). For FY2008, the Bush Administration requested almost $367 million in assistance for the Caribbean, with about 61% for Haiti, almost 13% for Cuba democracy programs, almost 10% for the Dominican Republic, and just over 7% for Guyana. The Caribbean regional program would be funded at $9.3 million, while Eastern Caribbean nations would also receive about $3.2 million for a Peace Corps program, $0.6 million for International Military and Training (IMET) assistance, $0.5 in counternarcotics assistance, and $0.5 million in anti-terrorism assistance (ATA). While in past years, Caribbean nations have received some Foreign Military Financing (FMF)—for example, almost $4 million in FY2006—the Administration did not request any FMF for Caribbean nations in FY2008. Funding for the Third Border Initiative would decline, and has been subsumed into a Western Hemisphere Program, with at least $1.750 million identified for the TBI in the State Department's FY2008 Congressional Budget Justification for Foreign Operations. (Also see discussion below on "Third Border Initiative and Security Issues.") In the 110 th Congress, the House passed H.R. 176 (Lee), the Shirley A. Chisholm United States-Caribbean Educational Exchange Act of 2007, on July 31, 2007, by a vote of 371-55. The measure would authorize assistance to the countries of the Caribbean to fund educational development and exchange programs. The AIDS epidemic in the Caribbean has begun to have negative consequences for economic and social development in several countries, and continued increases in HIV infection rates threaten future development prospects. In contrast to other parts of Latin America, the mode of HIV transmission in several Caribbean countries has been primarily through heterosexual contact, making the disease difficult to contain because it affects the general population. The countries with the highest prevalence or infection rates in the Caribbean are Belize, the Bahamas, Guyana, Haiti, and Trinidad and Tobago, with rates between 2% and 4%; and Barbados, the Dominican Republic, Jamaica, and Suriname, with rates between 1% and 2%. The response to the AIDS epidemic in the Caribbean America has involved a mix of support by governments in the region, bilateral donors (such as the United States, Canada, and European nations), regional and multilateral organizations, and nongovernmental organizations (NGOs). Many countries in the region have national HIV/AIDS programs that are supported through these efforts. U.S. government funding for HIV/AIDS in the Caribbean has increased significantly in recent years. Aid to the Caribbean region rose from almost $6 million in FY2000 to $23.2 million in FY2003, largely through the Child Survival and Health (CSH) foreign assistance funding account. Because of the inclusion of Guyana and Haiti as focus countries in the President's Emergency Plan for AIDS Relief (PEPFAR), largely funded through the Global HIV/AIDS Initiative (GHAI) funding account, U.S. assistance to the region for HIV/AIDS increased to $36 million in FY2004, $70 million in FY2005, $79 million in FY2006, and $104 million in FY2007. For FY2008, the Administration requested almost $116 million in HIV assistance for the Caribbean, with $83 million for Haiti and $21 million for Guyana. (See Table 5 , which shows U.S. aid levels for HIV/AIDS assistance to the Caribbean from FY2003-2008. The figures represent a subset of total assistance levels shown in Table 4 .) In the 110 th Congress, H.R. 848 (Fortuño), introduced February 6, 2007, would add 14 Caribbean countries to the list of focus countries targeted for increased HIV/AIDS assistance. The additional countries are Antigua and Barbuda, Barbados, the Bahamas, Belize, Dominica, Grenada, Jamaica, Montserrat, St. Kitts and Nevis, St. Vincent and the Grenadines, St. Lucia, Suriname, Trinidad and Tobago, and the Dominican Republic. Another initiative, H.Con.Res. 166 (Lee), introduced June 7, 2007, would support the goals and ideals of National Caribbean American HIV/AIDS Awareness Day. Over the past several years, several Caribbean nations have been potential recipients for Millennium Challenge Account (MCA) assistance, but none have been selected for the program, which provides assistance to countries with strong records of performance in the areas of governance, economic policy, and investment in people. Although Haiti and Guyana have been candidate countries potentially eligible for MCA funds since FY2004 (because of low per capita income levels), neither country has been approved to participate in the program because they have not met MCA performance criteria. Guyana has been designated as an MCA "threshold" country since FY2005, and in June 2007 was slated to receive $7.2 million in assistance (from FY2005 MCA funds) to help the country improve its fiscal policy so that it may become eligible for regular MCA funding. For FY2006 and FY2007, the per capita income level for MCA-eligibility increased, and as a result, in addition to Guyana and Haiti, three other Caribbean countries—the Dominican Republic, Jamaica, and Suriname—became potentially eligible for MCA funding but ultimately were not approved for participation. An obstacle in the provision of some U.S. assistance to the Caribbean has been that several Caribbean nations that are parties to the International Criminal Court (ICC)—Barbados, St. Vincent, and Trinidad and Tobago—have not signed agreements to exempt Americans from ICC prosecution, so-called "Article 98 agreements." The American Servicemembers' Protection Act (ASPA, P.L. 107-206 , title II), prohibited U.S. military assistance to countries that are parties to the ICC and do not have Article 98 agreements. In 2006, Congress modified ASPA through a provision in the FY2007 John Warner National Defense Authorization Act ( P.L. 109-364 ), which ended the ban on IMET; restrictions on FMF, however, remain in effect. Since FY2005, foreign operations appropriations legislation has also prohibited ESF assistance to countries that are parties to the ICC and have not signed Article 98 agreements, although the legislation has provided for presidential waiver. In July 2003, the Administration announced the termination of military assistance to six Caribbean nations because they had not signed bilateral immunity agreements: Antigua and Barbuda, Barbados, Belize, Dominica, St. Vincent and the Grenadines, and Trinidad and Tobago. Subsequently, Antigua and Barbuda signed an Article 98 agreement in September 2003; Belize signed one in December 2003; and Dominica signed one in May 2004. This left Barbados, St. Vincent, and Trinidad and Tobago as the three Caribbean countries forgoing U.S. military assistance because of the ASPA sanction. Trinidad and Tobago, which played a leading role in the establishment of the ICC, has strongly resisted signing an agreement, as has Barbados. In term of ESF assistance, both Barbados and Trinidad and Tobago reportedly have been excluded from Third Border Initiative projects, because these countries have not signed Article 98 agreements. Several Caribbean nations—especially Haiti, Grenada, Jamaica, and the Bahamas—were hard hit during the 2004 Atlantic hurricane season. Hurricane Charley struck western Cuba in August 2004, damaging over 70,000 homes and thousands of hectares of crops. Hurricane Frances struck the Bahamas in September 2004, causing widespread damage throughout the country's islands. In the same month, Hurricane Ivan caused severe damage across the Caribbean: it devastated Grenada, damaging some 80% of the nation's housing, and destroying or damaging much of country's public infrastructure; it passed over Jamaica, causing damage in the western part of the island and in southern coastal towns; and it affected western Cuba, damaging houses and crops. Tropical Storm Jeanne caused devastating mudslides and floods in northern Haiti in September 2004 that killed some 3,000 people, with over 2,800 of those in the city of Gonaives. Another 300,000 Haitians were affected by the loss of homes, livelihoods, and infrastructure. In response, the United States provided immediate humanitarian assistance to several Caribbean nations, especially Grenada, Haiti, and Jamaica, but also the Bahamas, the Dominican Republic, and Cuba. USAID's Office of Foreign Disaster Assistance (OFDA) set up Disaster Assistance Response Teams (DARTs) to respond to the storms, with team members located in the various islands. By the end of October 2004, USAID had provided almost $23 million in emergency humanitarian assistance, largely for assistance to respond to Hurricane Ivan and Tropical Storm Jeanne. In addition, the 108 th Congress appropriated $100 million in emergency assistance ( P.L. 108-324 ) in late October 2004 to provide longer-term reconstruction assistance for Caribbean nations afflicted by the storms. The reconstruction assistance was targeted as follows: $42 million for Grenada, $38 million for Haiti, $18 million for Jamaica, and $2 million for other countries affected by the storms. In Grenada, USAID's assistance program had two phases. The first was a short-term program to restore and revitalize rural communities, repair schools and health centers, and reestablish the productive capacity of small and medium-size businesses. The second, longer-term phase focused on rebuilding infrastructure, revitalizing the business sector, and restoring the government's economic management capacity. In Haiti, the reconstruction program had two major components. A community revitalization component involved road repair, disaster mitigation, water system rehabilitation, drainage and clean up, public building rehabilitation, and household repairs. A rural revitalization component involved hillside stabilization, irrigation, and an early warning system for flooding on the La Quinte River, which flows past Gonaives, the city that was devastated by Tropical Storm Jeanne. The Jamaica assistance program also had two phases. The first was an immediate recovery program to help repair community infrastructure and help revitalize the agricultural sector. The second phase involved the repair and rebuilding of homes, assistance for business recovery, and the rehabilitation and re-supply of schools. Other smaller hurricane assistance programs targeted affected communities in the Bahamas and Tobago, and also provided assistance to Eastern Caribbean nations to design and implement risk reduction efforts for low-income housing. Because of their geographic location, many Caribbean nations are transit countries for cocaine and heroin from South America destined for the U.S. and European markets. In addition, two Caribbean nations—Jamaica and St. Vincent and the Grenadines—are large producers and exporters of marijuana. Of the 16 countries in the Caribbean region, President Bush designated four of them—the Bahamas, the Dominican Republic, Haiti, and Jamaica—as major drug-producing or drug-transit countries in September 2006 pursuant to annual legislative drug certification requirements. The President urged the new government in Haiti to strengthen law enforcement and the judiciary to bring drug trafficking and crime under control. All four designated Caribbean countries are major transit countries for illicit drugs to the U.S. market, and Jamaica is the largest marijuana producer and exporter in the Caribbean. The Bahamas cooperates extensively with the United States on counternarcotics measures, including interdiction efforts through Operation Bahamas and Turks and Caicos (OPBAT), a multinational interdiction effort, and efforts that target Bahamian drug trafficking organizations. The Dominican Republic, a major transit country for both cocaine and heroin, cooperates closely with the United States, although the State Department's March 2007 International Narcotics Control Strategy Report notes that "corruption and weak governmental institutions remained an impediment to controlling the flow of illegal narcotics" through the country. Jamaican cooperation with U.S. law enforcement agencies on counternarcotics efforts is described by the State Department report as robust, but the report also noted that the government seemed unable to act against official corruption, ranging from petty shakedowns by street cops to higher-level corruption and other criminal activities. In Haiti, anti-drug efforts have been hampered over the years by weak institutions, poor economic conditions, and political instability. According to the State Department report, a challenge for the Preval government is curbing continued violence perpetrated by criminal elements, some of whom are involved in drug trafficking. Many other Caribbean nations, while not designated major transit countries, are still vulnerable to drug trafficking and associated crimes because of their geographic location. In particular, the State Department's March 2007 report maintains that such crimes have the potential to threaten the stability of the small states of the Eastern Caribbean, and to varying degrees, have damaged civil society in some of these countries. Given the poor outlook for the banana industry in the Caribbean, some observers believe that it will be difficult to contain marijuana production unless there is adequate support to diversify these economies away from banana production. St. Vincent and the Grenadines is the largest marijuana producer in the Eastern Caribbean. Efforts to crack down on money laundering also constitute a major component of U.S. anti-drug strategy, and became increasingly important as a counter-terrorist strategy in the aftermath of the September 2001 terrorist attacks in the United States. The State Department's list of major money laundering countries (also categorized as "jurisdictions of primary concern") includes six Caribbean countries—Antigua and Barbuda, the Bahamas, Belize, the Dominican Republic, Haiti, and St. Kitts and Nevis—and one British Caribbean dependency, the Cayman Islands. The Department of State, in its March 2007 drug strategy report, maintains that although Antigua and Barbuda has comprehensive legislation to regulate its financial sector, the country remains vulnerable to money laundering because the sector is loosely regulated and because of its Internet gaming industry; the report notes that Antigua and Barbuda has yet to prosecute a money laundering case. The Bahamas has enacted strong anti-money laundering laws that has made it difficult for drug traffickers to deposit large amounts of cash; as a result, traffickers have begun storing large quantities of cash in safe houses, purchasing real estate, vehicles, and jewelry, and processing money through legitimate businesses and shell companies. In Belize, money laundering is believed to occur primarily in the country's growing offshore financial center. Money laundering in both the Dominican Republic and Haiti stems from their roles as major drug transhipment points. In the Dominican Republic, financial institutions engage in transactions with money derived from illegal drug sales in the United States, with courier and wire transfers the primary methods for moving the funds. St. Kitts and Nevis, according to the State Department, is at major risk for corruption and money laundering because of the high volume of narcotics being trafficked through the country and because of the presence of known traffickers on the islands. The Financial Action Task Force on Money Laundering (FATF), an inter-governmental body with the objective of combating money laundering and terrorist financing, has published a list of non-cooperative countries and territories in the fight against money laundering since 2000. The FATF evaluative process has been a major factor in Caribbean countries improving their anti-money laundering regimes. Four Caribbean nations and one dependent territory were on the first FATF non-cooperative list issued in 2000: the Bahamas, the Cayman Islands, Dominica, St. Kitts and Nevis, and St. Vincent and the Grenadines. Grenada was added to the list in September 2001. Subsequent actions by all these nations to improve their anti-money laundering regimes resulted in all of them being removed from the list by June 2003. The Bahamas and the Cayman Islands were removed from the list in June 2001; St. Kitts and Nevis in June 2002; Dominica in October 2002; Grenada in February 2003; and St. Vincent in June 2003. Once a nation is removed from the list, the FATF continues to monitor developments in the country to ensure compliance. Some Caribbean officials and others have complained that pressure to strengthen and enforce anti-money laundering regimes in the region have had a detrimental effect on its offshore financial sectors. They maintain that the anti-money laundering measures required have been indiscriminate and constitute an attack on legitimate business conducted in the small financial sectors of the region. In particular, after the U.S. congressional passage of new anti-money laundering provisions in the USA PATRIOT Act ( P.L. 107-56 , Title III), approved in the aftermath of the September 11 terrorist attacks, some feared that the stricter scrutiny of transactions between U.S. and Caribbean financial institutions would threaten the offshore financial industry in the Caribbean. The act's anti-money laundering provisions include a prohibition on U.S. correspondent accounts with shell banks (banks that have no physical presence in the chartering country) and tighter bank record keeping requirements. Some observers maintain that the strengthening of anti-money laundering regimes in the Caribbean will have the end result of increasing the attractiveness of the region's offshore financial sectors for legitimate business transactions. According to this view, such efforts as the FATF evaluative process and the anti-money laundering measures under the PATRIOT Act will help change the reputation of the Caribbean as being a haven for money launderers and tax evaders. Legislation has been introduced in the 110 th Congress that would restrict the use of offshore tax havens and tax shelters to avoid U.S. Federal taxation. S. 396 (Dorgan), would amend the Internal Revenue Code to treat controlled foreign corporations established in tax havens as domestic corporations, including those in several Caribbean states. S. 681 (Levin) and H.R. 2136 (Doggett), the Stop Tax Haven Abuse Act, would restrict the use of offshore tax havens and tax shelters to inappropriately avoid Federal taxation. Of the 34 countries and territories listed in S. 681 / H.R. 2136 as "offshore secrecy jurisdictions," 16 are in the Caribbean: Anguilla, Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Cayman Islands, Dominica, Grenada, Netherlands Antilles, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, and Turks and Caicos Islands. Caribbean nations have strongly objected to the legislation because they believe it unfairly targets the region. They have called for the removal of CARICOM member states from the legislation, asserting that the countries are in compliance with international information and transparency requirements. According to the Organization for Economic Co-operation and Development (OECD), 17 Caribbean nations and territories that have been categorized as tax havens have committed to improving transparency, and are not listed on the OECD's list of uncooperative tax havens. Barbados, which had been listed as an OECD tax haven in 2000, was subsequently removed from the list because of its longstanding information exchange arrangements with other countries, and its actions to further enhance the transparency of its tax and regulatory rules. A controversial issue in U.S. relations with the Caribbean has been a World Trade Organization (WTO) complaint filed by Antigua and Barbuda challenging U.S. restrictions on cross-border Internet gambling. Antigua, which has invested in Internet gambling as a means of diversifying its economy, maintains that it has lost millions of dollars because of the U.S. restrictions. In April 2005, the WTO Appellate Body ruled that the restrictions were inconsistent with U.S. market access commitments under the General Agreement on Trade in Services (GATS), but that the United States could justify them under the GATS public morals exception. The Appellate Body also found, however, that the United States did not appear to be in full compliance with the exception because of possible discriminatory treatment of foreign service suppliers in the area of horseracing. The United States was given until April 2006 to comply. In July 2006, the WTO established a compliance panel at the request of Antigua, which maintained that the United States had taken no action in response to the 2005 decision. The compliance panel ruled in Antigua's favor in March 2007. In May 2007, the United States Trade Representative (USTR) announced that the United States would modify its commitments under the GATS to rule out any market access commitments on gambling services. As a result, Antigua and Barbuda, along with the European Union, Japan, India, Costa Rica, Macao, Canada, and Australia are seeking compensation from the United States for the decision to change its commitments under the GATS. A first round of talks on the issue was held in July 2007. In addition, Antigua and Barbuda announced separately in June that it would seek authorization from the WTO to impose more than $3.4 billion in annual trade sanctions on the United States for not complying with the 2005 WTO ruling against U.S. restrictions on cross-border Internet gambling. U.S. officials challenged Antigua's retaliation figure, and an arbitration panel was set up in late July 2007 to rule on Antigua's request. Antigua maintains that it simply wants a negotiated solution in the gambling case. CARICOM officials have expressed concerns about U.S. inaction in the WTO case and have told U.S. officials that they consider it a regional Caribbean issue with the United States as opposed to just a U.S. bilateral issue with Antigua and Barbuda. The issue was raised by Caribbean officials during CARICOM's June 2007 Washington conference, with CARICOM states urging the United States to collaborate with Antigua and Barbuda. The United States has offered a one-way duty-free preferential trade arrangement for a wide range of products from Caribbean Basin nations since the early 1980s as an incentive for increased investment and export production in the region. These preferences have changed over the years, but are broadly referred to as the Caribbean Basin Initiative (CBI). In 1983, Congress enacted the Caribbean Basin Economic Recovery Act (CBERA), which allowed duty-free importation of many categories of products with certain significant exceptions. Most apparel and textile goods were ineligible under the CBERA, but in the late 1980s imports of apparel from CBERA countries that were assembled from U.S. components became eligible for reduced duties. These production-sharing arrangements boosted the apparel sectors of several Caribbean Basin countries. In 1990, Congress enacted so-called CBI II legislation that enhanced the benefits of CBERA and made its provisions permanent. Congress approved the Caribbean Basin Trade Partnership Act (CBTPA) ( P.L. 106-200 , Title II) in 2000, which expanded preferential tariff treatment for Caribbean Basin nations, providing them with preferential tariff treatment on their exports to the United States, similar to that provided under the North American Free Trade Agreement. Most significantly, this included preferential treatment for petroleum products and qualifying textile and apparel products. To be eligible for the program, countries must fulfill criteria covering a wide spectrum of issues, including WTO obligations, intellectual property rights, worker rights, child labor, and counternarcotics, anti-corruption, and transparency efforts. The CBTPA benefits are scheduled to expire at the end of September 2008, or earlier if the country enters into a free trade agreement with the United States. Currently, seven Caribbean countries are participating in the CBTPA program because they fully meet the eligibility criteria: Barbados, Belize, Guyana, Haiti, Jamaica, St. Lucia, and Trinidad and Tobago. The Dominican Republic traded its benefits under both the CBERA and the CBTPA when it approved implementing legislation in March 2007 for a reciprocal free trade agreement with the United States as part of the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR). Remaining Caribbean countries continue to benefit from the CBERA program with the exception of Cuba, which is not eligible, and Suriname, a former Dutch colony which has never elected to participate in the CBI trade program. As noted above, the CBERA program has no expiration date. Haiti received additional tariff preferences beyond CBERA and CBTPA in 2006 when Congress approved the Haitian Hemispheric Opportunity through Partnership Encouragement (HOPE) Act of 2006 (Title V of P.L. 109-432 ), which includes more flexible rules of origin for apparel. Since the United States first implemented a preferential trade program for Caribbean Basin imports in 1984, the overall performance of the region's exports has been mixed (see Table 6 ). The Dominican Republic has been the Caribbean country that has benefitted most from the program, and its apparel sector expanded significantly because of production-sharing arrangements. Overall U.S. imports from the Caribbean amounted to about $4.8 billion in 1984 and to about $14.9 billion in 2005, an increase of over $10 billion. The Dominican Republic accounted for $3.5 billion of the increase. Trinidad and Tobago, an oil and gas exporter, increased its exports destined for the United States from $1.4 billion in 1984 to about $8.4 billion in 2005. For other Caribbean nations, however, such as Haiti and the Bahamas, overall exports to the United States have declined or been stagnant since the early 1980s. Bahamian exports to the United States fell when the country's oil refinery closed in 1985; the country's economy remains based on tourism and financial services. Many small Caribbean nations have service-based economies, with tourism and financial services the leading sectors. As a result, the U.S. trade preferences have not had a significant economic impact on these small economies. U.S. exports to the Caribbean region (including agricultural exports to Cuba, which have been allowed since late 2001) rose from $8.9 billion in 2001 to $14.2 billion in 2006 (see Table 7 ). Four Caribbean countries—Dominican Republic, Trinidad and Tobago, Jamaica, and the Bahamas—are the destination for the lion's share of U.S. exports to the region. In 2006, U.S. exports to these four countries accounted for 79% of total U.S. exports to the Caribbean. The United States ran a trade deficit of almost $700 million with the Caribbean in 2006, largely because of natural gas imports from Trinidad and Tobago. For most other Caribbean nations, the United States ran a significant trade surplus. All Caribbean nations with the exception of Cuba are participating in the negotiations for a Free Trade Area of the Americas (FTAA), although negotiations for that agreement have been stalled since 2004. Within CARICOM, while some governments, like Trinidad and Tobago, are enthusiastic about the FTAA, other Caribbean governments, especially the smaller countries of the region, have reservations about the FTAA and its impact on the region. While participating in the FTAA negotiations, Caribbean nations argue for special and differential treatment for small economies, including longer phase-in periods. CARICOM has also called for a Regional Integration Fund to be established that would help the smaller economies meet their needs for human resources, technology, and infrastructure. In April 2006, U.S. and CARICOM trade officials meeting in Washington began exploring the possibility of a free trade agreement, although Caribbean ministers reportedly maintained that they would only negotiate such an agreement if it included extensive transition periods for Caribbean nations. The officials also agreed to revitalize a dormant Trade and Investment Council, originally established in the early 1990s, that would be the mechanism used to continue exploratory talks on an FTA as well as other trade and investment issues. A key issue for the Caribbean and Congress is how to deal with the impending expiration of the CBTPA program in September 2008, which provides the greatest trade benefits to the region. At CARICOM's June 2007 meeting in Washington D.C., a joint U.S.-CARICOM statement expressed determination to strengthen existing trade arrangements. President Bush pledged to Caribbean leaders that he would work with Congress to extend and update the CBPTA. As first announced by President Bush at the April 2001 Summit of the Americas, the "Third Border Initiative" (TBI) had the goals of deepening cooperation in fighting the spread of HIV/AIDS, responding to natural disasters, and making sure the benefits of globalization are felt in even the smallest economies. The Caribbean was described as an often overlooked "third border," where illegal drug trafficking, migrant smuggling, and financial crime threaten U.S. and regional security interests. The initiative consisted of a package of programs to enhance diplomatic, economic, health, education, and law enforcement cooperation and collaboration. Most significantly, the initiative included increased funding to combat HIV/AIDS in the region. In the aftermath of the September 2001 terrorist attacks in the United States, the Third Border Initiative expanded to focus on issues affecting U.S. homeland security in the fields of administration of justice and security. Economic Support Funds (ESF) under the TBI have been used to help Caribbean airports modernize their safety and security regulations and oversight, which is viewed an important measure to improve the security of visiting Americans. TBI funds have also been used to support border security such as the strengthening of immigration controls; to help Caribbean economies move toward greater competitiveness; and to support an improvement of environmental management. Assistance in FY2007 was used to help Caribbean nations enhance security in preparation for the Cricket World Cup games. Recent funding for the TBI amounted to $8.9 million in FY2005, almost $3 million in FY2006, and a request of $3 million for FY2007. For the FY2008 request, the TBI has been subsumed into a larger Western Hemisphere Regional Program, with $1.75 million in ESF that will support TBI activities designed to enhance diplomatic, economic, health, education, disaster preparedness, and law enforcement cooperation and collaboration. An unspecified portion of $1.1 million humanitarian assistance under the Western Hemisphere Regional Program would fund TBI activities that help Caribbean governments plan and prepare for natural disasters. (See Table 4 on U.S. assistance to the Caribbean.) Caribbean nations have been supportive of the TBI program, and in 2004 signed a joint declaration with the United States stating that the TBI was a valuable framework for structuring Caribbean-U.S. engagement and enhancing cooperation in a variety of areas: diplomatic, security, economic, environmental, health, and education. As noted above, in early June 2007, the Department of Justice announced that four individuals—two Guyanese nationals, one Trinidadian national, and one U.S. citizen of Guyanese origin—were being charged with conspiring to blow up fuel tanks and a fuel pipeline at JFK International Airport in New York. The U.S. citizen—Russell Defreitas, a former airport cargo worker at JFK—was arrested in New York. The two Guyanese nationals, Abdul Kadir (a former member of Guyana's parliament) and Abdel Nur, and the Trinidadian national, Kareen Ibrahim, were arrested in Trinidad and Tobago and face extradition to the United States to stand trial. According to the Justice Department, the failed "plot tapped into an international network of Muslim extremists from the United States, Guyana, and Trinidad," and the defendants "used their connections to present their terrorist plot to radical groups in South America and the Caribbean, including senior leadership of Jamaat al Muslimeen (JAM)." The JAM had been responsible for a bloody coup attempt in 1990 in Trinidad and Tobago. Some news reports maintain that the plotters had also planned to seek help from Iran. U.S. officials have lauded cooperation from both Guyana and Trinidad and Tobago as instrumental in deterring the plot, and the arrests have highlighted the strong counterterrorism cooperation between the Caribbean and the United States. For some observers, the failed plot focuses attention to the potential security threat posed by Muslim extremists in the Caribbean. According to this view, while there are doubts that the accused had the resources and expertise to carry out the plot, the very presence of such individuals in the region espousing such radical views warrants closer scrutiny and attention. Some terrorism specialists, however, maintain that there is little evidence to indicate that Muslims in the Caribbean in such countries as Guyana and Trinidad and Tobago are attracted to radical Islamist ideologies. They contend that the JAM in Trinidad and Tobago has not a track record of operating outside of Trinidad. In addition to the TBI, the United States has also provided support to improve port security in the Caribbean region, with the objective of helping ports comply with the more stringent set of maritime regulations embodied in new International Ship and Port Facility Security (ISPS) Code, which went into effect on July 1, 2004. The ISPS is a set of maritime regulations for ships and port facilities with the objective of preventing terrorist incidents. There has been concern among Caribbean nations about the high cost of implementing these security regulations. Some of the larger, richer countries in the Caribbean will be better equipped to afford these extra security costs, while some of the smaller and poorer nations will have difficulty coming into compliance. The U.S. Coast Guard has responsibility for conducting foreign port security assessments to see whether the ports are in compliance with the ISPS standards. Trade sanctions are an option if the port is not in compliance. By November 2004, all Caribbean nations had self-reported that they were in compliance with the more stringent standards of the ISPS Code. The Coast Guard is currently involved in visiting foreign ports worldwide to ensure that security practices are up to standards. According to the Government Accountability Office, most Caribbean ports visited by the Coast Guard have implemented the ISPS Code to a large degree, but the Coast Guard also found facilities in some counties that needed to make improvements or take additional measures. In addition to the Coast Guard, several U.S. agencies have provided some support to help Caribbean nations come into compliance with the ISPS Code and improve port security. The U.S. Maritime Administration (MARAD) in the Department of Transportation organizes, manages, and implements the Inter-American Port Security Training Program (IAPSTP) for the Organization of American States. The State Department's Bureau for International Narcotics and Law Enforcement Affairs has funded port security improvements for several Western Hemisphere countries. In the past, USAID has funded a project specifically for Eastern Caribbean nations to help assess the status of each port's security requirements and its security plans, and has more recently funded a program to help Haiti comply with ISPS Code requirements. Several Caribbean ports are included in the Container Security Initiative (CSI), a program implemented by U.S. Customs and Border Protection (CBP) of the Department of Homeland Security. The CSI program helps ensure that high-risk containers are identified and inspected at foreign ports before they are placed on vessels for delivery to the United States. In September 2006, three Caribbean ports became operational CSI ports: Caucedo, Dominican Republic; Kingston, Jamaica; and Freeport, Bahamas. All three of these ports are also involved in the Megaports Initiative run by the National Nuclear Security Administration of the Department of Energy. That initiative has the goal of deploying radiation detection equipment to ports in order to detect nuclear or radioactive materials. The Megaports Initiative is currently operational in the Bahamas, while Jamaica and the Dominican Republic are working to implement the program. Caribbean nations that depend on tourism such as Jamaica and the Bahamas have expressed concern about the potential negative effects on tourism in the region because of new U.S. passport requirements mandated by Section 7209 of the Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ), known as the Western Hemisphere Travel Initiative. Beginning January 23, 2007, U.S. citizens traveling by air to the Caribbean (including Bermuda), as well as to Canada and Mexico, require passports. The requirement for the Caribbean originally had been set for December 31, 2005, but subsequently was delayed several times. Because of an extensive backlog of passport applications, the Departments of State and Homeland Security announced on June 8, 2007, that there would be some flexibility with the policy through the end of September 2007, whereby individuals who have applied but have not yet received their passports are able to travel with a government-issued photo and official proof of their passport application. The Caribbean tourism industry has feared that the impact of the air travel passport requirement would be catastrophic for Caribbean economies. To date, according to some anecdotal reports, the passport requirement has discouraged some travelers to the region, with reports of 10% declines in U.S. tourists going to Jamaica and other islands. In the Bahamas, stopover tourists declined 5% in the first quarter of 2007 compared to the same period in 2006. The passport requirement for U.S. citizens traveling by sea to the Caribbean (as well as by land and sea to Canada and Mexico) could be implemented as early as January 2008, according to the Department of State, but an exemption for cruise ship travel could mitigate a negative affect on tourism in the region. Proposed rules were published in the Federal Register on June 26, 2007, which laid out the documents that would be required for those traveling by land and sea. Under the proposed rules, U.S. citizens traveling on cruise ships on round trip voyages that begin and end in the same U.S. port would not require passports, but could travel with government-issued photo ID and a certified copy of their birth certificate. For several Caribbean nations, however, a majority of tourism revenues are derived from tourists arriving by air, compared to day trippers from cruise ships. In the 110 th Congress, both the House and Senate-passed versions of H.R. 2638 , the FY2008 Department of Homeland Security Appropriations Act have provisions that would delay the implementation of any plan for passport requirements to no earlier than June 1, 2009. The House approved its provision in the bill on June 15, 2007, when it passed H.Amdt 291 (LaTourette), by a vote of 379 to 25, prohibiting any funds in the bill from implementing a passport requirement plan under section 7209 of the Intelligence Reform and Terrorism Prevention Act of 2004 before June 1, 2009. The Bush Administration opposes any provisions in the bill that would delay implementation of the Western Hemisphere Travel Initiative to June 2009. High rates of violent crime, including murder and kidnaping, is a major public security concern throughout the Caribbean. Jamaica, with 1,335 murders in 2006, had a murder rate of 50.5 (per 100,000 people), the highest in the Caribbean. Other countries with high murder rates in 2006 were St. Kitts and Nevis (35.5), Belize (32.2), Trinidad and Tobago (28.6), St. Lucia (24), and Guyana (20.4). According to a March 2007 joint UN/World Bank study, homicide rates in the Caribbean are high by world standards. Comparative international rates from 2002 show that the region has more murders per capita—30 per 100,000—than any other region in the world, compared to a rate of 29 for Southern and West Africa, 26 for South America, and 7 for North America. The UN/World Bank study concluded that the transit of illicit drugs through the Caribbean is the major factor contributing to high rates of crime and violence in the region. The report maintained that a criminal justice-focused approach is necessary for certain types of crime and violence, but contended that there has been over-reliance on this approach for crime reduction in the region. Additional approaches could focus on prevention, environment-improvement, community policing, and targeted youth services. The report also called for more reintegration services for deportees (see discussion below) and for the availability of firearms to be limited and regulated. U.S. deportations to Latin American and Caribbean countries constitute the overwhelming majority of U.S. deportations worldwide. In FY2006, for example, the Department of Homeland Security (DHS) deported almost 197,000 aliens worldwide, with almost 188,000 of those, or 95%, going to Latin American and Caribbean countries. Overall in FY2006, some 45% of those deported to Latin America and the Caribbean were removed based on a criminal conviction. For a number of countries, particularly in the Caribbean, a majority of those deported were removed on criminal grounds. Legislation enacted in 1996—the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA, P.L. 104-132 ) and the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA, Division C of P.L. 104-208 )—made changes to immigration law that increased the number of aliens subject to deportation and decreased access to relief from deportation. As a result, U.S. deportations to the Latin American and Caribbean region have increased (as with deportations worldwide) more than fourfold over the past decade, from over 46,000 in FY1995 to, as noted above, some 199,000 in FY2005 and almost 188,000 in FY2006. Caribbean countries accounted for just over 3% of total U.S. deportations in FY2006, with 6,100 aliens deported to the sub-region. Among Caribbean countries, the major recipient of U.S. deportations in FY2006 were the Dominican Republic, with over 2,800 of its citizens deported, accounting for 46% of U.S. deportations to the Caribbean; Jamaica, with over 1,400 deportations, or 23%; and Haiti, with over 800, accounting for just over 13%. A number of small English-speaking Caribbean nations—such as St. Kitts and Nevis, Antigua and Barbuda, and Guyana—while having much smaller numbers of their citizens deported from the United States, were among the top recipient countries on a per capita basis. For most Caribbean nations, with the exception of Haiti, a large majority of their citizens deported from the United States were removed on criminal grounds. For example, almost 88% of Jamaicans and 80% of Dominicans were deported on criminal grounds in FY2006. (See Table 8 .) The deportation of Caribbean citizens from the United States has been one of the thorniest issues between Caribbean nations and the United States for a number of years, with challenges centered on criminal deportees and social stigma. The number of U.S. criminal deportations to the Caribbean has increased from just over 3,100 in FY1996 to over 5,300 in FY2005, although the number fell to about 4,500 in FY2006. While the majority of those returned are not hardened criminals, even a small number of such criminals can cause significant problems. A recent U.N.-World Bank study concluded that it is unlikely that the average deportee in Jamaica is committing violent crime, and that statistics on criminal deportees in Barbados and Trinidad and Tobago show low re-offender rates among criminal deportees. Nevertheless, the study maintains that it is possible that some deportees are involved in violent crime, and that such activity can have a significant impact in such small Caribbean countries. Stigma has been a major problem facing deportees to Caribbean countries, with employers often unwilling to hire deportees because of the perception that they are hardened criminals that cannot be trusted. Caribbean officials often fuel the stigma by contending that the deportees are largely responsible for the rise in crime in the region. For example, Haitian officials have repeatedly criticized the deportations, and have blamed the country's increase in violent crime and kidnaping on the deportees. In contrast, foreign diplomats as well as officials of the U.N. police force in Haiti dispute this, and assert that Haiti's powerful street gangs are responsible for the crime. In Jamaica, government officials often link the criminal deportees to criminal organizations and rising homicide rates in the country. Some Jamaican politicians contend that the deportees learned their criminal ways in the United States and that many have lived in the United States since they were young children. In contrast, noted Jamaican criminologist Bernard Headley contends that the majority of criminal deportees in Jamaica are not hardened criminals, and that a only minority of deportees were raised in the United States at a young age. Caribbean officials have called on the United States to provide better information on deportees with criminal records. Some have recommended that U.S. law enforcement authorities share information on all Caribbean deportees, with the goal of establishing a Deportee Databank for the region. Some Caribbean officials have also called on the United States to reconsider the policy of deporting long-term permanent residents, balancing such issues as the interests of children, the interests of the individual, and the impact on both the United States and recipient countries. Caribbean leaders have also called for reintegration assistance to help returning nationals, many who have spent many years away from their country. Speaking at the June 2007 CARICOM meeting in Washington D.C., Jamaican Prime Minister Portia Simpson Miller called for international assistance for rehabilitation, reintegration into society, and mechanisms for effective monitoring. The U.N.-World Bank study noted above maintained that assisting reintegration efforts in the Caribbean for deported offenders could be a cost-effective way for deportee-sending countries to promote development and weaken international criminal networks. The study recommended improved coordination and information sharing on criminal deportees by sending countries; robust research on the contribution of deportees to crime; and the financing of deportee reintegration programs, including financial support from sending countries. CARICOM issued a report on crime and security in 2002 recommending that its member states establish offices for the resettlement of deportees, modeled after such an office in St. Kitts and Nevis, that would provide temporary employment, housing, and other services. Several countries in the region have established such offices. Trinidad and Tobago, for example, established a Social Displacement Unit within the Ministry of Social Development that assesses the needs and provides some assistance to deportees. In 2006, the United States indirectly funded a $1 million pilot project in Haiti through the United Nations Development Program and implemented by the International Organization for Migration (IOM), which established a Haitian government program providing services to deportees. The program, which began operating in 2007 under the Haitian government's Ministry of Social Affairs, involves counseling, HIV/AIDS testing, a drug rehabilitation program, skills training, and micro-enterprise support. State Department officials indicate that they are hoping to use the program as a model for reintegration programs in other CARICOM countries in the future. A major concern for Caribbean nations—the majority of which are net energy importers—has been the rising price of oil and the potential effect of such rising prices on economic growth and social stability. In the Caribbean region, only three nations—Trinidad and Tobago, Cuba, and Suriname—have significant oil and gas reserves. Of these, only Trinidad and Tobago is a major oil and gas producer. With gas reserves of 19 trillion cubic feet—the fifth largest in the Western Hemisphere—Trinidad is the largest supplier of liquefied natural gas (LNG) to the United States, accounting for 75% of all U.S. LNG imports. It also produced an estimated 150,000 barrels of oil per day in 2006. Both oil and gas reserves in Trinidad have declined in recent years, putting pressure on exploration efforts in order to sustain future production. Cuba produces oil, about 69,000 barrels of oil per day, but still imports a majority of its consumption needs. Estimates of Cuba's offshore oil reserves, however, approach 5 billion barrels of undiscovered oil. Suriname produces about 12,000 barrels of oil per day. Barbados also produces a small amount of oil, which is refined in Trinidad and Tobago, but it imports 90% of its oil consumption needs. Venezuela is now offering oil to Caribbean nations on preferential terms in a new program known as PetroCaribe, and there has been some U.S. concern that the program could increase Venezuela's influence in the Caribbean region. Since 1980, Caribbean nations have benefitted from preferential oil imports from Venezuela (and Mexico) under the San Jose Pact, and since 2001, Venezuela has provided additional support for Caribbean oil imports under the Caracas Energy Accord. PetroCaribe, however, goes further with the goal of putting in place a regional supply, refining, and transportation and storage network, and establishing a development fund for those countries participating in the program. Under the program, Venezuela is offering to supply 190,000 barrels per day of oil to the region on preferential terms. When oil prices are over $50 a barrel, 40% of the volume is financed over 25 years at an annual interest rate of 1%. Cuba, a major beneficiary of PetroCaribe, receives some 90,000 barrels per day (bpd) of oil from Venezuela, while the Dominican Republic receives some 40-45,000 bpd and Jamaica receives some 23,500. Fourteen Caribbean nations are signatories of PetroCaribe. PetroCaribe also has the goal of putting in place a regional supply, refining, and transportation and storage network, and establishing a development fund for those countries participating in the program. Barbados, which already receives discounted petroleum rates from Trinidad, has declined to sign the agreement, and Trinidad, which has its own abundant energy resources, has declined to sign. In the past, Trinidad's Prime Minister Patrick Manning warned other CARICOM nations that PetroCaribe could leave them dependent on Venezuelan oil. Petrotrin, Trinidad and Tobago's state-owned oil company reportedly is looking for new oil markets outside the Caribbean to replace some markets lost to Venezuela because of PetroCaribe. The company traditionally has sold about 60,000 barrels per day of oil to the region. More recently, Trinidad has increased its energy cooperation with Venezuela. In March 2007, Trinidad and Venezuela signed an agreement for the joint development of offshore gas blocks that lie in common waters. Trinidadian Prime Minister Patrick Manning has suggested that the gas produced from the joint endeavor should be processed in Trinidad because it already has the infrastructure in place and well-developed LNG capabilities. Manning also has proposed to both Brazil and Venezuela that the three countries cooperate in building a second oil refinery in Trinidad and Tobago. The development of biofuels such as ethanol, produced from sugar, could help some Caribbean countries reduce their dependence on imported oil. In March 2007, the United States and Brazil signed an agreement to promote greater cooperation on ethanol with part of the accord focusing on assistance for biofuels development in several countries, including the Dominican Republic, Haiti, and St. Kitts and Nevis. In early August 2007, Brazil and Jamaica signed an agreements to help modernize Jamaica's sugar and ethanol sectors. H.Con.Res. 148 (Lee) , introduced May 14, 2007 and passed by the House on June 18, 2007 by voice vote, recognizes the significance of National Caribbean-American Heritage Month. H.Res. 418 (Engel) , passed (386-0) by the House June 11, 2007; recognizes and welcomes the delegation of Presidents, Prime Ministers, and Foreign Ministers from the Caribbean to Washington DC, and commends the Caribbean Community for holding the conference on the Caribbean. H.R. 176 (Lee) , Shirley A. Chisholm United States-Caribbean Educational Exchange Act of 2007—introduced January 4, 2007; reported by the House Committee on Foreign Affairs July 23, 2007 ( H.Rept. 110-254 ); and passed (371-55) by the House on July 31, 2007—would authorize assistance to the countries of the Caribbean to fund educational development and exchange programs. S. 1007 (Lugar) , introduced March 28, 2007, would, among other provisions: direct the Secretary of State to work with the government of Brazil and other foreign governments in the Western Hemisphere to ensure energy security by fostering the development of biofuels production, research and infrastructure; and require a study and investigation from the Secretary of the Treasury regarding ethanol imports from certain Caribbean Basin countries. S. 1106 (Thune) , would extend the additional duty on ethanol from January 1, 2009 to January 1, 2011, and require an investigation into ethanol imports from certain Caribbean Basin countries. H.R. 848 (Fortuño) , introduced February 6, 2007, would amend the State Department Basic Authorities Act of 1956 to authorize assistance to combat HIV/AIDS in Antigua and Barbuda, the Bahamas, Barbados, Belize, Dominica, Grenada, Jamaica, Montserrat, Saint Kitts and Nevis, Saint Vincent and the Grenadines, Saint Lucia, Suriname, Trinidad and Tobago and Dominican Republic. H.Con.Res. 166 (Lee) , introduced June 7, 2007, would support the goals and ideals of National Caribbean American HIV/AIDS Awareness Day. H.Con.Res. 173 (Jones, Stephanie Tubbs) , introduced June 21, 2007, would support the goals and ideals of the First Summit of Caribbean Ministers of Health. H.Con.Res. 16 (Lee) , introduced January 5, 2007, would congratulate Prime Minister Portia Simpson Miller for becoming the first democratically-elected female Prime Minister of Jamaica and the first female Jamaican head of state. H.R. 2638 (Thompson, Bennie) , the FY2008 Department of Homeland Security Appropriations Act, both the House and Senate-passed versions have provisions that would delay the implementation of any plan for passport requirements to no earlier than June 1, 2009. The House approved its provision on June 15, 2007, when it passed H.Amdt. 291 (LaTourette), by a vote of 379 to 25, prohibiting any funds in the bill from implementing a passport requirement plan under section 7209 of the Intelligence Reform and Terrorism Prevention Act of 2004. The Bush Administration opposes any provisions in the bill that would delay implementation of the Western Hemisphere Travel Initiative to June 2009. H.R. 1684 (Thompson, Bennie) , Department of Homeland Security Authorization Act for FY2008, passed (296-126) by the House May 9, 2007; Section 1124(a) of the House-passed bill would, among other provisions, provide that citizens of the United States or Canada less than 16 years of age not be required to present a passport when returning to the United States from Canada, Mexico, Bermuda, or the Caribbean at any port of entry along the international land or maritime border of the United States. H.R. 1061 (Slaughter) , Protecting American Commerce and Travel Act of 2007, introduced February 14, 2007, would: direct the Secretary of Homeland Security to conduct a pilot program to determine if a state driver's license may be enhanced to satisfy the passport requirements of the Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ) for land and sea travel only; provide that a U.S. citizen under 17 shall not be required to present a passport when returning to the United States from Canada, Mexico, Bermuda or the Caribbean at specified ports of entry; direct the Secretary of State to issue U.S. citizen applicants a passport card that may be used for international travel although the Secretary may limit the use of a passport card to only international land and sea travel. S. 396 (Dorgan) , introduced January 25, 2007, would amend the Internal Revenue Code to treat controlled foreign corporations established in tax havens as domestic corporations, including those in several Caribbean states. S. 681 (Levin) , introduced February 17, 2007, and H.R. 2136 (Doggett) , introduced May 3, 2007, the Stop Tax Haven Abuse Act, would restrict the use of offshore tax havens and tax shelters to inappropriately avoid Federal taxation. Of the 34 countries and territories listed as "offshore secrecy jurisdictions," 16 are in the Caribbean. H.R. 762 (Fortuño) , introduced January 31, 2007, would authorize appropriations for FY2008 for voluntary contributions on a grant basis to the Organization of American States to establish a Center for Caribbean Basin Trade and to establish a skill-based training program for Caribbean Basin countries. CRS Report RL33337, Article 98 Agreements and Sanctions on U.S. Foreign Aid to Latin America , by [author name scrubbed]. CRS Report RL33819, Cuba: Issues for the 110 th Congress , by [author name scrubbed]. CRS Report RS21718, Dominican Republic: Political and Economic Conditions and Relations with the United States , by [author name scrubbed] and [author name scrubbed]. CRS Report RL31870, The Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR) , by [author name scrubbed]. CRS Report RS21930, Ethanol Imports and the Caribbean Basin Initiative (CBI) , by [author name scrubbed]. CRS Report RS20864, A Free Trade Area of the Americas: Major Policy Issues and Status of Negotiations , by [author name scrubbed]. CRS Report RL32294, Haiti: Developments and U.S. Policy Since 1991 and Current Congressional Concerns , by [author name scrubbed] and [author name scrubbed]. CRS Report RL32001, HIV/AI DS in the Caribbean and Central America , by [author name scrubbed]. CRS Report RL33693, Latin America: Energy Supply, Political Developments, and U.S. Policy Approaches , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Report RL33828, Latin America and the Caribbean: Issues for the 110 th Congress , coordinated by [author name scrubbed]. CRS Report RS22657, Latin America and the Caribbean: Fact Sheet on Economic and Social Indicators , by [author name scrubbed]. CRS Report RL33162, Trade Integration in the Americas , by [author name scrubbed]. CRS Report RL33200, Trafficking in Persons in Latin America and the Caribbean , by [author name scrubbed]. CRS Report RL32739, Tsunamis: Monitoring, Detection, and Early Warning Systems , by [author name scrubbed]. CRS Report RL32487, U.S. Foreign Assistance to Latin America and the Caribbean , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Report RL33951, U.S. Trade Policy and the Caribbean: From Trade Preferences to Free Trade Agreements , by [author name scrubbed]. CRS Report RL32014, WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases , by [author name scrubbed].
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With some 42 million people encompassing 16 independent countries and 13 overseas territories, the Caribbean is a diverse region that includes some of the hemisphere's richest and poorest nations. The region consists of 13 island countries, from the Bahamas in the north to Trinidad and Tobago in the south; Belize, which is geographically located in Central America; and the two countries of Guyana and Suriname, located on the north central coast of South America. With the exception of Cuba and Haiti, regular elections in the region are the norm, and for the most part have been free and fair. Nevertheless, while many Caribbean nations have long democratic traditions, they are not immune to threats to their political stability, including terrorism. Many nations in the region experienced economic decline in 2001-2002 due to downturns in the tourism and agriculture sectors, but most Caribbean economies have rebounded since 2003. U.S. interests in the Caribbean are diverse, and include economic, political, and security concerns. The Bush Administration describes the Caribbean as America's "third border," with events in the region having a direct impact on the homeland security of the United States. The U.S.-Caribbean relationship is characterized by extensive economic linkages, cooperation on counternarcotics and security, and a sizeable U.S. foreign assistance program. U.S. aid supports a variety of projects to strengthen democracy, promote economic growth and development, alleviate poverty, and combat the HIV/AIDS epidemic in the region. The United States has offered preferential treatment for Caribbean imports since 1984 under the Caribbean Basin Initiative yet the performance of the region's exports to the United States has been mixed. During a June 2007 meeting in Washington, DC, Caribbean leaders and President Bush pledged to strengthen existing trade arrangements. President Bush vowed to work with Congress to extend and update the Caribbean Basin Trade Partnership Act, which provides NAFTA-like tariff treatment for Caribbean imports, before it expires at the end of September 2008. Despite close U.S. relations with most Caribbean nations, there has been tension at times in relations. Many Caribbean nations resent U.S. expressions of concern about their relations with Cuba and Venezuela. Another delicate issue has been the large number of deportations from the United States to the region over the past several years. This report, which will be updated periodically, deals with broad issues in U.S. relations with the Caribbean, including foreign assistance; counternarcotics and security cooperation; support to combat the HIV/AIDS epidemic; trade policy; the deportation issue; and energy issues. It does not include an extensive discussion of Cuba, the Dominican Republic, or Haiti, which are covered in other CRS reports. Additional CRS reports on the Caribbean region include CRS Report RL33951, U.S. Trade Policy and the Caribbean: From Trade Preferences to Free Trade Agreements, by [author name scrubbed], and CRS Report RL32001, HIV/AIDS in the Caribbean and Central America, by [author name scrubbed].
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Congressional commissions are formal groups established by Congress to provide independent advice, make recommendations for changes in public policy, study or investigate a particular problem or event, or perform a specific duty. Usually composed of policy experts chosen by Members of Congress and/or officials in the executive branch, commissions may hold hearings, conduct research, analyze data, investigate policy areas, or make field visits as they perform their duties. Most commissions complete their work by delivering their findings, recommendations, or advice in the form of a written report to Congress. Occasionally, legislation submitted by commissions will be given "fast track" authority in Congress. Although no legal definition exists for what constitutes a "congressional commission," in this report, a congressional commission is defined as a multi-member independent entity that (1) is established by Congress, (2) exists temporarily, (3) serves in an advisory capacity, (4) is appointed in part or whole by Members of Congress, and (5) reports to Congress. These five characteristics effectively serve to differentiate a congressional commission from a presidential commission, an executive branch commission, or other bodies with "commission" in their names. Over 100 congressional commissions have been established since 1989. Throughout American history, Congress has found commissions to be useful tools in the legislative process, and legislators continue to use them today. By establishing a commission, Congress can potentially provide a highly visible forum for important issues and assemble greater expertise than may be readily available within the legislature. Complex policy issues can be examined over a longer time period and in greater depth than may be practical for legislators. Finally, the non-partisan or bipartisan character of most congressional commissions may make their findings and recommendations more politically acceptable, both in Congress and among the public. Critics argue that many congressional commissions are established by legislators seeking "blame avoidance," and take difficult decisions out of the hands of Congress. Other observers have suggested that commissions are undemocratic, with their members neither electorally accountable to the public nor their meetings and decisionmaking processes public. Finally, some critics see commissions as financially inefficient, arguing that the costs of establishing a commission outweigh potential benefits, especially since their findings and recommendations may be ignored by Congress. Congressional commissions can be categorized as either policy commissions, investigatory commissions, or commemorative commissions. Most congressional commissions are policy commissions, such as the United States Commission on North American Energy Freedom, that study particular public policy problems and typically report their findings to Congress along with recommendations for legislative or executive action. Far fewer commissions are investigative commissions, such as the National Commission on Terrorist Attacks Upon the United States, that are established to examine past events. A small number of commissions are commemorative commissions, such as the Abraham Lincoln Bicentennial Commission, that plan, coordinate, and oversee celebrations of people or events, often in conjunction with milestone anniversaries. The temporary status of congressional commissions and short time period they are often given to complete their work product makes it important that legislators craft statutes creating congressional commissions with care. Statutes establishing congressional policy commissions generally include language that states the mandate of the commission, provides a membership structure and appointment scheme, defines member compensation and other benefits, outlines the commission's duties and powers, authorizes funding, and sets a termination date for the commission. A variety of options are available for each of these organizational choices. Legislators can tailor the composition, organization, and arrangements of a commission, based on particular goals. As a result, individual commissions often have organizational structures and powers quite different from one another. In the past, confusion has arisen over whether particular entities are "congressional commissions." There are several reasons for this confusion. First, the term "congressional commission" is not defined by law; observers might disagree as to whether an individual entity should be characterized as such. Second, many different entities within the federal government have the word "commission" in their name, such as regulatory commissions, presidential advisory commissions, and advisory commissions established in executive agencies. Conversely, many congressional commissions do not have the word commission in their name; instead, they are designated as boards, advisory panels, advisory committees, task forces, or by other terms. In this report, a congressional commission is defined as a multi-member independent entity that (1) is established by Congress, (2) exists temporarily, (3) serves in an advisory capacity, (4) is appointed in part or whole by Members of Congress, and (5) reports to Congress. This definition differentiates a congressional commission from a presidential commission, an executive branch commission, or other bodies with "commission" in their names, while including most entities that fulfill the role commonly perceived for commissions: studying policy problems and reporting findings to Congress. Each of these characteristics is discussed below. Congressional commissions are established by Congress, usually by statute. Not all advisory commissions established by statute, however, are congressional commissions. Congress routinely establishes advisory commissions in the executive branch by statute. Conversely, not all advisory commissions serving the federal government are established by Congress. Commissions may be established in the executive branch by the President, department heads, or individual agencies. Congressional commissions are also independent of Congress in function. This characteristic excludes commission-like entities established within Congress, such as congressional observer groups, working groups, and ad hoc commissions and advisory groups created by individual committees of Congress under their general authority to procure the "temporary services" of consultants to "make studies and advise the committee," pursuant to 2 U.S.C. 72a. Congressional commissions are established to perform specific tasks, with statutory termination dates linked to the completion of the tasks. This restriction excludes entities that typically serve an ongoing administrative purpose, do not have statutory termination dates, and do not produce reports, such as the House Office Building Commission or Senate Commission on Fine Art. Also excluded are entities that serve ongoing diplomatic or interparliamentary functions, such as the U.S. Group to the NATO Parliamentary Assembly, or the Canada-United States Interparliamentary Group. Finally, Congress has created a number of boards to oversee government entities, such as the United States Holocaust Memorial Council and the John F. Kennedy Center Board of Trustees. Although these entities could arguably be considered congressional commissions, their lifespan, purpose, and function differs from temporary congressional commissions. Unlike regulatory commissions, congressional commissions are not typically granted administrative authority, and they usually lack the power to implement their findings or recommendations. Instead, advisory commissions typically produce reports that present their findings and offer recommendations for either legislative or executive action. Congressional commissions provide that Members of Congress, particularly the leadership, be intimately involved in the appointment process, either through direct service on a commission, or by appointing or recommending candidates for membership. Congressional commissions are usually required to submit their reports to Congress, or to Congress and the President. Other advisory commissions, such as presidential or executive branch commissions, typically submit their reports only to the President or agency head. This report attempts to identify all congressional commissions established between the 101 st and 114 th Congress. A large number of bills creating congressional commissions are introduced in Congress each session. During the 114 th Congress, bills have been introduced that would have created more than 20 congressional commissions. Similar numbers of bills have been proposed in previous Congresses. Most of these bills proposing commissions are not enacted. A database search was conducted using the Legislative Information System (LIS) for the 101 st through 114 th Congresses (1989-2016). Each piece of legislation returned was examined to determine if (1) the legislation contained a commission; and (2) if the commission was an ad hoc congressional commission. If the commission was judged to be an ad hoc congressional commission, the name, public law number, Statutes-at-Large citation, and date of enactment were recorded. A total of 107 congressional commissions were identified through this search. Table 1 reports the number of commissions identified by the search in each Congress. Two caveats accompany these results. As stated above, identifying congressional commissions involves making judgment calls about particular characteristics. Second, tracking provisions of law that create congressional commissions is an inherently inexact exercise. Although many such bodies are created in easily identifiable freestanding statutes, others are contained within the statutory language of lengthy omnibus legislation. Consequently, individual commissions may have been missed by the search algorithm. Congressional commissions can be generally placed into one of three categories. Most congressional commissions are policy commissions , temporary bodies which study particular policy problems and report their findings to Congress. Less common are investigative commissions, which are similar in structure to policy commissions but tasked with reviewing specific events. C ommemorative commissions are entities established to commemorate a person or event, often to mark an anniversary. Table 2 reports the total number and percentage of each type of commission identified in the LIS database search of the 101 st through 114 th Congresses. The vast majority of congressional commissions, 79%, were established to study, examine, or review a particular policy problem. During the 110 th , 111 th , 113 th , and 114 th Congresses, policy commissions were established to study a range of issues, including the proliferation of weapons of mass destruction, motor fuel tax enforcement, surface transportation policy, defense policy, and the threat to the United States from Electromagnetic Pulse (EMP) attacks. Investigative commissions, established for the purpose of reviewing specific events, are much less common than policy commissions. Only seven such bodies have been established by Congress during the past 22 years. Investigative commissions, however, such as the National Commission on Terrorist Attacks Upon the United States (the 9/11 commission), often receive substantial public attention. Investigative commissions are often granted broad powers, including the power to subpoena witnesses. Most recently, the Commission on Wartime Contracting in Iraq and Afghanistan, the Congressional Oversight Panel for the Emergency Economic Stabilization Act, and the Financial Crisis Inquiry Commission were established during the 110 th and 111 th Congresses. Since 1989, Congress has created 15 commemorative congressional commissions. Six of the commissions were created to commemorate individuals and coincided with a milestone anniversary of their birth. Eight commissions were related to the commemoration of historical events and coincided with a milestone anniversary of the event. One commission—the Dwight D. Eisenhower Memorial Commission—was created to oversee the development of a permanent national memorial. Throughout American history, Congress has found commissions to be useful tools in the legislative process. Commissions may be established, among other things, to cope with increases in the scope and complexity of legislation, to forge consensus, to draft bills, to promote inter-party communication, to address issues that do not fall neatly within the jurisdictional boundaries of congressional committees, and to bring together recommendations. These goals can be grouped into six categories: expertise, issue and political complexity, consensus building, non-partisanship, solving collective action problems, and visibility. Congress may choose to establish a commission when legislators and their staffs do not currently have sufficient knowledge or expertise in a complex policy area. By assembling experts with backgrounds in particular policy areas to focus on a specific mission, legislators might efficiently obtain insight into complex public policy problems. Complex policy issues may cause time management challenges for Congress. Legislators often keep busy schedules and may not have time to deal with intricate or technical policy problems, particularly if the issues require consistent attention over a period of time. A commission can devote itself to a particular issue full-time, and can focus on an individual problem without distraction. Complex policy issues may also create institutional problems because they do not fall neatly within the jurisdiction of any particular committee in Congress. By virtue of their ad hoc status, commissions may circumvent such issues. Similarly, a commission may allow particular legislation or policy solutions to bypass the traditional development process in Congress, potentially removing some of the impediments inherent in a decentralized legislature. Legislators seeking policy changes may be confronted by an array of political interests, some in favor of proposed changes and some against. When these interests clash, the resulting legislation may encounter gridlock in the highly structured political institution of the modern Congress. By creating a commission, Congress can place policy debates in a potentially more flexible environment, where congressional and public attention can be developed over time. Solutions to policy problems produced within the normal legislative process may also suffer politically from charges of partisanship. Similar charges may be made against investigations conducted by Congress. The non-partisan or bipartisan character of most congressional commissions may make their findings and recommendations less susceptible to such charges and more politically acceptable to diverse viewpoints. The bipartisan or nonpartisan arrangement can potentially give their recommendations strong credibility, both in Congress and among the public, even when dealing with divisive issues of public policy. Commissions may also give political factions space to negotiate compromises in good faith, bypassing the short-term tactical political maneuvers that accompany public negotiations. Similarly, because commission members are not elected, they may be better suited to suggesting unpopular, but necessary, policy solutions. A commission may allow legislators to solve collective action problems, situations in which all legislators individually seek to protect the interests of their own district, despite widespread agreement that the collective result of such interests is something none of them prefer. Legislators can use a commission to jointly "tie their hands" in such circumstances, allowing general consensus about a particular policy solution to avoid being impeded by individual concerns about the effect or implementation of the solution. For example, in 1988 Congress established the Base Closure and Realignment Commission (BRAC) as a politically and geographically neutral body to make independent decisions about closures of military bases. The list of bases slated for closure by the commission was required to be either accepted or rejected as a whole by Congress, bypassing internal congressional politics over which individual bases would be closed, and protecting individual Members from political charges that they didn't "save" their district's base. By establishing a commission, Congress can often provide a highly visible forum for important issues that might otherwise receive scant attention from the public. Commissions often are composed of notable public figures, allowing personal prestige to be transferred to policy solutions. Meetings and press releases from a commission may receive significantly more attention in the media than corresponding information coming directly from members of congressional committees. Upon completion of a commission's work product, public attention may be temporarily focused on a topic that otherwise would receive scant attention, thus increasing the probability of congressional action within the policy area. Congressional commissions have been criticized by both political and scholarly observers. These criticisms chiefly fall into three groups. First, critics often charge that commissions are an "abdication of responsibility" on the part of legislators. Second, commissions are undemocratic, replacing elected legislators with appointed decisionmakers. Third, critics also argue that commissions are financially inefficient; they are expensive and their findings often ignored by Congress. Critics of commissions argue that they are primarily created by legislators specifically for "blame avoidance." In this view, Congress uses commissions to distance itself from risky decisions when confronted with controversial issues. By creating a commission, legislators can take credit for addressing a topic of controversy without having to take a substantive position on the topic. If the commission's work is ultimately popular, legislators can take credit for the work. If the commission's work product is unpopular, legislators can shift responsibility to the commission itself. A second concern about commissions is that they are not democratic. This criticism takes three forms. First, commissions may be unrepresentative of the general population; the members of most commissions are not elected and may not reflect the variety of popular opinion on an issue. Second, commissions lack popular accountability. Unlike Members of Congress, commission members are often insulated from the electoral pressures of popular opinion. Finally, commissions may not operate in public; unlike Congress, their meetings, hearings, and investigations may be held in private. A third criticism of commissions is that they have high costs and low returns. Congressional commission costs vary widely, ranging from several hundred thousand dollars to over $10 million. Coupled with this objection is the problem of congressional response to the work of a commission; in most cases, Congress is under no obligation to act, or even respond to the work of a commission. If legislators disagree with the results or recommendations of a commission's work, they may simply ignore it. In addition, there is no guarantee that any commission will produce a balanced product; commission members may have their own agendas, biases, and pressures. Or they may simply produce a mediocre work product. Finally, advisory boards create economic and legislative inefficiency if they function as patronage devices, with Members of Congress using commission positions to pay off political debts. Statutes establishing congressional policy commissions generally include language that states the mandate of the commission, provides a membership structure and appointment scheme, defines member compensation and other benefits, outlines the commission's duties and powers, authorizes funding, and sets a termination date for the commission. A wide variety of options are available for each of these organizational choices. Legislators can tailor the composition, organization, and working arrangements of a commission, based on the particular goals of Congress. As a result, individual congressional commissions often have an organizational structure and powers quite different from one another. A commission's establishment is generally prescribed in a brief introductory paragraph. The proposed Commission on Catastrophic Disaster Risk and Insurance was established with a single sentence: There is established a bipartisan Commission on Catastrophic Disaster Risk and Insurance. In some instances, the establishment clause will identify the commission as "established in the legislative branch." This can often resolve confusion as to whether certain executive branch personnel and ethics laws apply to employees of the commission. For commissions not specifically established in the legislative or executive branch, the manner in which the members of the commission are appointed may determine the commission's legal status. A commission with a majority of appointments made by the President may be treated as an executive branch entity for certain purposes; if a majority of appointments are made by Members of Congress, it may be treated as a legislative branch entity. A bill creating a commission will sometimes provide congressional "findings" identifying the conditions justifying the creation of the panel. The bill proposing the Commission on Catastrophic Disaster Risk and Insurance includes seven specific findings related to hurricane damage and the federal government's role in catastrophe management. In other cases, legislation creating a congressional commission may simply include a short "purpose" section describing the justification for the creation of the commission, in lieu of "findings." Congressional commissions use a wide variety of membership schemes and appointment structures. The statutory scheme may require that membership of a commission be made up in whole or in part of specifically designated Members of Congress, typically Members in congressional or committee leadership positions. In other cases, selected leaders, often with balance between the parties, appoint commission members, who may or may not be Members of Congress. A third common statutory scheme is to have selected leaders, again often with balance between the parties, recommend members, who may or may not be Members of Congress, for appointment to a commission. These leaders may act either in parallel or jointly, and the recommendation may be made either to other congressional leaders, such as the Speaker of the House and President pro tempore of the Senate, or to the President. Table 3 presents commission appointment data from the 101 st to 114 th Congress. For each appointing body, the table reports the percentage of commissions to which appointments are made, the total number of appointments made, and the percentage of total appointments made. As shown in the table, the legislative branch has statutorily taken part in the appointment of 100% of congressional commissions, and the executive branch and other sources have statutorily taken part in the appointment 77% of congressional commissions. Some statutory provisions may have the effect of limiting the degree of autonomy a Member has in appointing or making recommendations for commission membership. For example, statutory language may require the appointing official to select members who are specifically qualified by virtue of their education, knowledge, training, experience, expertise, distinguished service, or recognized eminence in a particular field or fields. Statutes creating congressional commissions often include deadlines for leaders making appointments. Such deadlines can range from several weeks to several months. For example, the deadline for appointments to the Antitrust Modernization Commission was 60 days after the enactment of the act. The deadline for appointment to the Commission on Wartime Contracting in Iraq and Afghanistan was 120 days from the date of enactment. The deadline for appointment to the National Commission on Terrorist Attacks Upon the United States was December 15, 2002, 18 days after enactment of the act. Most statutorily created congressional commissions do not compensate their members, except to reimburse members for expenses directly related to their service, such as travel costs. For example, Section 201(i) of the statute establishing the United States Commission on International Religious Freedom reads (i) Funding.—Members of the Commission shall be allowed travel expenses, including per diem in lieu of subsistence, at rates authorized for employees under subchapter I of chapter 57 of title 5, United States Code, while away from their homes or regular places of business in the performance of services for the Commission. Among congressional commissions that compensate their members, the level of compensation is almost always specified statutorily, and is typically set in accordance with one of the federal pay scales, prorated to the number of days of service. The most common level of compensation is the daily equivalent of Level IV of the Executive Schedule (EX), which has a basic annual rate of pay of $160,300 in 2016. For example, the statute establishing the Antitrust Modernization Commission states (a) Pay.— (1) Nongovernment employees.—Each member of the Commission who is not otherwise employed by a government shall be entitled to receive the daily equivalent of the annual rate of basic pay payable for level IV of the Executive Schedule under section 5315 of title 5 United States Code, as in effect from time to time, for each day (including travel time) during which such member is engaged in the actual performance of duties of the Commission. (2) Government employees.—A member of the Commission who is an officer or employee of a government shall serve without additional pay (or benefits in the nature of compensation) for service as a member of the Commission. (b) Travel Expenses.—Members of the Commission shall receive travel expenses, including per diem in lieu of subsistence, in accordance with subchapter I of chapter 57 of title 5, United States Code. As shown in Table 4 , approximately three-quarters of commissions created in the past 20 years have not paid members beyond reimbursement. The remaining commissions have paid members at the daily equivalent of level IV of the Executive Schedule. Congressional commissions created to study a policy problem or conduct an investigation are usually authorized to hire a staff. Many of these commissions are specifically authorized to appoint a staff director and other personnel as necessary. The size of the staff is not generally specified, allowing the commission flexibility in judging its own staffing requirements. Typically, maximum pay rates will be specified, but the commission will be granted authority to set actual pay rates within those guidelines. Most of these congressional commissions are also authorized to hire consultants and procure intermittent services. Many commissions are statutorily authorized to request that federal agencies detail personnel to assist the commission. Some commissions are also authorized to accept voluntary services. Statutes creating congressional commissions often direct the General Services Administration (or another agency) to offer administrative support to the commission: Upon the request of the Commission, the Administrator of General Services shall provide to the Commission, on a reimbursable basis, the administrative support services necessary for the Commission to carry out its responsibilities under this Act. These administrative services may include human resource management, budget, leasing, accounting, and payroll services. Congressional commissions are usually statutorily directed to carry out specific tasks. These can include studying a problem, fact-finding, assessing conditions, conducting an investigation, reviewing policy proposals, crafting recommendations, and making feasibility determinations. For example, the proposed Commission on Catastrophic Disaster Risk and Insurance is directed to assess the condition of the property and casualty insurance and reinsurance markets in the aftermath of Hurricanes Katrina, Rita, and Wilma in 2005, and the 4 major hurricanes that struck the United States in 2004; and the ongoing exposure of the United States to windstorms, earthquakes, volcanic eruptions, tsunamis, and floods; and recommend and report ... any necessary legislative and regulatory changes that will improve the domestic and international financial health and competitiveness of such markets; and assure consumers of availability of adequate insurance coverage when an insured event occurs. One of the primary functions of most congressional commissions is to produce a final report for Congress outlining their activities, findings, and legislative recommendations. Most commissions are required to produce an interim, annual, or final report for transmittal to Congress, and sometimes to the President or executive department or agency heads, usually within a specified period of time. A commission may also be authorized to issue other recommendations it considers appropriate. As seen in Table 5 , the majority of commissions created in the past 20 years have submitted their work product to both Congress and the President. About one-quarter of commissions have submitted their work to Congress only. The remainder have submitted their work to both Congress and an executive branch agency. Since the recommendations contained in a commission report are only advisory, no changes in public policy occur on the authority of a congressional commission. The implementation of such recommendations is dependent upon future congressional or executive branch action. Most commissions are given statutory deadlines for the submission of their final report. The deadline for the submission of final reports varies from commission to commission. Some commissions, such as the National Commission on the Cost of Higher Education, have been given less than six months to submit their final report for Congress. Other commissions, such as the Antitrust Modernization Commission, have been given three or more years to complete their work product. Table 6 summarizes the deadlines for submission of final reports. As shown in Table 6 , congressional commissions have been given a wide range of deadlines for the completion of the final reports to Congress. For the 107 identified commissions, final report deadlines ranged from 120 days to 4.5 years. Over 75% of the commissions had a final report deadline of two years or less. The overall length of time for commissions to complete their final report also varies based on when the specified time limit begins. For the 107 commissions identified by the database search, four different events were used as the start point related to the report deadline: the enactment of the legislation, the appointment of the commission members, the date of the first meeting of the commission, or a specific calendar date. Therefore, a commission with a six-month deadline from the first meeting of the commission will have more total time than a commission with a six-month deadline linked to the enactment of the legislation. Table 7 reports the frequency of use of each of these four events as starting points for report deadlines. As shown in Table 7 , most commissions identified by the search linked the deadline for the submission of the final report to either the first meeting of the commission or a specific calendar date. The length of time granted to a congressional commission for the completion of its work product is arguably one of the most important decisions facing legislators as they design a new commission. If the commission is given a short amount of time, the quality of its work product may suffer or the commission may not be able to fulfill its statutory mandate. Policymakers should also consider the amount of time necessary for "standing up" a new commission; the selection of commissioners, recruitment of staff, arrangement of office space, and other logistical matters may take six months or more from the date of enactment of commission legislation. On the other hand, if the commission is given a long amount of time to complete its work product, it may undermine one of the primary legislative advantages of a commission, the timely production of expert advice on a current policy matter. If legislators seek to create a commission to address a pressing policy problem, a short deadline may be appropriate. In addition, the cost of a commission will increase with a longer deadline. Legislators should also carefully select which event triggers the start of the deadline clock. Selecting a specific calendar date will ensure delivery of a final report at a predictable time, but may leave the commission less time to complete its work product than anticipated if there is a delay in member selection or staff hiring. Linking the deadline to a flexible date, such as the first meeting, will often give the commission a more predictable amount of time to complete its work, but may delay the actual calendar date of submission of the final report. Most congressional commissions are directed to hold public meetings to discuss commission matters, usually at the call of the chair or the majority of the commission. In addition, most of these congressional commissions are statutorily empowered to hold fact-finding hearings and take testimony from witnesses. Commissions are occasionally empowered to subpoena witnesses. For example, the proposed Hurricane Katrina Disaster Inquiry Commission is authorized to issue subpoenas by agreement of the chair and vice chair, or by the affirmative vote of eight commission members. Additional statutory language provides for the enforcement of the subpoenas in federal court. Some commissions are empowered to secure information from federal agencies. For example, the proposed Hurricane Katrina Disaster Inquiry Commission would be authorized to secure directly from any executive department, bureau, agency, board, commission, office, independent establishment, or instrumentality of the government, information, suggestions, estimates, and statistics ... [e]ach department, bureau, agency, board, commission, office, independent establishment, or instrumentality shall, to the extent authorized by law, furnish such information ... upon request made by the chairman. In addition, Congress occasionally directs specific executive branch agencies to assist a commission in the completion of its work. Commissions may also be given the following powers: the authority to contract with public agencies and private firms, the authority to use the mails in the same manner as departments and agencies of the United States, and the authority to accept gifts and donations. Congressional commission costs vary widely, ranging from several hundred thousand dollars to over $10 million. Overall expenses for any individual commission are dependent on a variety of factors, the most important of which are the number of paid staff and duration of the commission. Many commissions have few or no full-time staff; others employ large numbers, such as the National Commission on Terrorist Attacks Upon the United States, which had a full-time paid staff of 80. Additionally, some commissions provide compensation to members; others only reimburse members for travel expenses. Many commissions finish their work and terminate within a year of creation; in other cases, work may not be completed for several years. Secondary factors that can affect commission costs include the number of commissioners, how often the commission meets or holds hearings, and the number and size of publications the commission produces. Although congressional commissions are primarily funded through congressional appropriations, many commissions are statutorily authorized to accept donations of money and volunteer labor, which may offset costs. Most statutes authorizing the creation of congressional commissions do not specify how the commission should conduct its business. Instead, the statutory language is typically either silent on internal commission procedure or specifically empowers the commission to determine its own rules of procedure. For example, the statute authorizing the National Gambling Impact Study Commission provides that The Commission may establish by majority vote any other rules for the conduct of the Commission's business, if such rules are not inconsistent with this Act or other applicable law. Certain rules of internal procedure, however, are found in the language of most statutes that establish commissions. For instance, many commission statutes provide that votes taken by the commission will be by simple majority, or that a quorum will consist of a particular number of commissioners. Similarly, commissions that are given subpoena authority are usually statutorily directed as to who on the commission has the authority to issue the subpoenas. Many commissions provide that rules regarding staff hires will be determined by the commission. For instance, the statute authorizing the Commission on Protecting and Reducing Government Secrecy states that The Chairman, in accordance with rules agreed upon by the Commission, may appoint and fix the compensation of a staff director and such other personnel as may be necessary to enable the Commission to carry out its functions. Absent statutory guidance (either in general statutes or in individual statutes authorizing commissions), commissions vary widely in how they adopt their procedures. In general, three models exist: formal written rules, informal rules, and norms. Any individual commission may make use of all three of these models for different types of decisionmaking. (1) Formal Written Rules : Some commissions choose to formalize their procedures for meetings and hearings. For example, the United States-China Economic and Security Review Commission established written rules of procedure for the conduct of meetings of the commission and for hearings held by the commission. The rules include procedures for selection of chairpersons, proxy use, budgeting, expenditures of money, hiring and firing of staff, commissioner ethics, and periodic revision of the rules. Changes to the rules require a majority vote of the commission as well as review by outside counsel. The commission's written rules for hearings include procedures for the hearing structure, the selection of panelists, generation of questions, opening statements, and post-hearing recommendations to Congress. (2) Informal Rules : Some commissions adopt set processes for establishing rules piecemeal as the need arises. For example, the National Surface Transportation Policy and Revenue Commission did not establish formal written rules of procedure. However, the members of the commission did take occasional votes to clarify particular procedures that the commission would use for meetings. For example, at the first meetings of the commission, members voted by simple majority as to whether future votes of commission members could be conducted by proxy. Although the result of this vote was used as precedent for the remainder of the commission's existence, neither the result of the vote, the rule, or the rules governing the vote itself were formalized in a written fashion. (3) Norms : Many advisory commissions choose not to create formal rules for commission meetings or hearings. Instead, these commissions rely on a collegial relationship between commission members and staff, and conduct the meetings in a procedurally flexible manner. In some cases, deference to the wishes of the chairman is followed for procedural matters. For instance, the Congressional-Executive Commission on China does not operate within a system of formal rules of procedure. Commission members make collective agreements about operational issues such as the recording of minutes or voting procedure, but these agreements are created and enforced by collective norms, not formal action or votes. Similarly, the National Surface Transportation Infrastructure Finance Commission relied on member collegiality and deference to the chair and co-chair of the commission for procedural decisions. The choice to adopt written rules or rely on informal norms to guide commission procedure may be based on a variety of factors, such as the size of the commission, frequency of meetings, commission member preferences regarding formality, the level of collegiality among members, and the amount of procedural guidance provided by the commission's authorizing statute. Regardless of how procedural issues are handled, procedures for decisionmaking regarding the following operational issues may be important for the commission to consider at the outset of its existence: eligibility to vote and proxy rules staff hiring, compensation, and work assignments hearings, meetings, and field visits non-staff expenditures and contracting reports to Congress budgeting agenda setting modification of existing rules Congressional commissions are usually statutorily mandated to terminate. Termination dates for most commissions are linked to either a fixed period of time after the establishment of the commission, the selection of members, or the date of submission of the commission's final report. Alternatively, some commissions are given fixed calendar termination dates. The following are key considerations for Congress in forming a commission. What is the purpose of the proposed commission? How long will the commission have to complete its mission? How will the members of the commission be appointed? Will commission members be compensated? Will the commission have an executive director? Who will have the authority to hire staff? Can the commission procure temporary and intermittent labor? Can staff be detailed to the commission? Will the commission produce a final report or interim reports? Who will receive the work product of the commission? Will the commission have the power to hold hearings? Can the commission enter into contracts for services? Will the commission have subpoena power? Can the commission accept gifts? How much funding will the commission receive? Will funding be available on an annual basis or until expended? Who will provide administrative support to the commission? What procedural rules should be statutory? What will be left to the commission? Where will the commission and its staff be located? The tables that follow provide information on the 107 congressional commissions identified by the database search of the 101 st through 114 th Congresses. For each commission, the following information is provided: the name of the commission; the type of commission; and the public law creating the commission and date of enactment.
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Congressional advisory commissions are formal groups established to provide independent advice; make recommendations for changes in public policy; study or investigate a particular problem, issue, or event; or perform a duty. While no legal definition exists for what constitutes a "congressional commission," in this report a congressional commission is defined as a multi-member independent entity that (1) is established by Congress, (2) exists temporarily, (3) serves in an advisory capacity, (4) is appointed in part or whole by Members of Congress, and (5) reports to Congress. These five characteristics differentiate a congressional commission from a presidential commission, an executive branch commission, or other bodies with "commission" in their names. Over 100 congressional commissions have been established since 1989. Throughout American history, Congress has found commissions to be useful entities in the legislative process. By establishing a commission, Congress can potentially provide a highly visible forum for important issues and assemble greater expertise than may be readily available within the legislature. Complex policy issues can be examined over a longer time period and in greater depth than may be practical for legislators. Finally, the non-partisan or bipartisan character of most congressional commissions may make their findings and recommendations more politically acceptable, both in Congress and among the public. Critics argue that many congressional commissions are expensive, often formed to take difficult decisions out of the hands of Congress, and are mostly ignored when they report their findings and recommendations. The temporary status of congressional commissions and short time period they are often given to complete their work product makes it important that legislators craft statutes creating congressional commissions with care. A wide variety of options are available, and legislators can tailor the composition, organization, and working arrangements of a commission, based on the particular goals of Congress. As a result, individual congressional commissions often have an organizational structure and powers quite different from one another. This report provides an overview and analysis of congressional advisory commissions, information on the general statutory structure of a congressional commission, and a catalog of congressional commissions created since the 101st Congress.
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Pressure to reduce the federal budget deficit required Congress to consider reductions in spending on USDA programs. The 109 th Congress has addressed USDA spending levels on two fronts: in budget reconciliation and in the annual agriculture appropriations bill. The Deficit Reduction Act of 2005 ( P.L. 109-171 , enacted February 8, 2006) contains net reductions in USDA mandatory spending of $2.7 billion over five years. Nearly half of this reduction was achieved through a change in the timing of farm commodity payments, and most of the balance consists of cuts to conservation, rural development, and research spending. Separately, the full House has passed and the Senate Appropriations Committee has reported their respective versions of the FY2007 Agriculture appropriations bill ( H.R. 5384 ), which will provide annual funding for nearly all USDA agencies and programs. (See CRS Report RS22086, Agriculture and FY2006 Budget Reconciliation , by [author name scrubbed]; and CRS Report RL33412, Agriculture and Related Agencies: FY2007 Appropriations , coordinated by [author name scrubbed].) Several major weather events in 2005 and 2006, particularly Hurricanes Katrina and Rita and a widespread drought, have caused the 109 th Congress to consider emergency disaster assistance for farmers this year. In response to the 2005 hurricanes, Congress so far has provided about $1.6 billion in agricultural assistance in two emergency supplemental acts ( P.L. 109-148 and P.L. 109-234 ). To date, Congress has not authorized any emergency crop or livestock payments for 2005 or 2006 production losses outside of the Gulf states. However, the Senate-reported version of the FY2006 agriculture appropriations bill ( H.R. 5384 ) contains $4.0 billion in various forms of farm assistance, including payments for major crop and livestock losses caused by any 2005 disaster. Similar provisions for non-hurricane states were contained in the Senate-passed version of an FY2006 supplemental bill ( H.R. 4939 ), but were deleted in conference because of a threatened Administration veto of the measure. (See CRS Report RS21212, Agricultural Disaster Assistance , by [author name scrubbed].) Farm income and price support programs are dictated primarily by Title I of the 2002 farm bill ( P.L. 107-171 ), which expires in 2007. The House and Senate Agriculture Committee are conducting field hearings this year, with more intensive deliberations and markup expected in both committees in 2007. At issue is whether Congress will extend the current farm support policy, or if the pressures of tight federal spending constraints, concerns about the distribution of farm program benefits, and the threat of potential World Trade Organization (WTO) challenges to farm price and income support spending will compel Congress to consider significant changes to existing farm policy. (See CRS Report RL33037, Previewing a 2007 Farm Bill , coordinated by [author name scrubbed] , and CRS Report RL34594, Farm Commodity Programs in the 2008 Farm Bill , by [author name scrubbed].) Most crop payments are subject to annual per-person limits. Past legislative efforts to reduce the maximum amount of payments that producers can receive have been thwarted by strong opposition from southern cotton and rice growers. In the 109 th Congress, S. 385 and H.R. 1590 would reduce payment limits to a total of $250,000 and count commodity certificates and loan forfeiture toward the limits. A Senate floor amendment to add payment limits to the Deficit Reduction Act of 2005 ( P.L. 109-171 ) failed by a procedural vote of 46-53. The Administration's FY2007 budget request contains a legislative proposal that would tighten crop payment limits. (See CRS Report RL34594, Farm Commodity Programs in the 2008 Farm Bill , by [author name scrubbed].) The Milk Income Loss Contract (MILC) program provides payments to dairy farmers when farm milk prices are below a specified target level. A provision in the FY2006 budget reconciliation act ( P.L. 109-171 ) extended MILC program authority for two years, through September 30, 2007, but prohibits any MILC payments beyond August 31, 2007. Consequently, under current budget rules, the program will have no baseline budget spending allocated to it beyond its expiration date. A provision in the House-reported version of the FY2007 Agriculture appropriations bill ( H.R. 5384 ) would have allowed payments in September 2007 and preserved the program's budget baseline for the next farm bill debate in 2007. Because of its budget implications, the provision was deleted on the House floor. Separately, Congress also completed action on a measure ( P.L. 109-215 , S. 2120 ) that requires the regulation of a certain large dairy operation in the West that was previously exempt from paying federally mandated minimum farm milk prices. (See CRS Report RL34036, Dairy Policy and the 2008 Farm Bill , by [author name scrubbed] and [author name scrubbed].) In March 2005, a WTO appellate panel ruled against the United States in a dispute settlement case brought by Brazil, stating that elements of the U.S. cotton program are not consistent with U.S. trade commitments. In response, Congress included a provision in the Deficit Reduction Act of 2005 ( P.L. 109-171 ) authorizing the elimination of the Step-2 cotton program on August 1, 2006. Following the indefinite suspension of the WTO Doha Round of multilateral trade negotiations in July 2006, Brazil has pressed for further reductions in U.S. cotton support in response to the panel ruling. On September 28, 2006, the WTO established a compliance panel in response to a request by Brazil to determine whether current U.S. actions are sufficient to comply with the original WTO rulings and recommendations. As a result, additional permanent modifications to U.S. farm programs may still be needed to fully comply with the "actionable subsidies" portion of the WTO ruling. Such changes ultimately would be decided by Congress, most likely in the context of the 2007 farm bill. (See CRS Report RS22187, Brazil ' s WTO Case Against the U.S. Cotton Program: A Brief Overview , by [author name scrubbed].) Spending for conservation programs, which help producers protect and improve natural resources on some farmed land and retire other land from production, have grown rapidly since the 2002 farm bill, reaching a total of more than $5.2 billion in FY2005. This growth in spending reflects the expanded reach of conservation programs, which now involve many more landowners and types of rural lands. Budget pressures forced the 109 th Congress to weigh the benefits of these programs against growing costs. The Deficit Reduction Act of 2005 ( P.L. 109-171 ) reduced spending on several mandatory conservation programs by a combined $934 million over five years. Another topic that continues to attract congressional interest is implementation of the Conservation Security Program, enacted in 2002. Some stakeholders have questioned why USDA has implemented the program in only a few watersheds, and why Congress has limited funding even though the program was enacted as a true entitlement. The environmental, conservation, and agriculture communities have started to identify conservation policy options that might be considered in the next farm bill. The House and Senate Agriculture Committees have started to examine selected conservation issues in recent hearings. (See CRS Report RL33556, Soil and Water Conservation: An Overview , by [author name scrubbed] and [author name scrubbed].) Although not as energy-intensive as some industries, agriculture is a major consumer of energyâdirectly, as fuel or electricity, and indirectly, as fertilizers and chemicals. In early September 2005, energy prices jumped to record levels in the wake of Hurricanes Katrina and Rita. By raising the overall price structure of production agriculture, sustained high energy prices could result in significantly lower farm and rural incomes in 2006, and are generating considerable concern about longer-term impacts on farm profitability. Agriculture also is viewed as a potentially important producer of renewable fuels such as ethanol and biodiesel, although farm-based energy production remains small relative to total U.S. energy needs. The energy bill ( P.L. 109-58 ) enacted in July 2005 includes a renewable fuels standard (RFS) for biofuels that grows from 4 billion gallons in 2006 to 7.5 billion gallons in 2012. The RFS, along with tax credit incentives, is expected to encourage significant increases in U.S. ethanol production. (See CRS Report RL32667, Federal Management and Protection of Paleontological (Fossil) Resources Located on Federal Lands: Current Status and Legal Issues , by [author name scrubbed] (pdf); and CRS Report RL32712, Agriculture-Based Renewable Energy Production , by [author name scrubbed].) U.S. trade policy seeks to improve market access for U.S. agricultural products through multilateral, regional, and bilateral trade agreements. U.S. officials also seek to hold countries to commitments made under existing agreements, and to resolve disputes impeding farm exports. The Administration is participating in the current Doha Round of multilateral trade negotiations, which have focused on the so-called three pillars of agricultural trade liberalization: trade-distorting domestic subsidies, market access, and export competition. Negotiators have been unable to reach a compromise agreement on reducing subsidies or expanding market access for agricultural products. The expiration of Trade Promotion Authority for fast-track consideration of trade agreements next year makes the end of 2006 the effective deadline for getting an agreement ready for congressional consideration. The United States has insisted that it will not improve its offer on domestic subsidy reduction unless the EU improves its market access offer and the G-20 countries show a willingness to open their markets not only to agricultural products but to industrial products and services as well. (See CRS Report RL33144, WTO Doha Round: The Agricultural Negotiations , by [author name scrubbed] and [author name scrubbed].) The 109 th Congress passed legislation ( P.L. 109-53 ) to implement the Dominican Republic-Central America-U.S. free trade agreement (DR-CAFTA) despite strong opposition from the U.S. sugar industry, which fears those countries would gain increased access to the U.S. market. Separately, and also negotiating new free trade agreements with Panama, the Andean countries, Thailand, and the Southern African Customs Union, among others. (See CRS Report RL32110, Agriculture in the U.S.-Dominican Republic-Central American Free Trade Agreement (DR-CAFTA) , by [author name scrubbed].) Other ongoing issues of interest to Congress include rules of trade for the products of agricultural biotechnology (see CRS Report RL32809, Agricultural Biotechnology: Background and Recent Issues , by [author name scrubbed] and [author name scrubbed]); the scope of restrictions that should apply to agricultural sales to Cuba (see CRS Report RL33499, Exempting Food and Agriculture Products from U.S. Economic Sanctions: Status and Implementation , by [author name scrubbed]); and funding for U.S. agricultural export and food aid programs (see CRS Report RL33553, Agricultural Export and Food Aid Programs , by [author name scrubbed]). The potential of terrorist attacks against agricultural targets (agroterrorism) is increasingly recognized as a national security threat. "Food defense"âhardening the critical infrastructure against possible attackâhas received increased attention since 2001. Through increased appropriations, laboratory and response capacities are being upgraded. National response plans now incorporate agroterrorism. Yet some in Congress want additional laws or oversight to increase the level of food defense, particularly regarding interagency coordination, response and recovery leadership, and ensuring adequate border inspections. (See CRS Report RL32521, Agroterrorism: Threats and Preparedness , by [author name scrubbed] . ) Approximately 76 million people get sick and 5,000 die from food-related illnesses in the United States each year, it is estimated. Congress frequently conducts oversight and periodically considers legislation on food safety and could do so again. Some Members continue to be interested in the control of animal diseases that also threaten human health; the regulation of bioengineered foods, human antimicrobial resistance (which some link partly to misuse of antibiotics in animal feed), and the safety of fresh produce. In the 109 th Congress, for example, S. 729 and H.R. 1507 propose to consolidate U.S. food safety oversight under an independent U.S. agency. H.R. 3160 and S. 1357 clarify USDA's authority in prescribing performance standards for the reduction of pathogens in meat and poultry products. (See CRS Report RL31853, Food Safety Issues in the 109 th Congress , by [author name scrubbed]; and CRS Report RL32922, Meat and Poultry Inspection: Background and Selected Issues , by [author name scrubbed].) Bovine spongiform encephalopathy (BSE or "mad cow disease") continues to attract interest, with eleven native North American cases (three in the United States) confirmed through early October 2006. Authorities characterize the risk to human health from these cases as extremely low. However, the beef industry has suffered economically due to foreign borders being closed to U.S. beef. The appearance of BSE in North America in 2003 raised meat safety concerns and disrupted trade for cattle and beef producers. A major issue for Congress has been how to rebuild foreign markets for U.S. beef. Other issues include whether additional measures are needed to further protect cattle and the public, and concerns over the relative costs and benefits of such measures for consumers, taxpayers, and industry. (See CRS Report RS22345, BSE ( " Mad Cow Disease " ): A Brief Overview , by [author name scrubbed].) Since 2003, highly pathogenic avian influenza (H5N1) has spread from Asia into Europe, the Middle East, and Africa; however, no cases of H5N1 have been found yet in the United States. Because avian flu is highly contagious in domestic poultry and can be carried by wild birds, on-farm biosecurity is important. Controlling avian flu in poultry is seen as the best way to prevent a human pandemic from developing. Congress responded to the threat by providing an emergency FY2006 supplemental appropriation (in P.L. 109-148 ) to combat avian flu, including $91 million for USDA operations. This supplements the regular funding of $28 million for FY2006, which includes $15 million in unused funds from prior years. For FY2007, USDA requests $82 million for avian flu. (See CRS Report RL33795, Avian Influenza in Poultry and Wild Birds , by [author name scrubbed] and [author name scrubbed].) Mandatory COOL for fresh meats, produce, and peanuts was scheduled to take effect September 30, 2006. However, the FY2006 Agriculture Appropriations Act ( P.L. 109-97 ) again postponed mandatory COOL for two additional years. Some Members continue to support mandatory COOL, and a few of them would prefer that it take effect sooner ( S. 1331 ) or be expanded to processed meats ( S. 135 ). Others have sought to replace mandatory COOL with voluntary labeling programs. A bill ( H.R. 2068 ) sponsored by the chairman of the House Agriculture Committee (and an identical Senate bill, S. 1333 ) would make COOL labeling voluntary for fresh meats. S. 1300 would make COOL voluntary for meat, fish, and produce. (See CRS Report RS22955, Country-of-Origin Labeling for Foods , by [author name scrubbed].) Both the Senate- and House-passed versions of the FY2006 agriculture appropriation bill ( H.R. 2744 ) barred use of appropriated funds to pay for ante-mortem inspection of horses for food. The enacted version ( P.L. 109-97 ) makes the funding ban effective only for approximately the last six months of FY2006; during this time the three foreign-owned plants in the U.S. that currently slaughter horses, primarily for European and Japanese consumers, are paying user fees for such inspection. Free-standing legislation to ban horse slaughter includes H.R. 503 (which passed the full House by a vote of 263-146 on September 7, 2006) and S. 1915 . Among other pending farm animal welfare related-bills are S. 1779 and H.R. 3931 , to prohibit nonambulatory livestock (also called "downers") from being used for human food; and H.R. 5557 , to require the federal government to purchase only food and fiber products that were raised in compliance with prescribed humane standards. (See CRS Report RS21842, Horse Slaughter Prevention Bills and Issues , by [author name scrubbed]; and CRS Report RS21978, Humane Treatment of Farm Animals: Overview and Issues , by [author name scrubbed].) The Commodity Futures Trading Commission (CFTC) is an independent federal regulatory agency that regulates the futures trading industry. The CFTC is subject to periodic reauthorization; current authority expired on September 30, 2005. Congress traditionally uses the reauthorization process to consider amendments to the Commodity Exchange Act (CEA), which provides the basis for federal regulation of commodity futures trading. The House and Senate Agriculture Committees, with jurisdiction over CFTC, conducted hearings on CFTC reauthorization in March 2005. The full House passed its version of CFTC reauthorization ( H.R. 4473 ) on December 14, 2005. Floor action on a Senate-reported measure ( S. 1566 ) is pending. Among the issues in the debate are (1) regulation of energy derivatives markets, where some see excessive price volatility and a lack of effective regulation; (2) the market in security futures, or futures contracts based on single stocks, where cumbersome and duplicative regulation is blamed for low trading volumes; (3) the regulatory status of foreign futures exchanges selling contracts in the United States; and (4) the legality of futures-like contracts based on foreign currency prices offered to retail investors. (See CRS Report RS22028, CFTC Reauthorization , by [author name scrubbed].) Hired farmworkers are an important component of agricultural production. Many of these laborers are under guest worker programs, which are meant to assure employers (e.g., fruit, vegetable, and horticulture growers) of an adequate supply of labor when and where it is needed while not adding permanent residents to the U.S. population. The connection between farm labor and immigration policies is a longstanding one, particularly with regard to U.S. employers' use of workers from Mexico. The 109 th Congress is taking up the issue as part of a larger debate over initiation of a broad-based guest worker program, increased border enforcement, and employer sanctions to curb the flow of unauthorized workers into the United States. House and Senate immigration reform measures ( H.R. 4437 and S. 2454 ) currently being debated have important implications for hired farm labor. Other bills ( H.R. 884 / S. 359 and H.R. 3857 ) introduced in the 109 th Congress specifically address agricultural labor issues. (See CRS Report RL33125, Immigration Legislation and Issues in the 109th Congress , coordinated by [author name scrubbed]; CRS Report 95-712, The Effects on U.S. Farm Workers of an Agricultural Guest Worker Program , by [author name scrubbed]; and CRS Report RL30395, Farm Labor Shortages and Immigration Policy , by [author name scrubbed].)
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A number of issues affecting U.S. agriculture have been or are being addressed by the 109 th Congress. The Deficit Reduction Act of 2005 ( P.L. 109-171 ), enacted in February 2006, included a net reduction in spending on U.S. Department of Agriculture (USDA) mandatory programs of $2.7 billion over five years, and the reauthorization of a dairy income support program. Other issues of importance to agriculture during the second session of the 109 th Congress include the consideration of emergency farm disaster assistance; multilateral and bilateral trade negotiations; concerns about agroterrorism, food safety, and animal and plant diseases (e.g., "mad cow" disease and avian flu); high energy costs; environmental issues; agricultural marketing matters; the reauthorization of the Commodity Futures Trading Commission; and farm labor issues.
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From a peak in early 2002 through the first half of 2008, the (inflation adjusted) trade-weighted dollar exchange rate, for the most part, steadily depreciated, falling a total of about 25% (see Figure 1 ). The dollar's fall over this six-year period was moderately paced at about 3% to 4% annually. For the next nine months, as the wider economy was reeling from the effects of the financial crisis and recession, the dollar sharply appreciated, increasing more than 11% on a trade-weighted basis. For reasons that will be discussed later in the report, this appreciation was a market response to the great uncertainty associated with those economic troubles. As economic conditions began to stabilize in mid-2009, the dollar began to depreciate again and fell about 16% through mid-2011 and more or less returned to its prerecession trend of depreciation. However, a second bout of market uncertainty caused by the European sovereign debt crisis caused the dollar to appreciate more than 5% through the end of 2011. In early 2012, the dollar resumed its depreciation, down about 2% through February 2012 and, with the return of some degree of financial normalcy in Europe, the trend depreciation some believe may resume. The dollar's fall from early 2002 through early 2008 as well as the recent depreciation has not been uniform against individual currencies, however. For example, in the earlier period, it fell 45% against the euro, 24% against the yen, 18% against the yuan, and 17% against the Mexican peso. In the period since the trough of the business cycle in mid-2009, the dollar fell 13% against the euro, 11% against the yen, less than 3% against the yuan (all of which occurred recently), and 8% against the peso. These differing amounts of depreciation are partly a reflection of the countries' willingness to let their currencies fluctuate against the dollar. The euro is free floating, the yen has been moderately managed (mostly before 2005 but more deliberately since September 2010), and the yuan is actively managed (its value rigidly fixed to the dollar before 2005 and from mid-2008 until mid-2010; since then allowed to rise moderately against the dollar). But the pattern also reflects significant structural asymmetries in flows of global assets and global goods, as well as differences in business cycles, inflation rates, shocks affecting the different economies, and an unwinding of imbalances that were present in 2002. The weakening of the dollar raises concern in Congress and among the public that the dollar's decline is a symptom of broader economic problems, such as a weak economic recovery, rising public debt, and a diminished standing in the global economy. Have recent policy actions such as quantitative easing by the Federal Reserve (Fed) and fiscal stimulus passed by the 111 th Congress had an effect on the dollar? How might failure by the 112 th Congress to raise the federal debt ceiling or address the country's long-term government debt problem affect the exchange rate? Is there a positive side to dollar depreciation? Economic theory suggests that the dollar's path can be influenced by a variety of factors that could confer to the United States both benefits and costs, and in some circumstances a depreciating currency can be, on balance, beneficial. This report examines the several factors that are likely to influence the dollar's medium-term path; why further depreciation could occur; what effects a depreciating dollar could have on the economy, including the pace of economic recovery; and how alternative policy measures might influence the dollar's path. Since the break-up of the Bretton Woods international monetary system in 1973, the exchange rate of the dollar has been largely determined by the market—the supply and demand for dollars in global foreign exchange markets. Dollars are demanded by foreigners to buy dollar denominated goods and assets. (Assets include bank accounts, stocks, bonds, and real property.) Dollars are supplied to the foreign exchange markets by Americans exchanging them for foreign currencies typically needed to buy foreign goods and assets. Since the mid-1990s, the United States has had a growing trade deficit in goods transactions, generating a net increase in the supply of dollars on the foreign exchange markets, thereby exerting downward pressure on the dollar's exchange rate. At the same time, the United States has had an equal-sized surplus in asset transactions, reflecting a net increase in the demand for dollars on the foreign exchange market, thereby exerting upward pressure on the dollar's exchange rate. In most circumstances, however, there is a strong expectation that asset-market transactions will tend to be dominant and ultimately dictate the exchange rate's direction of movement. This dominance is the result of gross asset-market transactions occurring on a scale and at a speed that greatly exceeds what occurs with goods-market transactions. Electronic exchange makes most asset transfers nearly instantaneous and, in most years, U.S.-international asset transactions were two to three times as large as what would be needed to simply finance that year's trade deficit. In 2007, near the peak of the last economic expansion, the U.S. capital account recorded $1.5 trillion in purchases of foreign assets by U.S. residents (representing a capital outflow) and $2.1 trillion in purchases of U.S. assets by foreign residents (representing a capital inflow). So while the United States could have financed the $702 billion trade deficit in goods and services in 2007 simply by a $702 billion sale of assets to foreigners, U.S. and foreign investors engaged in a much larger volume of pure asset trading. Economic theory suggests that several economic factors could influence the direction of cross-border asset flows. The demand for assets (e.g., bank accounts, stocks, bonds, and real property) by foreigners will be strongly influenced by the expected rate of return on those assets. Therefore, differences in the level of interest rates between economies are, other things equal, likely to stimulate international capital flows from countries with relatively low interest rates to countries with relatively high interest rates, as investors seek the highest rate of return for any given level of risk. When inflation rates among economies are similar, the average level of nominal interest rates can be used as a fairly reliable first approximation of the rate of return on an asset in a particular currency. Rates of return on dollar assets can be influenced by the general performance of the economy as gauged by its ability to sustain a high rate of economic growth and a low rate of inflation. Another potential influence on expected rate of return is the Fed's conduct of monetary policy as it periodically moves interest rates up or down to stabilize the economy. In addition, whether the United States business cycle is synchronous or asynchronous with that of other economies will influence the relative level of interest rates between it and other economies. In general, these relatively short-term interest rate fluctuations will tend to either attract or deter foreign capital flows, particularly in relatively liquid assets. The rate of return advantage in the U.S. economy may be greater than the spread between market interest rates would suggest, however. A study by the International Monetary Fund (IMF) that focused on return to debt and equity capital for publicly traded companies in the large industrial economies and the developing economies for the decade 1994-2003 found the rate of return in the United States to have been about 8.6% as compared with a G-7 average of about 2.4% and an emerging market average of about minus 4.7%. Currently, the combination of substantial economic slack and highly stimulative monetary policy in the United States and other advanced economies has pushed down short-term and long-term interest rates to historically low levels and left virtually no sizable interest rate advantage of dollar assets over assets in the currencies of other G-7 economies. For example, the yields on 10-year government bonds in Germany, Canada, the United Kingdom, and the United States during 2011 have been within a narrow band of 2.5% to 3.0%. Japan, however, has been an outlier among advanced economies, with the yield on 10-year government bonds hovering slightly above 1% over this period. In contrast, many emerging economies are showing much stronger economic performance and asset yields are likely to be substantially above those in the United States and other advanced economies, which could entice many investors to move capital from the advanced economies to the emerging economies. This would exert downward pressure on the currencies of the advanced economies, including the dollar. Whether a currency's exchange rate will rise or fall in the future can figure prominently in some investors' calculation of what will actually be earned from an investment denominated in another currency. If, for example, the dollar depreciated on average 4% annually for the next several years, then the 2% to 4% average nominal interest rates currently attached to low-risk medium- to long-term U.S. securities would offer the foreign investor an expected return of approximately zero or less. (If the expected currency depreciation were greater, the investor would expect to incur a capital loss.) In general, expected dollar depreciation lowers the expected return and reduces the attractiveness of dollar assets to the foreign investor. On the other hand, if the exchange rate is expected to appreciate, the expected gain would be greater than the nominal interest rate attached to the security, making that asset more attractive. Investor expectations will, therefore, tend to act as an accelerant, adding momentum to the exchange rates movement, whether up or down. At the extremes this could be destabilizing, generating sizable over-valuations or under-valuations of a currency. The dollar's long and generally orderly depreciation between 2002 and 2008 suggests investor expectations about the currency's path did not act as a destabilizing factor. Nevertheless, the prospect of a secular depreciation likely reduced the attractiveness of dollar denominated assets to foreign investors at that time, and if the current depreciation of the dollar is seen as a resumption of that secular depreciation the attractiveness of dollar assets could also continue to be eroded. For any given interest rate differential and level of the exchange rate, international investors are likely to have a desired balance of assets in their portfolios, allocated not only among types of assets but also by the currency the assets are denominated in. As the stocks they hold of particular assets change over time, investors may see the need to rebalance their portfolios, shifting asset flows away from or toward assets denominated in a particular currency. Such rebalancing can cause exchange rates for the denominating currency to increase or decrease as well. For example, even if dollar assets offer a relatively high return, at some point foreign investors, considering both risk and reward, could decide that their portfolio's share of dollar-denominated assets is large enough. To mitigate exposure to currency risk in their portfolios, investors could slow or halt their purchase of dollar assets and increase their holdings of non-dollar assets. Such a diversification, other things equal, would tend to depreciate the dollar. How much pure diversification from dollar assets is likely to happen over the near term is difficult to determine. Nevertheless, with nearly $11 trillion in U.S. securities estimated to be in foreign investor portfolios, diversification toward other currencies could arguably be a factor of growing importance. However, over the near term, the general economic fragility of other advanced economies could mean there will be a lack of strong alternatives to dollar assets, tending to limit international investors' willingness to diversify into assets denominated in other currencies. On the other hand, the recent strong growth of many emerging economies could make them an increasingly attractive alternative destination for international capital flows. Beyond the standard determinants of risk and reward that are likely to have a strong near-term influence on the relative attractiveness of dollar-denominated assets, the United States has some added advantages that are thought to generate a sustained underlying demand for dollar assets. Large asset markets, such as those in the United States, offer a great variety of asset types and a high degree of liquidity. This means that these asset markets are able to handle large inflows and outflows of funds with only a small impact on the price of the asset. Recent IMF estimates of the relative size of the asset markets in the advanced economies show that in 2010 the U.S. bond market had a total value of more than $32 trillion (with government bonds accounting for about $11 trillion of that), whereas the United Kingdom, Germany, and Japan had much smaller bond markets with a total value of about $4.7 trillion, $5.4 trillion, and $12 trillion, respectively. In addition, the U.S. stock market has an estimated capitalized value of about $17 trillion, whereas the United Kingdom, Germany, and Japan's equity markets are much smaller, with estimated capitalized values of about $3.6 trillion, $1.4 trillion, and $4.0 trillion, respectively. A good example of a large highly liquid asset market is that for U.S. Treasury securities, which has been particularly attractive to foreign investors in recent years. Federal Reserve data show that for the week ending February 1, 2012, the U.S. government securities markets had a daily turnover of about $588 billion. Additional evidence of the high liquidity of the U.S. government securities market is its typically small bid-ask spreads. On relatively short-term Treasury securities, the spread is usually a few tenths of a cent per $100 dollar face value of the security. In recent years, the high liquidity of dollar assets has been an attractive feature for foreign central banks, which have been rapidly increasing their holdings of foreign exchange reserves, a substantial portion of which are thought to be dollar assets. The same is true for petroleum exporting countries, which have in recent years needed to store tens of billions of dollars but also to have ready access to those funds with minimal market disruption. The degree to which market size influences inflows of foreign capital is hard to determine. However, the persistence of large capital inflows to the United States despite already large foreign holdings of dollar assets offering modest interest differentials and the disproportionate share of essentially no-risk and high-liquidity U.S. Treasury securities in foreign holdings suggest that the magnitude of flows attributable to the liquidity advantage of U.S. asset markets is probably substantial. Failure of the U.S. government, however, to address its long-term government debt problem could raise concerns about default risk and quickly degrade the attractiveness of Treasury securities to foreign investors, and tend to weaken the dollar. Many investors may be willing to give up a significant amount of return if an economy offers them a particularly low-risk repository for their funds. The United States, with a long history of stable government, steady economic growth, and large and efficient financial markets, can be expected to draw foreign capital for this reason. The safe-haven-related demand for dollar assets was particularly evident in 2008 (see Figure 1 ), when uncertainty about global economic and financial conditions caused a substantial "flight to quality" by foreign investors that sharply appreciated the dollar. As global markets stabilized in 2009, the safe haven demand abated somewhat, contributing to the nearly 17% depreciation of the dollar from early 2009 through mid-2011. In the second half of 2011, investor concerns about the sovereign debt crisis in Europe are likely the principal force behind a nearly 5% appreciation of the dollar. The ongoing size of the safe-haven demand for dollar assets is not easy to determine, but the disproportionate share in foreign holdings of U.S. Treasury securities, which markets still consider to be essentially without default risk, suggests that the magnitude of safe-haven motivated flows is probably substantial, capable of periodically exerting sizable upward pressure on the dollar. Again, perceptions of how "safe" dollar assets are likely to be are influenced by how the 112 th Congress addresses the federal government's long-term debt problem. A reserve currency is a currency held in sizable quantities by foreign governments and central banks as part of their holdings of foreign exchange. Unlike private investors, central banks hold foreign exchange reserves primarily for reasons other than expected rate of return. These so-called official holdings generally serve two objectives. First, the accumulation of a reserve of foreign exchange denominated in readily exchangeable currencies, such as the dollar, provides a safeguard against currency crises arising out of often volatile private capital flows. This is most often a device used by developing economies that periodically need to finance short-run balance of payments deficits and cannot fully depend on international capital markets for such finance. In the wake of the Asian financial crisis of 1997-1998, many emerging economies built up large stocks of foreign exchange reserves, a large share of which were denominated in dollars. Second, official purchases are used to counter the impact of capital flows that would otherwise lead to unwanted changes in the countries' exchange rates. This is a practice used by China and many east Asian economies that buy and sell dollar assets to influence their exchange rates relative to the dollar in order to maintain the price attractiveness of their exports. Globally, central bank holdings of reserve currency assets have risen sharply in recent years. The IMF reports that from 2002 through the third quarter of 2011, worldwide official holdings of foreign exchange reserves increased from about $2 trillion to more than $10 trillion. Given the dollar's status as the dominant international reserve currency, a large portion of the accumulation was of dollar-denominated assets. IMF data indicate that of the $5.4 trillion of official holdings of which currency composition is known, nearly $3.4 trillion (or 63%) are in dollar assets. In addition, the U.S. Treasury reports that through January 2011, $3.2 trillion (or 68%) of the $4.7 trillion marketable Treasury securities held by foreigners was being held as foreign official reserves. (The total amount of Treasury securities held by the public, foreign and domestic, through January 2012 was about $10.5 trillion.) In 2011, China was the world's largest holder of foreign exchange reserves, with holdings valued at more than $3.2 trillion, an increase of nearly $3 trillion since 2002. The exact currency composition of China's foreign exchange reserves is not made public, but the dollar share is thought to be large because that accumulation is largely the consequence of China's buying dollar assets to stabilize the value of its currency relative to the dollar. Japan is the second-largest holder of foreign exchange reserves, with holdings valued at about $1.3 trillion; however, these reserves were largely accumulated prior to 2005. Japan has not in recent years actively tried to influence the value of its currency; nevertheless, dollar assets are thought to be a large share of its reserves. But on March 17, 2011, Japan announced that it would, in concert with other Group of 7 (G-7) nations, intervene in currency markets to stabilize the value of the yen. The Japanese currency had spiked following the earthquake on March 11, 2011, threatening to stall Japan's exports and deliver another blow to an economy already staggering from that disaster. Japanese officials believed that the yen's sudden strength was being driven by speculation that Japan's firms and financial institutions would soon be bringing back a large portion of their overseas investments to fund Japan's reconstruction. The intervention entailed the selling of yen-denominated assets, tending to push down its value relative to other G-7 currencies, such as the dollar. This was the first joint currency intervention by the G-7 countries in over a decade. Since the third quarter of 2010, however, the total accumulation of dollar assets by foreign central banks has slowed moderately. Of the $1.2 trillion increase in global foreign exchange reserves for the four quarters ending in the third quarter 2011, dollar holdings increased $220 billion, or represented a share of slightly over 18%, well below the rate in earlier time periods. At any point in time, all of the above factors will exert some amount of upward or downward pressure on the value of the dollar, often pushing in opposite directions, making it difficult to disentangle them from their net effect on the dollar. It is difficult to explain with clarity or predict with precision the dollar's near-term path (i.e., several weeks to several months ahead). However, it is possible to assess the general disposition of the forces (as discussed above) likely to influence the dollar in 2012 and 2013. The following factors point to near-term depreciation of the dollar: Low interest rates and slow economic growth in the United States, particularly in comparison to emerging economies, likely lower the relative expected rate of return on dollar assets. International holdings of dollar assets are high and prudent portfolio management could lead to diversification toward other currencies. A substantial trade deficit in goods continues to exert downward pressure on the dollar. If concerns about euro area sovereign debt problems abate, this will likely reduce recent safe-haven-motivated inflows for dollar assets. A growing inflation problem could induce China to slow accumulation of dollar reserves and let its currency rise relative to the dollar. Standard economic analysis suggests that a sustained depreciation in the value of the dollar in international exchange has several likely effects, positive and negative, on the U.S. economy. The exchange rate determines the relative price of domestic goods and foreign goods, thus it can influence the value and volume of exports sold and imports bought and, in turn, influence the trade balance. Because a depreciating dollar improves the price competitiveness of U.S. exports in foreign markets and deteriorates the price competitiveness of foreign goods in U.S. markets, it will tend to reduce the U.S. trade deficit. A smaller trade deficit is likely to have two favorable effects on the U.S. economy: first, it will subtract less from demand in the economy, providing a boost to employment; and second, it will slow the growth of U.S. foreign indebtedness. In an economy that still has substantial economic slack, stronger U.S. exports increase domestic economic activity and boost employment; weaker imports represent a rechanneling of domestic spending away from foreign goods and toward domestic goods, which also increases domestic economic activity and boosts employment. Because the U.S. trade deficit is financed by borrowing from the rest of the world (as evidenced by an equal sized net inflow of foreign capital), a smaller trade deficit will slow the rise of an already substantial net foreign indebtedness and could temper the associated concern about a rising external debt service burden. The period 1985-1991 was the last time a substantial dollar depreciation and trade deficit adjustment occurred. At that time, the dollar fell a cumulative 40% from a historically high level. In response, the trade deficit started to narrow within two years of the initial depreciation, falling from 3.5% of GDP to near balance by 1991. For the period 2002-2007, despite a large depreciation of the dollar, the adjustment process has been much slower, with the trade deficit only tipping down modestly in 2007. However, the depreciation of the dollar was having an impact. Economic research suggests that in the United States, depreciation is likely to have a quicker and stronger impact on exports than on imports. This seems to have occurred. Real (non-petroleum) exports began to accelerate in 2003 (the first full year of dollar depreciation) and would continue to grow at a nearly 10% annual rate through 2006 (the year the trade deficit peaked). The slow effect of the depreciating dollar on the trade balance was the result of import volumes continuing to grow. Again, economic research suggests that U.S. imports have a relatively muted response to exchange rate changes, with a dollar depreciation more likely to slow their growth rather than cause them to decrease. However, in this period several other factors worked to increase imports above what otherwise might be expected and caused a particularly slow response of the trade deficit to the depreciation of the dollar. First, the rapid shift in trade in recent years toward low-cost emerging economies has tended to erode U.S. price competiveness and offset, in part, the competiveness-improving effect of the depreciating dollar. Second, up to 2006 the U.S. economy was growing faster than most other advanced economies, tending to boost U.S. imports. Third, oil prices rose to historic highs, increasing the trade deficits of oil-importing countries, such as the United States. (Because the international price of oil is denominated in dollars, dollar depreciation does not directly affect oil's price in the U.S. market. However, some argue it directly contributes to commodity price inflation. (This possible relationship is discussed in the " World Commodity Prices (in Dollars) Tend to Increase " section below.) The U.S. trade deficit in 2010 increased to $470 billion and based on three-quarters of available data should be near that level in 2011 as well. The deficit's increase from 2009's recession-induced low of $378 billion was to be expected in a recovering economy, as rising economic activity at home and abroad increased goods and asset flows to more normal levels. In particular, the rebuilding of inventories by U.S. businesses, typical in the early stages of economic recovery, drew in a sizable volume of imports. But that process is transitory and likely already substantially completed. With the dollar already at a relatively competitive level and with strong growth occurring in most emerging economies, there may be strong demand for U.S. exports. Barring a major spike in oil prices or an unlikely surge in spending by U.S. consumers, the trade deficit could stabilize for the near term at about $500 billion. Any further dollar depreciation will give added momentum to exports and will raise the prospect that the trade deficit could fall over the next few years and help to boost the rate of economic growth. The rising price of imports relative to exports caused by a depreciation of the dollar reduces the purchasing power of U.S. consumers and businesses that purchase imports. To judge the combined effect of export and import price changes on U.S. international purchasing power, economists use the change in the ratio of export prices to import prices or what is called the terms of trade. For the 26% dollar depreciation that began in early 2002 and ended in mid-2008, the U.S. terms of trade for the same period decreased by approximately 13%. A 13% decrease in the terms of trade is substantially less than the depreciation of the dollar, which reflects changes in factors in addition to the exchange rate. One factor of particular significance is the effect of changes in producer profit margins. To preserve market share in the U.S. market, importers have shown a tendency to not completely pass through exchange rate depreciations to the dollar price of their products, absorbing a portion of the exchange rate change through slimmer profit margins. This practice substantially mutes the currency depreciation's negative effect on U.S. purchasing power. Also likely muting the impact of a fall in the terms of trade on total purchasing power is the relatively small importance of imports in U.S. gross domestic product (GDP), which only total about 16%. The dollar value of the loss of purchasing power caused by the dollar's depreciation from 2002 to 2008 can be estimated by comparing the growth of real GDP to the growth of real command-basis gross national product (GNP). Command-basis GNP measures the goods and services produced by the U.S. economy in terms of their international purchasing power. In particular, it adjusts the value of real exports to reflect changes in their international purchasing power due to changes in the U.S. terms of trade. Thus, when the terms of trade ratio decreases because of dollar depreciation, real command-basis GNP falls relative to the normally calculated real GDP. From early 2002 through mid-2008, real GDP increased a cumulative $1.9 trillion as compared with command-basis real GDP increasing about $1.6 trillion. The difference of about $300 billion is the estimated loss of international purchasing power due to the dollar's 26% depreciation for that time period. A depreciating dollar tends to improve the U.S. net foreign debt position. This improvement is caused by favorable valuation effects on U.S. foreign assets. These occur because U.S. foreign liabilities are largely denominated in dollars, but U.S. foreign assets are largely denominated in foreign currencies. Therefore, a real depreciation of the dollar increases the value of U.S. external assets and largely does not increase the value of U.S. external liabilities. This asymmetry in the currency composition of U.S. external assets and liabilities means that a dollar depreciation tends to reduce U.S. net external debt. Exchange-rate-induced valuation effects are substantial because they apply to the entire stock of U.S. foreign assets, valued at about $20.3 trillion in 2010. The large scale of U.S. foreign assets means that valuation changes can offset a sizable portion of the current account deficit's annual addition to the existing stock of external debt. For example, in 2006, the current account deficit reached a record $811.4 billion. As this was financed by foreign borrowing, it made a like-sized contribution to U.S. external debt. However, the total value of net external debt in 2006 increased only about $300 billion because valuation changes caused the value of the stock of U.S. foreign assets to increase by more than $500 billion. Nearly half of this offset was attributable to positive valuation effects on U.S. foreign assets that were attributable to the dollar's depreciation during that year. In 2007, the impact of valuation changes, including $444 billion caused by dollar depreciation, was sufficiently large to cause the U.S. net external debt to fall despite having to finance a $638 billion current account deficit that year. The fall of the dollar from 2002 to 2007 coincided with large increases in commodity prices. The price of gold increased from about $300 per ounce to more than $600 per ounce, the price of oil increased from about $20 per barrel to near $140 dollars per barrel, and the index of nonfuel commodity prices rose about 85%. Because most commodities in international markets are priced in dollars, their prices to the U.S. buyer are not directly affected by movements of the exchange rate. However, a 2008 IMF analysis argues that the dollar does have an indirect impact on commodity prices, which works through at least three channels. First, a dollar depreciation makes commodities, usually priced in dollars, less expensive in non-dollar countries, encouraging their demand for commodities to increase. Second, a falling dollar reduces the foreign currency yield on dollar denominated financial assets, making commodities a more attractive investment alternative to foreign investors. Third, a weakening dollar could induce a stimulative monetary policy in other countries, particularly those that peg their currencies to the dollar. A stimulative monetary policy tends to decrease interest rates, which could stimulate foreign demand, including that for commodities. The IMF study estimated that if the dollar had remained at its peak of early 2002, by the end of 2007, the price of gold would have been $250 per ounce lower, the price of a barrel of crude oil would have been $25 a barrel lower, and nonfuel commodity prices would have been 12% lower. Other factors were likely more direct and important causes of the rapid climb of commodity prices at this time. Large increases in world industrial production, particularly in emerging Asian economies, have likely been a factor pulling up commodity prices. Also, low interest rates in the United States have reduced the incentive for current extraction over future extraction and generally lowered the cost of holding inventories, dampening the supply response to higher commodity prices. Other impacts of a depreciating dollar are more problematic, but are potential risks. A falling dollar itself does not directly affect interest rates in the United States. However, the underlying international capital flows that influence the dollar may also influence conditions in domestic credit markets. A weakening of the demand for dollar-denominated assets by private investors tends to depreciate the dollar. A weaker demand for dollar assets is also a likely consequence of a decrease in the net inflow of foreign capital to the U.S. economy. Other things equal, a smaller net inflow of foreign capital reduces the supply of loanable funds available to the economy, tending to increase the price of those funds, that is, increase interest rates. At this time, however, other things are not equal. The economy, while recovering from the 2008-2009 recession, still retains substantial economic slack, and the demand for loanable funds by businesses and households remains particularly weak. In addition, at least through late 2014, the Federal Reserve appears committed to a policy of monetary stimulus that will keep interest rates low. However, as economic slack decreases as the recovery progresses, the Fed will likely steadily reduce the amount of monetary stimulus and the domestic demand for credit will likely increase to a more normal level, and together this will exert more upward pressure on interest rates. That pressure will be greater to the degree that domestic savings does not increase sufficiently to offset the reduced inflow of foreign capital (i.e., a reduced supply of loanable funds), making it likely that, coincident with the falling dollar, U.S. interest rates would tend to rise more than they otherwise would. This added upward pressure on U.S. interest rates could be prevented if there were also an increase in the supply of domestic saving generated by households and the government, sufficient to offset the diminished inflow of foreign capital. Also, rising U.S. interest rates could feedback to improve the relative attractiveness of dollar assets to some foreign investors, tending to slow the net outflow of capital, decrease upward pressure on interest rates, and dampen the rate of dollar depreciation. If, as noted above, the capital outflow is being motivated by other factors in addition to the level of U.S. interest rates, then this feedback effect is not likely to stop the outflow, only slow it. Foreign central bank holdings of reserve currency assets have risen sharply over the past decade. These "official holdings" have nearly quadrupled since 1997, increasing from about $2 trillion to more than $10 trillion by the end of 2011. Of the $5 trillion of official holdings of which currency composition is known, nearly $3 trillion (or 60%) is in dollar assets. Euro-denominated assets have the second-largest share at about 25%. For the United States, there are significant benefits from the dollar being the world's primary reserve currency. Central banks' demand for the reserve currency tends to be less volatile than that of private investors. This stabilizes the demand for dollars and reduces the foreign exchange risk faced by U.S. companies in their international transactions. Exchange rate risk is also reduced because the United States borrows in its own currency, so that the appreciation of foreign currencies against the dollar cannot increase debt-service cost or raise default risk. Another major benefit of having the primary international reserve currency is that it enables the United States to borrow abroad at a lower cost than it otherwise could. This cost advantage occurs because there is a willingness of foreign central banks to pay a liquidity premium to hold dollar assets. Also, the dollar's status as the world's reserve currency raises the incidence of foreigners using U.S. asset markets. This added foreign involvement increases the breadth and depth of these markets, which tends to attract even more investors, which further magnifies the benefits of issuing the reserve currency. However, the prospect of substantial further depreciation of the dollar could erode the dollar's ability to provide the important reserve currency function of being a reliable store of value. Foreign central banks may see the erosion of this function as a growing disincentive for using the dollar as their principal reserve currency. Another potential threat is any perceived unsustainability of the U.S. long-term debt problem that may eventually result in a downgrading of the U.S. sovereign-risk rating. Yet, so far there appears to be only modest diversification from dollar assets by foreign central banks. The dollar share of official reserves reached a peak value of about 72% in 2001. Over the subsequent decade this share has slowly decreased, stabilizing at about 62% in 2009 and 2010. The principal alternative to the dollar as a reserve currency has been the euro. Since its creation in 1999, the euro share of global official reserves rose from about 18% to 27% in 2007; however, since then the euro has not increased its share of global reserve assets. Despite the problems posed for some by the dollar's ongoing depreciation, at present there is arguably no alternative currency to assume its role as principal reserve currency. The sovereign debt crisis in Europe is likely to have diminished the euro's attractiveness to central banks. In addition, the size, quality, and stability of dollar asset markets, particularly the short-term government securities market in which central banks tend to be most active, continues to make dollar assets attractive. A further advantage is the power of "incumbency" conferred by the important "network-externalities" that accrue to the currency that is currently dominant. Together these factors will likely inhibit for the medium term a large or abrupt change in the dollar's reserve currency status. Nevertheless, over the long term, many economists predict that a multiple currency arrangement is likely to emerge involving, in addition to the dollar, a continued role for the euro and a substantially increased role for China's yuan. This presumes that China will be able to greatly improve the size and liquidity of its financial markets and create attractive financial instruments. Sustained dollar depreciation could accelerate this process by encouraging more active movement away from dollar assets by central banks. Although asset market trade offers opportunities to raise overall economic efficiency and improve the economic welfare of borrower and lender alike, trade in assets is prone to occasional volatility, the disorderly resolution of which can lead to financial disruption and, more broadly, a slowing of economic growth. The essential weakness of asset markets is that assets are a claim on a stream of earnings over time—and the future is always uncertain. This can mean that relatively small changes in investors' beliefs about that future could have large effects on the value of the asset. Historically, this has tended to make these markets much more volatile than goods markets, in which value is generally far less contingent on the uncertainties of the future. Add to this the often observed tendency for "herd-like" behavior among investors, particularly those focused on the short run, and the volatility in asset markets can grow larger. Then add in leveraged purchases, the inherent weakness of modern fractional-reserve banking, exchange rate risk, and the usual problems of distance (i.e., different language, law, and business practices) and the potential for volatility and crisis becomes even larger. There is no precise demarcation of when a falling dollar might move from being an orderly decline to being a crisis, but the depreciation would be significantly more rapid than the orderly fall that has already occurred. The troubling characteristic of a dollar crisis would be that this adjustment could move from orderly to disorderly, due to a precipitous decline in the willingness of investors to hold dollar assets, causing a sharp decrease in the price of those assets and an equally sharp increase in the interest rates attached to those assets. A sudden spike in interest rates could slow domestic interest-rate-sensitive spending more quickly than the falling dollar can stimulate net exports. This negative impulse could cause overall economic activity to slow, perhaps to the point of stalling the economic recovery. One factor governing whether dollar depreciation is an orderly or disorderly adjustment is investor expectations about future dollar depreciation. Rational expectations will have a stabilizing effect on the size of international capital flows. The rational forward-looking investor will have some notion of the equilibrium exchange rate and whether the currency is currently overvalued or undervalued. Such investors would only hold assets that have expected yields high enough to compensate for the expected depreciation and also preserve a competitive rate of return. In contrast, a sharp plunge of the dollar could occur if most investors do not form rational expectations about a likely future depreciation of the dollar. Once investors come to realize that the dollar is falling at a faster rate than they had expected, there could be a sudden attempt by large numbers of investors to sell their dollar assets. But with many sellers and few buyers, the exchange rate would fall precipitously, along with the price of dollar assets, before stabilizing. Some economists argue that foreign investors do not appear to have built a rational expectation of future dollar depreciation into the nominal yields they are accepting to hold dollar assets. The average nominal rate of return on low-risk treasury securities is currently about 2.5%, and in 2010 the dollar depreciated at about a 4% annual rate, so that the ex-post rate of return for foreigners holding these securities has been negative. If many holders of dollar assets conclude their expectations for dollar depreciation had been too low and try to move quickly out of dollar assets, the ensuing stampede could potentially cause a dollar crisis. A buyer is needed to shed dollar assets, but in a crisis environment this may require a precipitous bidding down of the price of the less desirable dollar assets. This leads not only to a sharply falling exchange rate, but also to sharply rising interest rates in U.S. financial markets (lower asset prices translate into higher effective interest rates). The dollar, of course, has been on a depreciating trend since 2002, and foreign investors have continued to hold dollar assets for which the attached interest rate seems insufficient to compensate for that depreciation. But there has been no dollar crisis. The avoidance of crisis is, perhaps, explained in part by the large accumulation of dollar reserves by foreign central banks. If foreign central banks have longer investment horizons than private investors, they will tend to stabilize the demand for dollar assets. In general, the large size and stability of the dollar-asset markets (along with the ongoing needs of central banks and other international investors) for liquidity and a store of value undergirds the strong persistent international demand for dollar assets. Treasury Secretaries have in the past asserted that the United States has a "strong dollar policy," but have rarely taken direct steps to influence the dollar's value. As noted earlier, since the 1973 demise of the Bretton Woods fixed exchange rate international monetary system, the de facto U.S. dollar policy has been to let market forces determine the dollar's value. The collapse of that monetary system was to a large degree due to its increasing inability to maintain fixed-exchange rates in the face of the massive growth of international capital flows in a reintegrated and rapidly growing post-war global economy. Mainstream economic theory suggests that a country cannot be open to large international capital flows (as the United States is) and directly control both its exchange rate and its interest rates. Because the management of interest rates is seen as central to the overriding policy goal of stabilizing the domestic economy to maintain high employment and low inflation, the U.S. Federal Reserve and the central banks of most other advanced economies control interest rates and, therefore, have implicitly decided to let their exchange rates fluctuate, more or less, freely. The exchange rate, while usually not the primary target, can be affected by macroeconomic policies, such as quantitative easing, fiscal stimulus, and debt reduction. Its movement might well support achieving these broader macroeconomic goals, but a particular level for the exchange rate has not been an explicit policy goal in the United States. However, occasionally the government has acted to directly influence the exchange rate. In addition, government policies, programs, and institutions that undergird a "strong U.S. economy" arguably exert an indirect positive effect on the dollar. Given the importance of international asset markets in determining the dollar's exchange rate, policies aimed at directly or indirectly influencing the demand and supply of dollar assets would potentially have the greatest direct impact on the dollar. This policy involves the Federal Reserve at the request of the Treasury buying or selling foreign exchange in an attempt to influence the dollar's exchange rate. (This intervention will most often be a sterilized intervention that alters the currency composition of the Fed's balance sheet but does not change the size of the monetary base, neutralizing any associated impact on the money supply.) To strengthen the dollar, the Fed could attempt to boost the demand for dollars by selling some portion of its foreign exchange reserves in exchange for dollars. (Sterilization in this case would require the Fed to also purchase a like value of domestic securities to offset the negative effect on the monetary base of its selling of foreign exchange reserves.) The problem with intervention is that the scale of the Fed's foreign exchange holdings is small relative to the size of global foreign exchange markets, which have a daily turnover of more than $4.0 trillion. Facing markets of this scale, currency intervention by the Fed would likely be insufficient to counter a strong market trend away from dollar assets and prevent depreciation of the dollar. A coordinated intervention by the Fed and other central banks would have a greater chance of success because it can increase the scale of the intervention and have a stronger influence on market expectations. Since 1985, there have been six coordinated interventions: the Plaza Accord of 1985 to weaken the dollar, the Louvre Accord of 1987 to stop the dollar's fall, joint actions with Japan in 1995 and 1998 to stabilize the yen/dollar exchange rate, G-7 action in 2000 to support the newly introduced euro, and G-7 action in 2011 to limit appreciation of the Japanese yen. All but the Louvre Accord do correspond with turning points for the targeted currencies. However, these interventions were most often accompanied by a change in monetary policy that was consistent with moving the currencies in the desired direction. Many economists argue that coordinated intervention in these circumstances played the useful role of a signaling device helping overcome private investors' uncertainty about the future direction of monetary policy and the direction the central banks want the currency to move. But absent an accompanying change in monetary policy it is unlikely that even coordinated intervention would be successful at altering the exchange rate's trend if it were being strongly propelled by private capital flows. The Federal Reserve uses monetary policy to influence economic conditions. By increasing or decreasing interest rates, it tightens or loosens credit conditions. Changing the level of interest rates can also influence the dollar's exchange rate. A tighter monetary policy would tend to strengthen the dollar because higher interest rates, by making dollar assets more attractive to foreign investors, other things equal, boost the demand for the dollar in the foreign exchange market. In contrast, lower interest rates would tend to weaken the dollar by reducing the attractiveness of dollar assets. In either case, however, it would be unprecedented for the Fed to use monetary policy to exclusively target the exchange rate, but it could be the side-effect of policies aimed at controlling inflation or stimulating aggregate spending to speed economic recovery. In general, a floating exchange rate gives the central bank greater autonomy to use monetary policy to achieve domestic stabilization goals. In the current macroeconomic situation, if the Fed were obligated to prevent the dollar from depreciating, it would likely be constrained from applying the degree of monetary stimulus needed to promote economic recovery. It is likely that the Fed's current policy of monetary stimulus to sustain economic recovery, by keeping interest rates low, has exerted downward pressure on the dollar as well. Although not the primary target of this monetary policy, the incidental depreciation of the dollar contributes to the Fed's stabilization goal of boosting economic growth by providing a boost to net exports. Government choices about spending and taxing can also influence the exchange rate. Budget deficits tend to have a stimulative effect on the economy. However, because the government must borrow funds to finance a budget deficit, it increases the demand for credit market funds, which, other things equal, tends to increase interest rates. Higher interest rates will tend to increase the foreign demand for dollar-denominated assets, putting upward pressure on the exchange rate. However, in the current state of the U.S. economy, with a sizable amount of economic slack and weaker than normal private demand for credit market funds, current government borrowing does not appear to have elevated market interest rates, and, therefore, does not appear likely to exert upward pressure on the exchange rate. Moreover, the likely prospect of a slower than normal economic recovery suggests a substantial amount of economic slack and relatively weak private demand for credit is likely to persist over the near term. These conditions will continue to mute the interest-elevating effect of currently anticipated government borrowing and continue to exert minimal upward pressure on the dollar. As economic recovery moves the U.S. economy closer to full employment and the private demand for credit market funds increases, continuing large government budget deficits may result in higher interest rates. Some foreign investors could be attracted by these higher interest rates, increasing their demand for dollar assets. This would exert upward pressure on the dollar. However, if the federal government does not implement a credible solution to its long-term debt problem, it is possible that the expectation of persistent large budget deficits and sharply rising public debt could degrade the expected long-term performance of the U.S. economy by crowding out productive investment and slowing the pace of economic growth. This anticipated deterioration could reduce international investors' expected rate of return on dollar assets, accordingly reducing the long-term demand for dollar assets. This reduced demand would exert downward pressure on the dollar's international exchange value. Putting in place a credible program of fiscal consolidation would also have an ambiguous effect on the dollar's longer-term path. Less government borrowing would tend to lower interest rates and depreciate the dollar, while the improved prospect for long-term growth and expected rates of return would tend to appreciate the dollar. Policies that tend to increase the foreign demand for U.S. goods and services also tend to strengthen the dollar. The continued existence of various trade barriers in many countries may keep the demand for U.S. exports weaker than it otherwise would be. If lowering those barriers significantly boosts the demand for U.S. goods and services, it would also exert some upward pressure on the dollar exchange rate. It is difficult to judge how strong this upward pressure would be. Moreover, this is not likely to be a readily implementable policy tool and probably has little near-term significance for the dollar's exchange rate. If the United States has goods and services that are strongly in demand in the rest of the world, there will be some upward pressure on the exchange rate. Economic theory suggests that the government's role in this process is to support those aspects of research and development that are likely to be under-invested in by the private market. This type of policy would most likely have long-run implications, but not have much effect on the near-term value of the dollar. Over the long run, at least three factors will likely continue to indirectly support the international demand for dollar assets: (1) the basic economic performance of the U.S. economy as measured by GDP growth, productivity advance, and pace of innovation has for the past 25 years been superior to that of Japan and the major euro area economies; (2) the Fed is widely seen as a credible manager of monetary policy and has a strong record of maintaining macroeconomic stability; and (3) the large and highly liquid U.S. asset markets will likely continue to be an attractive destination for foreign investors. Therefore, decisions by the 112 th Congress regarding policies that enhance or degrade any of these three attributes of the U.S. economy will accordingly tend to indirectly strengthen or weaken the dollar's long-term path. Of likely immediate relevance are the near-term issue of sustaining economic recovery and reducing unemployment and the long-term issue of reducing the growth of federal debt. As already discussed, the dollar's exchange rate largely reflects fundamental economic forces, particularly those that influence the demand for and supply of assets on international financial markets. Currently, an examination of those forces highlights a large and potentially destabilizing imbalance in the global economy: in the United States persistent large trade deficits and the accumulation of foreign debt, and in the rest of the world large trade surpluses, weak domestic demand, and the accumulation of dollar denominated assets. Most economists would argue that this is a condition that carries more than a negligible risk of generating financial instability and eventual global economic crisis. To achieve an orderly correction of these imbalances that assures more stable exchange rates and leaves all the involved economies on sounder macroeconomic footing, mainstream economic thinking suggests that the needed rebalancing can be most efficiently achieved by a coordinated international policy response, the salient elements of which are in the United States, raising the national saving rate via substantial increases in the saving rates of households and government and through that reducing the U.S. trade deficit to a "sustainable" size; in Japan and Europe, generating faster economic growth primarily propelled by domestic spending rather than net exports; in Asia (excluding Japan and China), fostering a recovery of domestic investment and reducing the outflow of domestic saving; and in China (and other surplus economies that fix their exchange rates to the dollar), allowing their currencies to appreciate and channel more of their domestic savings into domestic spending. A key attribute of such a rebalancing of global spending would likely be further depreciation of the dollar. This outcome illustrates that an orderly depreciation of the dollar can be, on balance, a beneficial attribute of policy adjustments and economic changes that would ultimately improve economic conditions in the United States and abroad. There is some evidence that a global rebalancing is in progress. In the United States, the saving rate of households is up and the federal government seems to be moving toward raising public saving by reducing its long-term deficit problem. In China, the yuan has appreciated and the government's recently released five-year plan points to that country undertaking policies to raise its domestic consumption and narrow its global trade surplus.
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Depreciation of the dollar since 2002 raises concern among some in Congress and the public that the dollar's decline is a symptom of broader economic problems, such as a weak economic recovery, rising public debt, and a diminished standing in the global economy. However, a falling currency is not always a problem, but possibly an element of economic adjustments that are, on balance, beneficial to the economy. A depreciating currency could affect several aspects of U.S. economic performance. Possible effects include increased net exports, decreased international purchasing power, rising commodity prices, and upward pressure on interest rates; if the trend is sustained, the United states may also experience a reduction of external debt, possible undermining of the dollar's reserve currency status, and an elevated risk of a dollar crisis. The exchange rate is not a variable that is easily addressed by changes in legislative policy. Nevertheless, although usually not the primary target, the dollar's international value can be affected by decisions made on policy issues facing the 112th Congress, including decisions related to generating jobs, raising the debt limit, reducing the budget deficit, and stabilizing the growth of the federal government's long-term debt. Also, monetary policy actions by the Federal Reserve, over which Congress has oversight responsibilities, can affect the dollar. The exchange rate of the dollar is largely determined by the market—the supply and demand for dollars in global foreign exchange markets associated with the buying and selling of dollar denominated goods, services, and assets (e.g., stocks, bonds, real property) on global markets. In most circumstances international asset-market transactions will tend to be dominant, with the size and strength of inflows and outflows of capital ultimately determining whether the exchange rate appreciates or depreciates. A variety of factors can influence the size and direction of cross-border asset flows. Of principal importance are the likely rate of return on the asset, investor expectations about a currency's future path, the size and liquidity of the country's asset markets, the need for currency diversification in international investors' portfolios, changes in the official holdings of foreign exchange reserves by central banks, and the need for and location of investment safe havens. All of these factors could themselves be influenced by economic policy choices. To give Congress the economic context in which to view the dollar's recent and prospective movement, this report analyzes the evolution of the exchange rate since its peak in 2002. It examines several factors that are likely to influence the dollar's medium-term path; what effects a depreciating dollar could have on the economy; and how alternative policy measures that could be taken by the Federal Reserve, the Treasury, and the 112th Congress might influence the dollar's path.
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The U.S. Fish and Wildlife Service (FWS), an agency within the Department of the Interior (DOI), is the principal federal agency tasked with the conservation, protection, and restoration of fish and wildlife resources across the United States and insular areas. The service's history dates to 1871, when the Office of the Commission of Fish and Fisheries—a predecessor to FWS—was established. FWS manages both regional and national programs, which are carried out by FWS staff at headquarters, regional offices, and field offices. FWS functions include administering the National Wildlife Refuge System, managing migratory bird species, protecting endangered and threatened species, and restoring fish species and aquatic habitats, as well as enforcing fish, wildlife, and conservation laws and conducting international conservation efforts. FWS also is responsible for the disbursement of fish and wildlife conservation and restoration funds to states, territories, and tribal governments. This report summarizes the history, organizational structure, and selected functions of FWS and provides an overview of the agency's appropriations structure. The report describes the actions Congress has taken to shape the structure and functions of FWS over time and notes selected issues of interest to Congress. The origins of FWS date back to the formation of two agencies in the late 1800s. In 1871, the first of FWS's predecessor agencies, the Office of the Commission of Fish and Fisheries (an independent agency), was established. In 1885, the second agency that later would become part of FWS, the Section of Economic Ornithology, was formed within the Department of Agriculture (USDA). After several administrative and legislative reorganizations to these agencies, FWS took its current form in DOI in the second half of the 20 th century. (See Figure 1 for a timeline of selected events that helped to structure the agency.) Additional details on the administrative and congressional actions that have shaped the agency are provided below. On February 9, 1871, Congress created the Office of the Commission of Fish and Fisheries, commonly referred to as the Fish Commission, to respond to a perceived decline in marine and freshwater fish stocks in American waters. The Fish Commission was established as an independent agency and tasked with investigating the cause of the decline and providing recommendations to mitigate it. In this role, the Fish Commission analyzed and reported on the commercial fishing industry and actively propagated species of interest to bolster populations. The Fish Commission remained an independent agency until February 1903, after which the office was integrated into the newly created Department of Commerce and Labor and renamed the Bureau of Fisheries. In addition to the responsibilities held by the Fish Commission, the Bureau of Fisheries assumed responsibility for several additional activities, including management of the salmon fishery and fur-bearing animals in Alaska. In 1913, the Department of Commerce and Labor was divided into two separate departments, the newly created Department of Labor and the renamed Department of Commerce (DOC). After the division, the Bureau of Fisheries, which remained in DOC, again was tasked with additional responsibilities, including the enforcement of the Federal Black Bass Act and the Whaling Treaty Act, as well as increased responsibilities in Alaska. In addition to these and other activities, the Bureau of Fisheries continued to work to mitigate threats to fisheries and bolster fish stocks, including through the operation of fish hatcheries. The Bureau of Fisheries remained within DOC through June 1939. In 1885, USDA established the Section of Economic Ornithology within the Division of Entomology, using funds appropriated to the division. The section was tasked with investigating the food habits, distribution, and migrations of birds in relation to agriculture, including insects and plants. In 1886, the section became a stand-alone division within USDA, known as the Division of Economic Ornithology and Mammalogy, and its responsibilities were expanded to include mammals. The mandate for the division continued to expand over the next several years to include mammals and birds as they related to agriculture, horticulture, and forestry, as well as the general geographic distribution of animals and plants. The Division of Economic Ornithology and Mammalogy later was renamed the Division of Biological Survey in 1896. The renaming recognized the expansion of the division's responsibilities to broadly investigate America's wildlife and plants, including their geographic distribution. The division was renamed again in 1905 as the Bureau of Biological Survey. Over the next 34 years, the bureau's responsibilities broadened to include various conservation and regulatory activities. During this time, several sections and divisions were created within the bureau. Each of these divisions had specific responsibilities, including habitat loss, non-native species, species endangerment, and control of predatory and injurious wildlife. In addition, the bureau was tasked with the enforcement of conservation laws and the administration of wildlife refuge lands, which were designated by Administrations and Congress for the conservation of wildlife and birds. These wildlife refuges ultimately would be consolidated into the National Wildlife Refuge System (see " National Wildlife Refuge System "). The Bureau of Biological Survey remained within USDA through June 1939. The Bureau of Fisheries and the Bureau of Biological Survey were transferred from their respective homes within DOC and USDA by Reorganization Plan Number II of 1939. To consolidate conservation and wildlife resource activities, the reorganization plan moved the bureaus to DOI, effective July 1, 1939. The plan transferred all of the bureaus' associated responsibilities and authorities with them, including the regulatory authorities over fisheries and the whaling industry for the Bureau of Fisheries and the conservation of wildlife, game, and migratory birds and conservation law enforcement for the Bureau of Biological Survey. In a message regarding Reorganization Plan Number II, President Franklin D. Roosevelt provided justification for the transfer: The plan provides for the transfer to the Department of the Interior of the Bureau of Fisheries from the Department of Commerce and of the Bureau of Biological Survey from the Department of Agriculture. These two Bureaus have to do with conservation and utilization of the wildlife resources of the country, terrestrial and aquatic. Therefore, they should be grouped under the same departmental administration, and in that Department which, more than any other, is directly responsible for the administration and conservation of the public domain. One year after the bureaus were transferred to DOI, the President proposed a further consolidation as part of Reorganization Plan Number III of 1940. Effective June 30, 1940, the Bureau of Fisheries and the Bureau of Biological Survey were combined to form the Fish and Wildlife Service. In establishing the Fish and Wildlife Service, the plan also created the position of director within the agency and abolished the former positions heading the two original bureaus. In his attached message, President Roosevelt explained the further consolidation: Reorganization Plan II transferred the Bureau of Fisheries of the Department of Commerce and the Bureau of Biological Survey of the Department of Agriculture to the Department of the Interior and thus concentrated in one department the two bureaus responsible for the conservation and utilization of the wildlife resources of the Nation. On the basis of experience gained since this transfer, I find it necessary and desirable to consolidate these units into a single bureau to be known as the Fish and Wildlife Service. The Bureau of Biological Survey administers Federal laws relating to birds, land mammals, and amphibians whereas the Bureau of Fisheries deals with fishes, marine mammals, and other aquatic animals. The natural areas of operation of these two bureaus frequently coincide, and their activities are interrelated and similar in character. Consolidation will eliminate duplication of work, facilitate coordination of programs, and improve service to the public. Shortly after the consolidation, the Fish and Wildlife Service's headquarters was temporarily relocated from Washington, DC, to Chicago, IL, in 1942 due to World War II. The service returned to Washington, DC, in 1947. The U.S. Fish and Wildlife Service (as opposed to its earlier moniker, the Fish and Wildlife Service), or FWS, was established as a result of legislation passed in 1956. The Fish and Wildlife Act of 1956 both established FWS and created the position of Commissioner of Fish and Wildlife to lead the agency. The act also created the position of Assistant Secretary for Fish and Wildlife within DOI and established that FWS would be comprised of two bureaus—the Bureau of Commercial Fisheries and the Bureau of Sport Fisheries and Wildlife—each headed by its own director. The Fish and Wildlife Act further specified the division of the existing responsibilities held within the predecessor agency between the two new bureaus. Specifically, the act states (1) The Bureau of Commercial Fisheries shall be responsible for those matters to which this Act applies relating primarily to commercial fisheries, whales, seals, and sea-lions, and related matters; (2) The Bureau of Sport Fisheries and Wildlife shall be responsible for those matters to which this Act applies relating primarily to migratory birds, game management, wildlife refuges, sport fisheries, sea mammals (except whales, seals and sea-lions), and related matters.... In addition to renaming and reorganizing FWS, the act declared as policy that fish and wildlife resources "make a material contribution to our national economy and food supply, as well as a material contribution to the health, recreation, and well-being of our citizens." The act also stipulated that all functions related to fisheries, wildlife management, and conservation previously administered by DOC and USDA were to be transferred to DOI. Reorganization Plan Number IV of 1970 restructured FWS by transferring the responsibilities entrusted to the Bureau of Commercial Fisheries to the National Oceanic and Atmospheric Administration (NOAA; also created by the reorganization plan), housed within DOC. This reorganization shifted back much of the responsibility that had grown out of the original Bureau of Fisheries, which had been housed in DOC prior to being transferred to DOI in 1939. (See " Fish and Fisheries ," above.) Since its passage, the Fish and Wildlife Act of 1956 has been amended multiple times. In particular, P.L. 93-271 (enacted in 1974) provided for further reorganization of FWS, paving the way for the agency's current structure. Among other things, P.L. 93-271 consolidated the U.S. Fish and Wildlife Service and the Bureau of Sport Fisheries and Wildlife under FWS. FWS, under the act, was to "succeed to and replace the United States Fish and Wildlife Service (as constituted on June 30, 1974) and the Bureau of Sport Fisheries and Wildlife (as constituted on such date)." In replacing the previous FWS structure, the act transferred all existing authorities and responsibilities to the consolidated FWS. P.L. 93-271 also abolished the position of Commissioner of Fish and Game and established the position of the Director of FWS to administer the agency under the supervision of the Assistant Secretary of Fish and Wildlife within DOI. The law stipulated that the director position requires appointment by the President and confirmation by the Senate. In addition, the act established a positive education and experience requirement for the director: "No individual may be appointed as the Director unless he is, by reason of scientific education and experience, knowledgeable in the principles of fisheries and wildlife management." Since 1974, the service has grown and adapted to its current structure and continued as the principal federal agency responsible for the conservation, protection, and restoration of fish and wildlife resources in the United States. FWS reorganization is still a topic of interest to both the Administration and Congress. Congress has regularly debated shifting responsibilities into or out of FWS jurisdiction. Likewise, on several occasions, Administrations have discussed or proposed reorganizations that would shift responsibilities and redistribute FWS staff and resources. FWS is composed of a three-tier structure, including national, regional, and field offices spread across the United States and insular areas. In 2017, FWS employed approximately 9,000 people, though the number of employees varied throughout the year. The national level is primarily responsible for policy formulation and budget allocation, and the regional and field offices are responsible for implementing and enforcing policy. In addition, FWS administers 566 national wildlife refuges and 70 national fish hatcheries, as well as national monuments (four within the National Wildlife Refuge System and three under other authorities), other fisheries offices, and field stations. In total, FWS administers 856 million acres of lands, submerged lands, and waters, under primary or secondary jurisdiction, of which 146 million acres are included in national wildlife refuges and 705 million acres are in mostly marine national monuments. At the national level, which has its headquarters in the Washington, DC, metropolitan area, FWS is administered by the Director of FWS, who is supervised by the Assistant Secretary for Fish and Wildlife within the DOI. There are 13 FWS programs, such as the National Wildlife Refuge System or Law Enforcement, which are overseen by 11 assistant directors and 2 chiefs (see Figure 2 ). Most of the assistant directors and chiefs in turn supervise deputies and one or more divisions within their programs. Selected assistant director and chief positions were established in statute. For example, the position of Assistant Director for Wildlife and Sport Fish Restoration was established by the Fish and Wildlife Programs Improvement and National Wildlife Refuge System Centennial Act of 2000. FWS is divided into eight regions, each headed by a regional director ( Figure 2 ). The eight regions predominately coincide with state boundaries, though Oregon and Nevada each are split across two regions (see Figure 3 ). In addition to the continental United States, Regions 1 and 4 contain the Pacific, including Hawaii, and the Caribbean, respectively. The programmatic structure at the regional level is similar to FWS headquarters. In addition to each regional director, regions have a leadership team composed of deputy regional directors, assistant regional directors, special agents, and regional chiefs for various programs. Assistant regional directors and/or assistant regional chiefs are responsible for programs including fisheries and aquatic conservation, the National Wildlife Refuge System, ecological services, migratory birds, science applications, budget and administration, external affairs, and wildlife and sport fish restoration. However, every region may not have an assistant regional director or chief for every program that is included at the national level. In addition, regions can have special program managers for region-specific activities (e.g., the DOI case manager for the Deepwater Horizon Natural Resource Damage Assessment in Region 4). Within each region are FWS sites and numerous field offices. FWS's mission is to "work with others to conserve, protect and enhance fish, wildlife and plants and their habitats for the continuing benefit of the American people." To accomplish this mission, FWS performs numerous administrative and enforcement activities, which are reflected in the agency's programmatic structure. These activities include but are not limited to the following: operation of the National Wildlife Refuge System; restoration of fisheries and fish habitats; protection of threatened and endangered species; management of migratory birds; assistance in international conservation efforts; enforcement of federal wildlife laws; and disbursement of funds to states and territories for wildlife and sport fish restoration and for hunting and fishing safety and education. In addition to activities entirely carried out by FWS, cooperation, coordination, and partnerships are integral to FWS activities. The service routinely partners with other federal, state, local, tribal, and private partners to carry out activities. Congress has codified several of FWS's programs in statutes, which provide guidance to the agency. In cases where programs are not directly established in statute, authority is derived from other FWS enabling legislation, such as the Fish and Wildlife Act of 1956 or the National Wildlife Refuge System Administration Act of 1966. The following sections provide an overview of selected FWS programs and certain statutes, treaties, and agreements relevant to each program. (See Figure 4 for a timeline of selected statutes related to FWS.) Although many of FWS's primary responsibilities are described, not all of the service's programmatic responsibilities are discussed herein. Selected issues that may be of interest to Congress are noted in each section. The National Wildlife Refuge System (NWRS) is one of the primary public faces of FWS. The NWRS is a network of FWS-administered lands, submerged lands, and waters that provide habitat for fish and wildlife resources across the United States, U.S. territories, and other insular areas. Many NWRS units are open to the public and provide recreational opportunities, including hunting, fishing, bird-watching, and other activities. In addition to refuges, the NWRS includes several national monuments, wetland management districts, waterfowl production areas, and coordination areas. The first wildlife conservation area that eventually would become part of the NWRS was the Pelican Island National Bird Reservation, established by President Theodore Roosevelt through an executive order signed on March 14, 1903. As of September 30, 2017, the NWRS contained 566 national wildlife refuges (which include wildlife refuges, wildlife ranges, wildlife management areas, game preserves, and conservation areas); 4 national monuments; 210 waterfowl production areas, which are almost entirely consolidated into 38 wetland management districts; and 50 coordination areas. FWS is responsible for administering, either through primary or secondary jurisdiction, more than 836 million acres as part of the NWRS; of this total, national wildlife refuges make up 146 million acres. Almost 90 million acres of these national wildlife refuges are in the 50 states; the remaining acreage is comprised of land, submerged land, and water in the territories and insular areas. The areas managed by FWS were not formally consolidated into a unified system until the enactment of the National Wildlife Refuge System Administration Act of 1966 (NWRSAA). NWRSAA has been amended several times, including through the National Wildlife Refuge System Improvement Act of 1997. The National Wildlife Refuge System Improvement Act, among other things, formally established that "the mission of the System is to administer a national network of lands and waters for the conservation, management, and where appropriate, restoration of the fish, wildlife, and plant resources and their habitats within the United States for the benefit of present and future generations of Americans." NWRSAA, as amended, further specified activities permitted within the NWRS and required that most activities that occur in national wildlife refuges be compatible with the NWRS's mission and with the purpose for which an NWRS unit was established. Further, NWRSAA established that wildlife-dependent recreation, including hunting and fishing, shall be priority uses of the NWRS, when it is compatible with the mission and purpose of a given unit. NWRS units may be established through multiple methods, including through legislation and administrative actions, such as executive orders, public land withdrawals, and agreements with other federal agencies. Of the 566 refuges, approximately 500 were established through administrative actions; the remaining refuges were established, reestablished, or repurposed through congressional actions. However, Congress has acted to modify and codify many of the administratively created refuges, making it difficult to clearly differentiate which refuges were established through administrative versus congressional action. Further, lands and interests in lands, including easements and other agreements, can be acquired through purchase or donation pursuant to NWRSAA and other authorities, including migratory bird-related authorities, with funds from the Migratory Bird Conservation Fund (MBCF) and the Land and Water Conservation Fund. (For more information on migratory bird authorities and the MBCF, see " Migratory Birds ," below.) The NWRS is served by the Refuge Law Enforcement program. Refuge law enforcement is staffed by federal wildlife officers who serve specifically in the NWRS. They provide a safe and secure visitor experience and protect FWS employees, federal property, and fish and wildlife resources. Federal wildlife officers working within the NWRS are distinct from personnel within the Office of Law Enforcement (see " Law Enforcement ," below). Congress routinely addresses issues related to the administration and funding of the NWRS. Issues of interest to Congress may include the establishment and naming of refuges and the compatibility of different activities within the NWRS, such as hunting and fishing and oil and gas activities. The Fish and Aquatic Conservation Program within FWS works to conserve, manage, and restore fish populations and their aquatic habitats. The conservation and restoration of aquatic species has been part of FWS core functions since the 1871 establishment of the Office of the Commission of Fish and Fisheries (see " Fish and Fisheries " section, above). The Fish and Aquatic Conservation program's mission is to "conserve, restore and enhance fish and other aquatic resources for the continuing benefit of the American people." To fulfill its mission, the Fisheries Program focuses on the propagation of fish species, species and habitat conservation, invasive species management, and the provision of recreational and educational opportunities for the public. Of particular importance is supporting recreational freshwater fishing opportunities across the country (NOAA in the DOC has jurisdiction over living marine resources per the 1970 reorganization that shifted the Bureau of Commercial Fisheries from DOI to DOC; see " Further Reorganization "), including through promoting public access, protecting and restoring fish habitat, and bolstering fish populations while minimizing risks associated with the introduction and spread of non-native species. The Fish and Aquatic Conservation Program includes the National Fish Hatchery System, which is composed of 70 national fish hatcheries as well as fish health centers, fish technology centers, and the Aquatic Animal Drug Approval Partnership Program. The first hatchery, known as the Baird Hatchery, was established in 1872 on the McCloud River in California under the Fish Commission. Authority for construction and operation of fish hatcheries is vested in FWS by numerous statutes, including statutes establishing specific hatcheries and those providing FWS with broader conservation and restoration authorities. Other fish hatcheries have been established through appropriations acts. Congress also has provided for the transfer of some fish hatcheries to nonfederal entities, such as states or universities. National fish hatcheries are responsible for the propagation of fish species related to recreation and public use, endangered and imperiled species recovery, and fulfillment of tribal partnerships and responsibilities. In addition, in cooperation with states, tribes, and other groups, FWS works to conduct research aimed at better understanding the ecology of fish species, and the Fisheries Program uses applied science to inform fisheries' conservation practices. Both fish health centers and fish technology centers are integral to scientific pursuits undertaken by the National Fish Hatchery System. In addition to conducting research into fish diversity, distributions, conservation, and management, the Fish and Aquatic Conservation Program contains the Aquatic Animal Drug Approval Partnership Program, which works to obtain approval of medications used in fish culture and fisheries management from the U.S. Food and Drug Administration. The Fisheries Program also is responsible for addressing aquatic invasive species, also known as aquatic nuisance species. The Aquatic Invasive Species (AIS) Program is authorized through the National Invasive Species Act of 1996, which amended the Nonindigenous Aquatic Nuisance Prevention and Control Act of 1990. The AIS Program funds regional invasive species coordinators and facilitates activities undertaken in coordination with public and private partners. In addition, the AIS Program provides funding for the Aquatic Nuisance Species Task Force, a multiagency task force chaired by FWS and NOAA that implements a national program to address aquatic invasive species. The Aquatic Nuisance Species Task Force was established through the Nonindigenous Aquatic Nuisance Prevention and Control Act. In addition, the AIS Program assists in the evaluation and listing of injurious wildlife under the Lacey Act (see " Law Enforcement " for more information on the Lacey Act) and in the development and implementation of integrated natural resources management plans for military installations under the Sikes Act. Congress has regularly addressed issues related to the funding and administration of national fish hatchery programs and the implementation of fish habitat conservation activities. In addition, Members of Congress have frequently addressed questions pertaining to interagency cooperative efforts, including those led or contributed to by FWS, to address habitat conservation and invasive species, including zebra and quagga mussels. In particular, questions related to how to address existing invasions and prevent future invasions may be important to Congress. The Secretaries of the Interior and Commerce are primarily responsible for implementing and enforcing the Endangered Species Act (ESA), which provides for the protection and recovery of threatened and endangered species and their habitats. This responsibility generally is delegated to FWS for the Secretary of the Interior and to NOAA Fisheries for the Secretary of Commerce. FWS is responsible for terrestrial and freshwater species; NOAA Fisheries is responsible for marine species. NOAA Fisheries also has jurisdiction for most anadromous species—species that are born in freshwater, migrate to the ocean to mature, and return to freshwater to reproduce—such as some salmon, river herring, and sturgeon species. NOAA Fisheries and FWS are jointly responsible for the management of some species, such as Atlantic salmon. Catadromous species—species that spend most of their lives in freshwater but reproduce in marine waters (e.g., some American eels)—are under FWS jurisdiction, though no catadromous species are currently listed under ESA. ESA provides a comprehensive legal framework for the protection and recovery of threatened and endangered species. FWS conducts and administers multiple activities under ESA, including species conservation, listing, and delisting; critical habitat identification; development and implementation of recovery plans for listed species; federal consultations on projects that may impact listed species; coordination with nonfederal stakeholders on activities that may impact listed species, including the development of habitat conservation plans; grants for species conservation on nonfederal lands (i.e., Cooperative Endangered Species Conservation Grants); cooperation with tribes and other partners for species conservation; implementation of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES); and other species conservation activities. One of the primary—and, according to some stakeholders, most contentious—responsibilities that FWS undertakes pursuant to ESA is identifying and listing species of plants and animals as either endangered or threatened , depending on the species' risk of extinction. Once a species is added to the federal list of endangered and threatened species, it can receive protection under ESA. During the listing process, FWS also must determine if there are any critical habitat areas for a species. Once a species is listed, FWS develops a recovery plan for the species, and legal tools are available to aid the species' recovery and protect its habitat. One of the best-known tools is the prohibition of unpermitted take (e.g., killing, capturing, or harming) of endangered and threatened species. ESA also requires that federal agencies consult with the Secretary responsible for implementing ESA, usually the Secretary of the Interior or Commerce (depending on the species), to ensure federal actions do not jeopardize listed species. In addition, ESA provides for permitting authority related to incidental take of listed species and the import and export of wildlife. Other ESA activities are broad-reaching and include providing financial assistance, coordinating conservation efforts with landowners, and forming partnerships with nonfederal stakeholders to protect and recover listed species. In addition to listing and protecting species, ESA is the implementing legislation for CITES. The Secretary of the Interior is designated as the management and scientific authority to implement CITES, and this authority is statutorily designated to FWS. Similar to ESA, CITES divides listed species into groups according to their risk of extinction. However, CITES uses three categories, known as Appendix I, II, and III, which range from most threatened to least threatened. CITES focuses exclusively on the regulation of trade and does not consider or attempt to control habitat loss. Under ESA, a violation of CITES is considered a violation of U.S. law if the violation is committed within U.S. jurisdiction. Similar to ESA, the Marine Mammal Protection Act (MMPA) is administered jointly by the Secretaries of the Interior and Commerce, as delegated to FWS and NOAA Fisheries. MMPA makes it illegal to harass, hunt, capture, or kill a marine mammal in U.S. waters or by U.S. citizens outside of U.S. waters. MMPA defines marine mammal as any mammal which (A) is morphologically adapted to the marine environment (including sea otters and members of the orders Sirenia [sea cows], Pinnipedia [seals, sea lions, and walruses] and Cetacea [dolphins, porpoises, and whales]), or (B) primarily inhabits the marine environment (such as the polar bear); and, for the purposes of this chapter, includes any part of any such marine mammal, including its raw, dressed, or dyed fur or skin. The Secretary of the Interior, delegated to FWS, is responsible for the implementation of MMPA for marine mammals other than "members of the order Cetacea and members, other than walruses, of the order Pinnipedia," which are under the jurisdiction of the Secretary of Commerce, delegated to NOAA. FWS has jurisdiction over polar bears, sea otters, walruses, manatees, and dugongs. MMPA also prohibits the import and export of marine mammals and marine mammal products in the United States. These prohibitions are subject to limited exemptions, including for subsistence or traditional uses by selected Alaska Native groups. Several marine mammals protected by MMPA also are listed under ESA or CITES. Administration and funding related to endangered and otherwise protected species is of perennial interest to Congress. Issues include how species are listed and delisted, the permitting process, requirements for consultation, regulations surrounding exporting wildlife, and the importation of trophies from international hunting activities. In addition, both Congress and various Administrations have discussed the divided jurisdiction between FWS and NOAA Fisheries for implementing ESA and MMPA, which has led to consideration of shifting jurisdiction over protected species programs and moving NOAA Fisheries into FWS (see " Further Reorganization "). The Migratory Bird Program at FWS is tasked with protecting, conserving, and restoring migratory bird populations and their habitat for the benefit of the American people. The program is responsible for the conservation of more than 1,000 species and their habitats. FWS works in cooperation with federal, state, local, tribal, and nongovernmental partners to achieve the program's objectives. The Migratory Bird Program is tasked with several responsibilities, including bird population monitoring, habitat conservation, permits and regulations, consultation, and recreation. Bird populations and their habitats are protected through a large number of statutes and international treaties, which have been enacted and ratified over more than a century. These include species-specific statutes (e.g., Bald and Golden Eagle Protection Act ), general conservation statutes (e.g., Migratory Bird Treaty Act [MBTA] ), and broader wildlife-related statutes (e.g., ESA and Lacey Act). Some statutes, such as the MBTA, which reflects multiple bipartite agreements between the United States and other countries, also serve as implementing legislation for international treaties. Similar to statutes aimed at protecting specific or multiple migratory bird species, habitat protection statutes related to migratory birds protect both domestic (e.g., North American Wetlands Conservation Act [NAWCA] and Migratory Bird Hunting and Conservation Stamp Act [commonly known as the Duck Stamp Act] ) and international bird habitats (e.g., NAWCA and Neotropical Migratory Bird Conservation Act ). Habitat protection statutes generate revenues and allocate funds to be used for the acquisition and conservation of migratory bird habitats. For example, the Duck Stamp Act generates revenue through the sale of federal waterfowl hunting stamps, which are required for waterfowl hunters 16 years of age and older. These revenues are deposited into the Migratory Bird Conservation Fund and used to acquire property interests for waterfowl habitat. Certain international treaties also provide for habitat protection, such as the Convention on Wetlands of International Importance Especially as Waterfowl Habitats (also known as the RAMSAR Convention), which was ratified by the Senate in 1986. The Migratory Bird Program carries out several actions related to promulgating regulations, providing educational resources, and administering grant programs. For example, FWS annually promulgates rules pertaining to the hunting of migratory birds, as authorized by the MBTA, that establish the framework (e.g., the eligible opening and closing dates) for migratory bird hunting seasons for states and tribes. States are then allowed to determine their hunting seasons and bag limits within the federal framework. Other regulations pertain to permitting activities that fall under the oversight of either the MBTA or the Bald and Golden Eagle Protection Act, such as incidental take and depredation permits as well as scientific research and falconry. Depredation permits allow for the regulated take of species protected under migratory bird statutes, for example "to reduce damage caused by birds or to protect other interest such as human health and safety or personal property." The environmental impact and issuance of depredation permits may be contentious among some stakeholders. Additionally, FWS allows stakeholders to take specific species, without requiring an individual depredation permit, through the issuance of a depredation order that is subject to specific restrictions and conditions. The Migratory Bird Program participates in several educational programs to develop "an understanding of and an appreciation for wildlife and nature." The program provides several educational activities and resources to connect youth, parents, educators, and others with migratory bird conservation. These activities include the Junior Duck Stamp Conservation and Design Program, International Migratory Bird Day, and the Shorebird Sister Schools Program. The education program also provides resources for bird identification and for people interested in bird watching. A significant component of the Migratory Bird Program is administering grant programs for bird habitat conservation. In particular, NAWCA, the Neotropical Migratory Bird Conservation Act, and the Urban Conservation Treaty for Migratory Birds provide resources, including grant funding, to conserve migratory birds and their habitats. These programs support partnerships to conduct habitat restoration projects both domestically and internationally across the Western Hemisphere. Further, by requiring matching funds, these programs seek to leverage federal funds for conservation activities. Several issues related to migratory birds are of general interest to Congress. For example, Congress may be interested in how hunting regulations are established for migratory birds, the extent of migratory bird habitats that are acquired, and the permitting process for the incidental take of species protected by migratory bird statutes. The International Affairs program at FWS "coordinates domestic and international efforts to protect, restore, and enhance the world's diverse wildlife and their habitats with a focus on species of international concern." The program has multiple responsibilities, including administering grant programs, providing technical assistance to wildlife managers in other countries, and helping to conserve foreign and domestic species through the regulation of international trade and wildlife trafficking. The International Affairs program derives its authorities through multiple statutes and international agreements. Authorizing statutes, treaties, and agreements take many forms and can focus on wildlife and habitat conservation, individual species, or species groups. Although several of these laws and treaties overlap with other functions of FWS—such as the MBTA, migratory bird bilateral treaties and conventions, CITES, and ESA—others focus on international conservation efforts for specific species or groups of species. For example, the International Affairs program administers funds associated with the African Elephant Conservation Act, Rhinoceros and Tiger Conservation Act, Asian Elephant Conservation Act, Great Ape Conservation Act, and Marine Turtle Conservation Act. To conserve these species, FWS partners with and supports a wide array of international partners, including foreign state, educational, nonprofit, and multinational organizations. Each species conservation act is associated with a fund to protect that species or species group, which supports international grants for conservation efforts. These funds typically are provided for in annual discretionary appropriations. Although the import of trophies and illegal wildlife trade generally falls under ESA, the Lacey Act, and related statutes, international conservation statutes also can be a mechanism for implementing trade restrictions on certain products (e.g., ivory from African elephants under the African Elephant Conservation Act). As such, Congress may consider international conservation efforts as both mechanisms to promote and fund conservation activities and as ways to address the importation of foreign wildlife products. In addition, the reauthorization of existing international conservation statutes is a common issue of interest for Congress. FWS is responsible for enforcing fish and wildlife conservation laws across the country. FWS law enforcement has a long history dating back to FWS's predecessor agency, the Division of Biological Survey (see " Agencies Preceding the Fish and Wildlife Service ," above). In 1900, Congress enacted the Lacey Act, and the Division of Biological Survey was tasked with enforcing it. The Lacey Act, as amended, "prohibits the importation, exportation, transportation, sale, or purchase of fish, wildlife, or plants taken or possessed in violation of federal, state, tribal, or foreign laws." Since being tasked with enforcing the Lacey Act, FWS's law enforcement mission has expanded to include investigating wildlife crime, habitat destruction, and environmental contamination; combating invasive species; regulating wildlife trade, shipment, importation, and exportation; enforcing federal hunting regulations; protecting endangered species and their critical habitat; and educating the public about federal wildlife and conservation laws. FWS's law enforcement authority is derived from a number of federal wildlife statutes and from the implementation of selected international treaties. (Many of these laws are discussed in other sections of this report, including NWRSAA, Lacey Act, ESA, MMPA, MBTA, Bald and Golden Eagle Protection Act, and several of the international conservation agreements.) The Office of Law Enforcement operates at the national, regional, and field levels. The national office provides "oversight, support, policy, and guidance." At the regional and field levels, where most personnel are located, special agents and wildlife inspectors execute on-the-ground law investigations and wildlife inspection. Special agents carry out investigations of wildlife trafficking to disrupt illegal trade and dismantle smuggling networks, among other responsibilities. Wildlife inspectors oversee wildlife transiting through U.S. ports. In addition, they are tasked with processing shipments to identify and intercept illegal wildlife in trade before it enters the country or continues in transit. The Office of Law Enforcement is distinct from the Refuge Law Enforcement program. Funding for both programs is included under the same appropriation account within the FWS budget, Resource Management, but through different activities (see " Discretionary Appropriations " within " U.S. Fish and Wildlife Service Appropriations ," below). Ensuring that conservation laws are implemented effectively is a perennial issue of interest to Congress. To do so, Congress considers not only questions pertaining to funding the FWS Law Enforcement but also questions of introducing new or amending existing environmental statutes that would modify the responsibilities of law enforcement personnel. For example, these modifications might include altering responsibilities for special agents in the field or wildlife inspectors in ports of entry. Many of the issues of interest to Congress in other programs (such as protected species or international conservation) have the potential to impact the FWS Law Enforcement program. The Wildlife and Sport Fish Restoration program "works with states, insular areas and the District of Columbia to conserve, protect, and enhance fish, wildlife, their habitats, and the hunting, sport fishing and recreational boating opportunities they provide." The program is responsible for administering and disbursing funds associated with multiple grant programs that support wildlife and sport fish restoration, as well as hunting- and boating-related activities. Grants are available for states, territories, tribes, and DC, though eligibility differs by grant type. Authority for several FWS-administered grant programs is provided in two statutes, the Federal Aid in Wildlife Restoration Act of 1937 (commonly known as the Pittman-Robertson Act) and the Federal Aid in Sport Fish Restoration Act of 1950 (commonly known as the Dingell-Johnson Act). Authority for the State and Tribal Wildlife grant program is routinely provided through annual appropriations legislation. Pittman-Robertson and Dingell-Johnson are supported through revenues generated by excise taxes on hunting- and fishing-associated equipment, respectively. These programs are premised on a user-pay, user-benefit model, in which taxes on hunting equipment support hunting-related activities and wildlife restoration and taxes on fishing and related equipment support boating-related activities and sport fish restoration. Revenues generated from these taxes are deposited into trust funds administered by the Department of the Treasury and used to provide for mandatory appropriations to support the respective grant programs. Funding is allocated to states and territories (and, in the case of Dingell-Johnson, to Washington, DC) according to program-apportionment formulas. Pittman-Robertson provides funding for wildlife restoration and hunter education and safety programs. Dingell-Johnson provides funding for sport fish restoration and other activities. Sport fish restoration accounts for approximately 58% of funding from the Dingell-Johnson fund (excluding administration and multistate grants); the remaining 42% supports boating access and infrastructure, aquatic education, and coastal and wetland conservation, among other uses. Both acts provide funding for administration and multistate conservation grant programs. Since their enactment, Pittman-Robertson and Dingell-Johnson have provided nearly $21 billion dollars in financial assistance for states, territories, and DC for wildlife restoration, hunter safety and education, and sport fish restoration, not including other Dingell-Johnson uses (see Figure 5 ). From FY2014 through FY2018, these programs were provided a combined total of more than $1 billion annually, on average, for wildlife and sport fish restoration and hunter education. State and Tribal Wildlife grants are used to support state fish and wildlife agencies and tribal governments in developing and implementing plans and programs that benefit wildlife and its habitat. Historically, state assistance has been disbursed in two parts, one based on a formula and one based on a competitive grant process. Tribal grants are awarded based on an application process, which is open to federally recognized tribes. Congress routinely considers issues related to wildlife and sport fish restoration grants. Members of Congress regularly introduce legislation to amend Pittman-Robertson and Dingell-Johnson, including bills that would alter what types of activities are funded, the allocation of funding, and the sources of funding. Additionally, Congress annually considers funding levels for the State and Tribal Wildlife grants, and the Trump Administration has proposed to eliminate funding for competitive State and Tribal Wildlife grants. FWS is funded through both discretionary and mandatory appropriations, which are provided on an annual basis. Discretionary funding is used to support many of the agency's essential functions, and mandatory funding supports selected activities specified in previously enacted statutes, including a significant portion of FWS's financial assistance activities. Both discretionary and mandatory appropriations have fluctuated over time ( Figure 6 ). From FY2009 through FY2018, FWS discretionary appropriations totaled $1.5 billion annually, on average; over the same period, mandatory appropriations amounted to $1.2 billion annually, on average. Whereas discretionary appropriations have for the most part remained flat over the past 10 years, mandatory appropriations for FWS have generally increased. Congress generally funds FWS in annual appropriations laws for the Department of the Interior, Environment, and Related Agencies. In some years, funding for DOI agencies, including FWS, is provided through either continuing resolutions or omnibus/consolidated appropriations acts. Discretionary appropriations for FWS are provided to carry out many of the essential functions related to the agency's mission, namely the conservation; protection; and enhancement of fish, wildlife, and plants and their habitats. This aim is accomplished through various activities: resource management, construction projects, land acquisition, international conservation, and payments and grants to states and other parties. During the appropriations process, Congress faces several perennial issues, including the overall level of discretionary funding, its distribution across agency programs, and consideration of an Administration's proposals to eliminate or change levels of funding for some functions. Congress also routinely considers FWS policy issues, such as those discussed in the " U.S. Fish and Wildlife Service Programs " section above. From FY2009 through FY2018, FWS discretionary funding has averaged $1.5 billion, allocated across nine appropriations accounts ( Figure 7 ). During this time period, the majority of FWS discretionary funding (81.67%) has been provided to the Resource Management account, which provides funding for several activities, including Ecological Services, which includes activities related to FWS's role in ESA implementation; Habitat Conservation; National Wildlife Refuge System; Conservation and Law Enforcement; Fish and Aquatic Conservation; Cooperative Landscape Conservation; Science Support; and General Operations. The remaining 18.33% has been allocated across eight appropriations accounts, each receiving between 0.27% and 4.35% of the total appropriation, on average ( Figure 7 ). The remaining accounts include Construction (1.84%); Land Acquisition (3.91%); Cooperative Endangered Species Conservation Fund (3.84%); National Wildlife Refuge Fund (0.91%); North American Wetlands Conservation Fund (2.53%); Neotropical Migratory Bird Conservation Fund (0.27%); Multinational Species Conservation Fund (0.68%); and State and Tribal Wildlife Grants (4.35%). The Construction account funds engineering design and construction throughout FWS facilities and infrastructure through three activities: Line Item Construction Projects, Bridge and Dam Safety Programs, and Nationwide Engineering Services. Funding for the Land Acquisition account generally is derived from the Land and Water Conservation Fund and is used to acquire land for recreation and conservation purposes. The remaining six accounts fund conservation activities and payments to states and tribes for conservation and in-lieu-of tax reasons. These programs support grant, financial, and technical assistance programs to states, international partners, tribes, and other stakeholders. From FY2009 through FY2018, FWS received $1.2 billion on average, annually, in mandatory (also called permanent) appropriations. Mandatory appropriations have ranged from 39% (FY2012) to 50% (FY2015) of the total FWS budget ( Figure 6 ) in recent years. FWS mandatory appropriations fund land acquisition for migratory bird habitat conservation, financial assistance to the states and territories for fish and wildlife conservation and related activities, and other purposes. From FY2009 through FY2018, each account received between 0.36% and 50.51% of total mandatory appropriations, on average ( Figure 8 ). FWS mandatory appropriations are spread across several accounts: Federal Aid in Wildlife Restoration (50.51%); Federal Aid in Sport Fish Restoration (36.57%); Cooperative Endangered Species Conservation Fund (5.30%); Migratory Bird Conservation (5.09%); North American Wetlands Conservation Fund (0.73%); National Wildlife Refuge Fund (0.64%); Federal Lands Recreational Enhancement Act funds (0.44%); contributed funds (0.37%); and other miscellaneous permanent appropriations (0.36%). The majority of FWS mandatory appropriations are included in two accounts, the Federal Aid in Wildlife Restoration (also known as the Pittman-Robertson) account and the Federal Aid in Sport Fish Restoration (also known as Dingell-Johnson) account (for more information on these activities, see " Wildlife and Sport Fish Restoration " section, above). Both of these accounts are funded through excise taxes on various sporting goods related to hunting and fishing. Receipts for these taxes are collected annually and deposited into trust funds for each program. Disbursements from the funds are then allocated to states and territories (and Washington, DC, in the case of Dingell-Johnson) in the year following their collection. Funding for the Migratory Bird Conservation account is derived from the sale of federal duck stamps pursuant to the Migratory Bird Hunting and Conservation Stamp Act, commonly known as the Duck Stamp Act (see " Migratory Birds " section, above) and an import duty on arms and ammunition implemented by the Emergency Wetlands Resource Act of 1986. Funds in the Migratory Bird Conservation Fund support the acquisition of interests, either through title or easement, of wetlands and upland habitat for the conservation of migratory birds. The Cooperative Endangered Species Conservation Fund is supported through both discretionary and mandatory appropriations. The fund, established by Section 6 of ESA, supports grants for states and territories to conduct species and habitat conservation activities on nonfederal lands. Funding for the Cooperative Endangered Species Conservation Fund is derived from 5% of the total amounts deposited into the Pittman-Robertson and Dingell-Johnson accounts. In addition, any balance in excess of $500,000 dollars derived from amounts collected on fines, penalties, or property forfeiture for ESA and Lacey Act violations is to be transferred to the Cooperative Endangered Species Conservation Fund. Mandatory appropriations for the North American Wetlands Conservation Fund are derived from multiple sources, including interest on the Pittman-Robertson Wildlife Restoration account and fines related to violations of the Migratory Bird Conservation Treaty Act. In addition, the Coastal Wetlands Planning, Protection and Restoration Act provides funding from the Dingell-Johnson Sport Fish Restoration account to complete NAWCA-authorized projects in coastal states. NAWCA mandatory funds supplement NAWCA discretionary funds to support cooperative efforts to protect, enhance, and restore habitat for wetland species. These funds support domestic programs and conservation efforts in Canada and Mexico (see " Migratory Birds " section, above). From FY2009 through FY2018, FWS has received supplemental appropriations outside the annual discretionary and mandatory appropriations cycle on three occasions: in 2009, 2013, and 2018 (see Table 1 ). Each of these three acts is discussed in more detail below. On February 17, 2009, the American Recovery and Reinvestment Act of 2009 was enacted. Through the act, FWS received an additional $280 million divided between the Resource Management and Construction appropriations accounts. The Resource Management account received $165 million for "deferred maintenance, construction, and capital improvements on national wildlife refuges and national fish hatcheries and for high priority habitat restoration projects." The Construction account received $115 million for "construction, reconstruction, and repair of roads, bridges, property, and facilities and for energy efficient retrofits of existing facilities." Funding from the act was used to facilitate capital improvements, deferred maintenance, habitat restoration, visitor center construction, facility repair, and energy efficiency projects. The service prioritized projects that could be completed in the shortest amount of time, generate the most jobs, and create lasting value for the American people. In response to damages resulting from Hurricane Sandy, the Disaster Relief Appropriations Act of 2013 was enacted on January 29, 2013. Through this act, the FWS's Construction account received $68.2 million for "necessary expenses related to the consequences of Hurricane Sandy." In addition to funds appropriated directly to FWS, DOI's Office of the Secretary was appropriated $360 million for Departmental Operations. In total, including both directly appropriated funds and funds provided through the DOI appropriation, FWS received $167 million for Hurricane Sandy recovery. This funding supported projects such as direct recovery actions (e.g., beach and shoreline recovery and refuge and hatchery rebuilding) and resilience and preparedness activities (e.g., dam removal, shoreline modification, and modernization of the Coastal Barrier Resource System maps). Congress included supplemental funding for FWS for damages associated with Hurricanes Harvey, Irma, and Maria under Division B of the Bipartisan Budget Act of 2018. Pursuant to the act, $210.6 million was appropriated to the FWS Construction account for "necessary expenses related" to the hurricanes.
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The U.S. Fish and Wildlife Service (FWS), an agency within the Department of the Interior (DOI), is the principal federal agency tasked with the conservation, protection, and restoration of fish and wildlife resources across the United States and insular areas. This report summarizes the history, organizational structure, and selected functions of FWS and provides an overview of the agency's appropriations structure. The report describes the actions Congress has taken to shape FWS's structure and functions over time and notes selected issues of interest to Congress. The current structure of FWS is the result of more than 150 years of agency and departmental reorganizations. FWS began as two agencies: the Office of the Commission of Fish and Fisheries (established as an independent agency in 1871) and the Bureau of the Biological Survey (established in 1885 as an outgrowth of the U.S. Department of Agriculture's [USDA's] Division of Entomology). These two entities evolved into the Bureau of Fisheries (in the Department of Commerce) and the Bureau of Biological Survey in USDA. They were consolidated and established within DOI as the Fish and Wildlife Service in 1939. After that time, the service was further restructured on several occasions through both presidential reorganizations and congressional statutes. The most recent major reorganization took place in 1970, although FWS has continued to evolve pursuant to the passage of additional laws and the addition of new responsibilities. In its current form, FWS contains national, regional, and field offices spread across the United States, including its headquarters in the Washington, DC, metropolitan area, eight regional headquarter offices, and other field and FWS-administered sites. Pursuant to authorizing statutes, FWS is responsible for a multitude of fish- and wildlife-related activities. These activities include administering the National Wildlife Refuge System; managing migratory bird species; protecting endangered and threatened species; restoring fish species and aquatic habitats; enforcing fish, wildlife, and conservation laws; conducting international conservation efforts; and disbursing financial and technical assistance to states, territories, and Indian tribes for wildlife and sport fish restoration and other activities. For example, FWS is responsible for the enforcement of several wildlife-related statutes and international agreements, such as the Endangered Species Act (16 U.S.C. §§1531 et seq.), the Lacey Act (16 U.S.C. §§3371-3378 and 18 U.S.C. §§42-43), and the Migratory Bird Treaty Act (16 U.S.C. §§703-712). The service administers the National Wildlife Refuge System pursuant to the National Wildlife Refuge System Administration Act (16 U.S.C. §§668dd-668ee), as amended, which includes more than 800 million acres of lands and waters that FWS administers through either primary or secondary jurisdiction, including 566 national wildlife refuges as well as other service lands and waters. FWS also manages more than 70 national fish hatcheries, fish health centers, and fish technology centers and oversees the Aquatic Animal Drug Approval Partnership Program. In addition, FWS coordinates both domestic and international conservation activities, including administering multiple international conservation statutes. FWS also is responsible for disbursing financial assistance pursuant to the Federal Aid in Wildlife Restoration Act (known as the Pittman-Robertson Act; 16 U.S.C. §§669 et seq.) and the Federal Aid in Sport Fish Restoration Act (commonly known as the Dingell-Johnson Act; 16 U.S.C. §§777 et seq.), as well as State and Tribal Wildlife grants. From FY2014 through FY2018, Pittman-Robertson and Dingell-Johnson allocations together provided more than $1 billion annually to states, territories, and DC for wildlife and sport fish restoration and hunter education. FWS is funded through a mix of discretionary and mandatory appropriations. Discretionary appropriations, which averaged $1.5 billion annually from FY2009 through FY2018, regularly have been allocated across nine accounts and have supported many of the agency's essential functions. FWS mandatory funding, which averaged $1.2 billion annually from FY2009 through FY2018, predominately has been derived through revenues generated from excise taxes on hunting- and fishing-related equipment. Mandatory funding supports land acquisition and financial assistance activities, including a significant portion of FWS's grant-making activities to states and insular areas.
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94-459 -- The U.S. Occupation of Haiti, 1915-1934 May 26, 1994 In the early twentieth century, Haiti suffered from a tumultuous political life and from chronic financial mismanagement. Eighty percent of the Haitian budget went to debt service, and U.S. government officials wereconcernedthat financial obligations to its own citizens might not be met. There was greater fear, also, that one among thewarring European countries -- especially France or Germany -- might establish a position of influence in the country,leading to naval bases that could endanger access to the newly constructed Panama Canal. These concerns wereheightened after the outbreak of World War I, when Haitian authority collapsed into bloody factional struggles inthesummer of 1915; the Administration of Woodrow Wilson determined to take action. In July 1915, Admiral WilliamB. Caperton, then embarked on the battleship Washington , was directed to land forces to establish orderandassume responsibility for administering the customhouses. With virtually no resistance, a landing party of some 330 sailors and marines took control of the capital within a few hours. (There were only two U.S. fatalities, and these may have resulted from friendly fire; Haitian fatalitieswere also minimal.) Admiral Caperton called upon additional U.S. forces to take control of other coastal areas;resistance by guerrilla bands in the more mountainous areas of the country was temporarily put down, ending withthecapture of Fort Rivière in mid-November. By the end of 1915, the marine presence was reduced to 100officers and some 1,600 enlisted men. Although the Marine Brigade was extensively deployed to help put downresurgentguerrilla activity in 1918-1920, for most of the rest of the occupation, the 1,200-1,400 marines were assignedgarrison duty, with some patrolling of the countryside. Once firmly established in the major population centers, U.S. officials quickly ensured the election by the Haitian National Assembly of an amenable president, Philippe Sudre Dartiguenave, who had served as the presidentof theHaitian Senate. As a result of continuing unrest, Admiral Caperton also established censorship and promulgatedmartial law. These emergency measures were not rescinded for over ten years. In another move to ensure an orderlygovernment, the United States presented the Haitians with a treaty that permitted a U.S.-nominated official to collecttaxes and make debt repayments and other disbursements. The treaty, (1) ratified by Haiti in November 1915 andby the U.S. Senate the following February, also created a constabulary (or gendarmerie) composed of native Haitiansunder American direction to serve both as Haiti's military and police force. The treaty was to remain in force forten years and could be extended for another ten "if the purpose of this treaty has not been fully accomplished." InMarch 1917, the duration of the 1915 treaty was officially extended to twenty years. Despite the treaty, the Haitian National Assembly was uncooperative in its relationship with U.S. officials. The State Department drafted a new Haitian Constitution which would have validated the occupation and allowedforeigners to own property in Haiti. The assembly, unwilling to ratify the document, was dissolved when Lt. Col.Smedley D. Butler, a U.S. Marine officer serving with the Haitian Gendarmerie, entered the capitol in June 1917,toread a dissolution order that Dartiguenave had been pressured to sign. Unwilling to risk the election of anotherAssembly, U.S. authorities effected the approval of the new constitution by plebiscite (only 769 votes out of 100,000were negative) in June, 1918. The new constitution created a Council of State, whose members were appointed bythe Haitian president, to perform all legislative functions until an Assembly could be reconstituted at a time to bedetermined. Although the United States occupied the principal towns of the country, guerrilla bands remained in the mountainous interior of the country. Known as cacos (named after a Haitian bird of prey), these bandshad long played asignificant role in Haitian politics, fighting at times on behalf of one or more factions within the dominantfrancophone elite. Renewed attacks by guerrillas commenced in October 1918, and persisted for a number ofmonths(including a raid on Port-au-Prince in October 1919), until the marines and the Gendarmerie were able to neutralizethem by frequent patrolling, paying bounties for weapons turned in, and by eliminating their leaders. After 1920,there were only occasional outbreaks of caco violence. The Gendarmerie, whose name was changed in 1928 to the Garde d'Haiti, became an essential part of the administrative structure of the country. Officered at first by Americans -- largely enlisted marines -- who were paidboth by theU.S. Marine Corps and by Haiti, the Gendarmerie, numbering 2,000-2,600 members, was deployed throughout thecountry and became largely responsible for maintaining law and order, settling disputes, and supporting publicworksprojects. It also served as Haiti's military force. Gradually, U.S. officers were replaced by Haitians, a process thatwas accelerated after 1929. Historians, otherwise critical of the occupation, acknowledge that Haitians had moresecurity intheir persons and property than they had ever previously known and that the Gendarmerie, during the occupation,functioned as an effective and impartial agency. (After U.S. forces departed in 1934, Haitian officers would becomemuchmore involved in political activities.) Throughout the occupation, U.S. forces suffered minimal casualties, totaling 10 killed and 26 wounded (with 172 other casualties). Complaints of brutality against native Haitians led the U.S. Congress to conduct hearings onHaiti and theDominican Republic in 1922. (2) The specialcommittee rejected the more serious charges and concluded that most of the abuses occurred during the effort to putdown the caco insurrection in 1918-1919. The counterinsurgency effortresulted in the deaths, by some estimates, of over 2,000 cacos . (3) Although affirming that cruelty was not officially countenanced, the committeenoted that there were at least ten instances of illegal executions by Americans. Once the caco rebellion was suppressed, there were virtually no physical attacks by Haitians on U.S. marines or civilians. After the 1922 congressional investigation criticized lack of coordination among U.S. officials in Haiti, U.S. civilian and military authority was consolidated. The senior U.S. representative from 1922 to 1930, General JohnH. Russell,USMC, served both as the senior marine in Haiti and as the U.S. High Commissioner, responsible to the StateDepartment. Reporting to him were U.S. officials (technically appointed by the President of Haiti) dealing withfinance, publicworks, sanitation, and agriculture, as well as the chief of the Gendarmerie. General Russell, described as aconscientious and somewhat imperious officer, became the most powerful figure in the country. He was laterappointedCommandant of the U.S. Marine Corps. The onset of the Great Depression and declining markets for Haitian products, especially coffee, produced economic hardships and contributed to increased unrest among a population long denied a political role. December1929 riots inLes Cayes threatened to spread throughout the country. A detachment from the Marine Brigade in Port-au-Princewas sent to restore order, but a confrontation led to the deaths of at least 12 Haitians. Subsequent incidents wereendedwithout loss of life, but the Hoover Administration was concerned that it might become involved in hostilities thatU.S. public opinion would not support. In early 1930, President Hoover appointed a bipartisan commission headed by W. Cameron Forbes, formerly the Governor General of the Philippines, to investigate conditions in Haiti. (4) After several weeks in the country during whichtestimony was taken from all sectors of the society, the commission submitted a report that argued that the UnitedStates could not relinquish its responsibilities for ensuring the financial stability of Haiti, but made several proposalsforchanges, especially the separation of civil and military responsibilities, increasing the number of Haitians in thegovernment, and, in general, for less intervention in Haitian domestic affairs. (5) In November, General Russell was replaced bya State Department official, Dana G. Munro, who was appointed Minister rather than High Commissioner. AnExecutive Agreement was negotiated in 1932 providing for the complete Haitianization of the Garde by October1934 and forthe withdrawal of the Marine Brigade, two years prior to the expiration of the extended 1915 Treaty. Washington was nonetheless determined to pull out of Haiti at an earlier date. Arrangements were made for the election of a temporary Haitian president and the subsequent holding of national elections in October 1930 thatreturned astrongly nationalistic majority. The complete Haitianization of the Garde was completed. President FranklinRoosevelt paid an official visit to Cap-Haitien in July 1934 and the last marines departed the following month. Nonetheless, aU.S. financial adviser would remain until 1941 to oversee payments on the Haitian debt. The U.S. occupation in large measure accomplished its goals of stabilizing Haitian finances. Security for investors was a key concern of the U.S. Government and to a large extent became the justification for the occupationonce thepotential threat of European intervention disappeared with the conclusion of World War I. A $16-million U.S. loanwas negotiated in 1922 to consolidate Haiti's outstanding foreign debts. Efficient collection of duties and prompt,evenadvance, payment of debts owed to U.S. banks soon restored the country's financial standing. Eventually, some 60% of Haitian revenues were expended under U.S. supervision, the greatest percentage going to debt repayment. Some critics, including the Forbes Commission, argued that monies used for advance repaymentof debtscould have been more usefully allocated to domestic projects. There is consensus, however, that Haitian financeswere honestly handled during the occupation and that steps were taken to insure that foreign interests did not takeadvantageof the country. (6) In the 1920s, annual Haitiangovernment revenues of $8-10 million were double that of the pre-occupation period; coffee production and smallbusinesses grew significantly, but little progress was made in establishing asound permanently economic base for the country. The occupation also resulted in the completion of a significant number of public works projects, mostly after 1920. Most important was the construction of roads and bridges throughout the country (some of which wascompleted through ahighly unpopular system of forced labor or corvée ). Although most of the 800 miles of roadswere not hard-surfaced, they greatly facilitated transportation between coastal areas and the rural uplands at a timewhen automobiles and truckswere being introduced into Haiti in significant numbers. A number of port facilities were erected, lighthouses wereconstructed, and a number of harbors were dredged. Efforts to improve agricultural productivity were complicatedby thesmall size of land holdings and a lack of accurate legal titles. The United States undertook a major effort to provide access to modern health care to the mass of the Haitian population that in some cases had never come into contact with trained doctors and nurses. A National PublicHealth Servicewas created with a network of some 153 rural clinics and 11 hospitals supervised by U.S. Navy doctors, and effortswere made to provide basic medical instruction to the population. This effort was financed by the Haitiangovernment atU.S. encouragement. The United States did not assume a responsibility to "build democracy," and U.S. officials did not devote significant efforts towards the encouragement of local self-government. Prior to the occupation, the Haitiangovernment had beenlargely the province of a narrow elite consisting of about 5 percent of the population. The Haitian presidents whoserved during most of the occupation, Dartiguenave (1915-1922), Louis Borno (1922-1930), and Eugene Roy, whoserved astemporary President from May-November 1930, were elected by the Council of State at the instigation of U.S.authorities. They, in turn, appointed members of the Council of State. There were no national elections held untilOctober1930, and local elections that produced unsuitable winners were invalidated. Newspapers were censored, andoffending editors jailed. Inattention to efforts to promote democracy stemmed, in part, from a knowledge that any election might produce results hostile to U.S. interests and probably from racial attitudes that considered Haitians unsuited forself-government. Theyears of the Haitian occupation coincided with widespread racial segregation in the United States and oppositionby a majority of U.S. whites to a political role for blacks. These attitudes, brought to Haiti by the occupation, ledto social aswell as political discrimination against Haitians, even the educated and politically active elite, that was bitterlyresented and undercut well-intentioned development projects. To a large extent, U.S. racial attitudes ensured thatthere was nosignificant element of the Haitian populace that supported the U.S. presence. (7) Education was also largely neglected during the occupation. Schooling in Haiti had been traditionally divided between francophone instruction for the elite and a very few rudimentary elementary schools for others. Little effortto changethis situation was undertaken. The mass of the population remained illiterate, and the elite continued to seek aneducation that did not lead to careers in commerce and industry. Efforts to provide technical training to developtheagricultural and industrial potential of the country (the Service Technique ) were not warmly receivedand did not reach a large number of students.
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In 1915, the United States undertook a military occupation of Haiti to preempt anyEuropean intervention, to establish order out of civil strife, and to stabilize Haitian finances. Duringthe nineteen-year occupation, U.S. military and civilian officials, numbering less than 2,500 for the most part,supervised the collection of taxes and the disbursement of revenues, maintained public order, and initiated a programofpublic works. The Haitian government remained in place, but was subject to U.S. guidance. The Haitian peoplebenefitted from the end of endemic political violence and from the construction of roads, bridges, and ports as wellas from improved access to health care. The U.S. occupation was, nonetheless, deeply resented throughout Haitiansociety, and many of its accomplishments did not long endure its termination in 1934.
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This report is part of a suite of reports that discuss appropriations for the Department of Homeland Security (DHS) for FY2016. It specifically discusses appropriations for the components of DHS included in the third title of the homeland security appropriations bill—the National Protection and Programs Directorate (NPPD), the Office of Health Affairs (OHA), and the Federal Emergency Management Agency (FEMA). Collectively, Congress has labeled these components in recent years as "Protection, Preparedness, Response, and Recovery." The report provides an overview of the Administration's FY2016 request for Protection, Preparedness, Response, and Recovery, and the appropriations proposed by Congress in response, and those enacted thus far. Rather than limiting the scope of its review to the third title, the report includes information on provisions throughout the proposed bill and report that directly affect these functions. The suite of CRS reports on homeland security appropriations tracks legislative action and congressional issues related to DHS appropriations, with particular attention paid to discretionary funding amounts. The reports do not provide in-depth analysis of specific issues related to mandatory funding—such as retirement pay—nor do they systematically follow other legislation related to the authorization or amending of DHS programs, activities, or fee revenues. Discussion of appropriations legislation involves a variety of specialized budgetary concepts. The Appendix to CRS Report R44053, Department of Homeland Security Appropriations: FY2016 , explains several of these concepts, including budget authority, obligations, outlays, discretionary and mandatory spending, offsetting collections, allocations, and adjustments to the discretionary spending caps under the Budget Control Act ( P.L. 112-25 ). A more complete discussion of those terms and the appropriations process in general can be found in CRS Report R42388, The Congressional Appropriations Process: An Introduction , by [author name scrubbed], and the Government Accountability Office's A Glossary of Terms Used in the Federal Budget Process . Except in summary discussions and when discussing total amounts for the bill as a whole, all amounts contained in the suite of CRS reports on homeland security appropriations represent budget authority and are rounded to the nearest million. However, for precision in percentages and totals, all calculations were performed using unrounded data. Data used in this report for FY2015 amounts are derived from the Department of Homeland Security Appropriations Act, 2015 ( P.L. 114-4 ) and the explanatory statement that accompanied H.R. 240 as printed in the Congressional Record of January 13, 2015, pp. H275-H322. Contextual information on the FY2016 request is generally from the Budget of the United States Government, Fiscal Year 2016 , the FY2016 DHS congressional budget justifications, and the FY2016 DHS Budget in Brief . However, most data used in CRS analyses in reports on DHS appropriations are drawn from congressional documentation to ensure consistent scoring whenever possible. Information on the FY2016 budget request and Senate-reported recommended funding levels is from S. 1619 and S.Rept. 114-68 . Information on the House-reported recommended funding levels is from H.R. 3128 and H.Rept. 114-215 . Data for FY2016 are derived from P.L. 114-113 , the Omnibus Appropriations Act, 2016—Division F of which is the Homeland Security Appropriations Act, 2016—and the accompanying explanatory statement published in Books II and III of the Congressional Record for December 17, 2015. Generally, the homeland security appropriations bill includes all annual appropriations provided for DHS, allocating resources to every departmental component. Discretionary appropriations provide roughly two-thirds to three-fourths of the annual funding for DHS operations, depending how one accounts for disaster relief spending and funding for overseas contingency operations. The remainder of the budget is a mix of fee revenues, trust funds, and mandatory spending. Appropriations measures for DHS typically have been organized into five titles. The first four are thematic groupings of components: Departmental Management and Operations; Security, Enforcement, and Investigations; Protection, Preparedness, Response, and Recovery; and Research and Development, Training, and Services. A fifth title contains general provisions, the impact of which may reach across the entire department, impact multiple components, or focus on a single activity. The following pie chart presents a visual comparison of the share of annual appropriations requested for the components funded in each of the first four titles, highlighting the components discussed in this report. As shown below, the components funded under Protection, Preparedness, Response, and Recovery would have received in total 27% of the discretionary budget authority requested for FY2016, roughly half of which is designated as disaster relief under the Budget Control Act. As noted above, the Protection, Preparedness, Response, and Recovery title (Title III) of the DHS appropriations bill is the second-largest title in the bill in terms of net discretionary budget authority: NPPD, OHA, and FEMA are funded in this title. Some provisions in Title V, General Provisions, may affect the funding available for some of these components. The Administration requested $6,222 million in FY2016 net discretionary budget authority for components included in this title, as part of a total budget for these components of $19,020 million for FY2016. The appropriations request was $267 million (4.5%) more than was provided for FY2015. The Administration also requested an additional $6,713 billion not reflected in the above totals for the Federal Emergency Management Agency (FEMA) in disaster relief funding, as defined by the Budget Control Act (BCA, P.L. 112-25 ). This amount is covered by an adjustment under the Budget Control Act (BCA), and does not add to the total adjusted net discretionary budget authority in the bill. Senate-reported S. 1619 would have provided the components included in this title $6,291 million in net discretionary budget authority—$69 million (1.1%) more than requested, and $336 million (5.6%) more than was provided in FY2015—while House-reported H.R. 3128 would have provided $6,122 million—$100 million (1.6%) less than requested, and $167 million (2.8%) more than was provided in FY2015. Both Senate- and House-reported bills included the requested disaster relief funding. On December 18, 2015, the President signed into law P.L. 114-113 , the Consolidated Appropriations Act, 2016, Division F of which was the Department of Homeland Security Appropriations Act, 2016. The act included $6,353 million for these components in FY2016, $398 million (6.8%) more than was provided for FY2015, and $131 million (2.1%) more than was requested. It also included the requested disaster relief funding. Table 1 lists the enacted funding level for the individual components funded under Protection, Preparedness, Response, and Recovery for FY2015, the amounts requested for these accounts by the Administration for FY2016 by the Administration, proposed by the Senate- and House-reported bills, and provided by the enacted annual appropriation for FY2016. The table includes information on funding under Title III as well as other provisions in the bill. The National Protection and Programs Directorate (NPPD) was formed by the Secretary of Homeland Security in response to the Post-Katrina Emergency Management Reform Act of 2006. The Directorate includes the Office of the Under Secretary for NPPD and accompanying administrative support functions; the Office of Infrastructure Protection, the Office of Cybersecurity and Communications, and the Office of Cyber and Infrastructure Analysis, which together manage the Infrastructure Protection and Information Security Program; the Federal Protective Service; and the Office of Biometric Identity Management. Overall, the Administration requested $1,659 million in net discretionary budget authority for NPPD. This is $157 million (10.4%) more than was provided in FY2015. The Senate-reported bill included $1,638 million for the directorate, $21 million (1.3%) less than requested, while the House-reported bill included $1,585 million, $75 million (4.5%) less than requested. The omnibus provided $1,636 million, $24 million (1.5%) below the request, but $133 million (8.8%) above what was enacted for FY2015. Because of the diverse missions of NPPD, this report separately addresses appropriations in detail for three individual subcomponents of NPPD: Infrastructure Protection and Information Security; the Federal Protective Service; and the Office of Biometric Identity Management. Aside from those three subcomponents, a separate appropriation is provided for the directorate's management and administration function, which is reflected in Table 1 . The Infrastructure Protection and Information Security Program (IPIS) supports the programmatic activities of the Office of Infrastructure Protection, the newly formed Office of Cyber and Infrastructure Analysis, and the Office of Cybersecurity and Communications. The Administration requested $1,312 million for the IPIS program for FY2016. This is $123 million above what Congress enacted for FY2015. The request would increase funds for Infrastructure Protection activities by $24 million, Cybersecurity activities by $65 million, and Communications activities by $34 million, above FY2015 enacted levels. These increases reflect the net results of adjustments made to base funding (including realignments of funds between PPAs), programmatic increases, and programmatic decreases. Many of these changes take place below the level of detail reflected in the appropriations committee reports. Note: the following discussion in this report of programmatic increases and decreases within the FY2016 request reflect comparisons between the FY2015 request and the FY2016 request as made in the budget justifications for IPIS. The final FY2015 DHS appropriation had not been finalized by the time the FY2016 budget justifications were released to Congress. Program changes could therefore not be measured against a FY2015 enacted level, so the new FY2016 justifications compared the proposal to the old FY2015 justification. Although FY2015 appropriations were enacted several weeks later, there is no authoritative assessment of proposed program-level changes in the request versus FY2015 allocations. The FY2016 budget request included relatively large programmatic increases for Network Security Deployment ($96 million), Continuous Diagnostics and Monitoring ($87 million in the Federal Network Security PPA), and Next Generation Priority Telecommunication Services ($79 million). It also included an increase ($16 million in the Infrastructure Security Compliance PPA) to support implementation of the Ammonium Nitrate Final Rule. The budget request also included an increase of $10 million to assess the risk to critical infrastructures associated with climate change ($6 million in the Infrastructure Analysis and Planning PPA and $4 million in the Sector Management and Governance PPA). Also of note, adjustments-to-the-base included pay adjustments related to cybersecurity pay reform (totally $16 million distributed across all but two of the PPAs). These proposed increases were balanced to some extent by adjustments to the base level of spending (again, assessed using FY2015 as a baseline). For example, despite a program increase of $87 million for certain Continuous Diagnostics and Monitoring (CDM) activities, the request included a relatively large drop in the request for the overall Federal Network Security PPA, the request for which is $40 million below the FY2015 request. This was because the PPA also included a negative adjustment-to-base of $126 million associated with non-recurring costs from the previous year related to other CDM activities. The budget request also included relatively smaller programmatic reductions, the largest being reduced support for the Multi-State Information Sharing and Analysis Center (-$4 million in the Critical Infrastructure Cyber Protection and Awareness PPA) and reductions in support of the Chemical Security Assessment Tool (-$3 million in the Infrastructure Security Compliance PPA). The Senate Appropriation Committee recommended $1,297 million for IPIS, $15 million below the Administration's request. The Senate Committee report expressed concern regarding the department's difficulties in meeting its hiring goals, and reduced personnel-related funds by $7 million. The committee also recommended reducing the request for Infrastructure Security Compliance PPA by $5 million, noting the delay in issuing a final rule for regulating ammonium nitrate manufacture, sale, and transport. The Senate Committee also disagreed with the Administration in several areas of the budget request associated with the Infrastructure Analysis and Planning PPA. The committee recommended no less than $17 million for the National Infrastructure and Analysis Center (NIAC) (the Administration had planned to realign some funds from the NIAC to develop some low- and mid-level analytical capabilities within NPPD, although it did not state how much). The committee also recommended that funds for vulnerability assessments be kept at last year's level (the Administration had requested a $2 million increase), while adding $2 million to fund the development of a strategic plan to help the Regional Resiliency Analysis Program engage in risk-informed budgeting. The committee also did not agree with the Administration's reduction in cyber education activities within the Global Cybersecurity Management PPA and provided not less than $16 million for those activities. The House Appropriations Committee recommended $1,245 million for IPIS, $67 million below the Administration's request. The committee also expressed concern that the department has not been able to meet its hiring objectives and, therefore, recommended that the full complement of positions asked for by the department not be funded. As a result, the budget request was reduced by $45 million, distributed across the PPAs. In addition, the committee did not approve the $10 million requested for assessing the risks to critical infrastructure associated with climate change. Also noting that the final rule on regulating ammonium nitrate manufacture, sale, and transport has not yet been approved, the committee recommended delaying the appropriation of $16 million that was requested for implementing the rule until next fiscal year. Finally, the committee recommended that the department continue to support the Multi-State Information Sharing and Analysis Center at FY2015 levels. Table 2 outlines the funding levels enacted for FY2015, as well as the proposed and enacted FY2016 funding levels for each PPA within the IPIS program. The omnibus provided $273 million for Infrastructure Protection, $22 million less than requested. The omnibus did not provide the requested $16 million program increase to support implementation of the ammonium nitrate regulations, which accounted for much of this reduction. The explanatory statement noted the delay in implementing a final rule as the reason for the reduction. However, the omnibus did provide $4 million for DHS to help secure ammonium nitrate and other explosive precursors until the regulations are finalized. The omnibus did not provide the requested $10 million program increase to assess the potential impacts of climate change on critical infrastructures. The omnibus also appropriated $4 million less than the request for Regional Field Operations. This reduction is not explained in the explanatory statement. The omnibus provided $2 million for a three-year strategic plan that would guide future vulnerability assessments and the Regional Resiliency Assessment program. It also appropriated an additional $4 million to expedite the development of a new critical infrastructure database (as part of the Sector Management and Governance PPA). The omnibus appropriated $819 million for cybersecurity programs, slightly more than what was requested. While the Administration's request included a reduction in DHS's cybersecurity education efforts, the omnibus supported those activities at FY2015 levels ($16 million). The explanatory statement accompanying the omnibus also rejected a proposed $500,000 reduction to funding for the Multi-State Information Sharing and Analysis Center (MS-ISAC), and provided $500,000 to ensure current services to state, local, and tribal governments are maintained. The explanatory statement required DHS to provide a detailed accounting and justification for its obligation of funds to this activity. The omnibus appropriated $199 million for communication security programs, including fully funding the request for the Next Generations Network PPA. Cutting across all of the PPAs, the omnibus fully supported NPPD's current hiring projections. While both the House and Senate appropriations committees expressed concern about the Directorate's inability to meet its hiring goals, the House committee proposed a greater reduction in personnel-related expenses than did the Senate. Since, according to the House committee, the Directorate has typically redirected the unexecuted funds as the year goes along, the ability to do so this next fiscal year presumably would be restricted more under the House-reported version. Congress's decision will affect how much flexibility the Directorate will have in this next fiscal year. The omnibus fully supported DHS's projection for hiring. While the Senate committee was silent regarding funds for climate change-related risk assessments, it recommended $10 million less for the two PPAs that had funds budgeted for those assessments (equal to the amount the Administration proposed spending). Presumably, under the Senate's version, if the Directorate went ahead with these assessments, it would have to reduce expenditures in other Infrastructure Analysis and Planning and Sector Management and Governance activities. The House committee explicitly did not provide the extra $10 million requested for these assessments. The omnibus explicitly did not provide funds for these assessments. Both committees did not fully support the Administration's request for an additional $16 million to implement ammonium nitrate rules that have not yet been made final. The House committee did not provide any extra funding. The Senate committee reduced the total funding for Infrastructure Security Compliance PPA by $5 million, but directed $13 million toward the Ammonium Nitrate Security Program. It is not clear the relative impact either recommendation may have, if any, on implementing compliance with the rules once they are made final. The omnibus explicitly stated that no funds were appropriated to implement these rules, but it did provide $5 million to allow DHS to take additional measures to secure ammonium nitrate and other explosive precursors. The House and Senate committees also differed on how much to spend on DHS's cybersecurity education-related activities. The omnibus maintained funding for these activities at FY2015 levels ($16 million). Finally, there were a number of bills introduced this session dealing with varying aspects of cybersecurity, including those focused on improving information sharing between the federal government and the private sector. Agreed-upon legislation, entitled the Cybersecurity Act of 2015, was included in Division D of the omnibus. Analyzing the potential impact of these bills on this year's IPIS appropriations is beyond the scope of this report. The Federal Protective Service (FPS), within the National Protection and Programs Directorate (NPPD), is responsible for the protection and security of federal property, personnel, and federally owned and leased buildings. In general, FPS operations focus on security and law enforcement activities that reduce vulnerability to criminal and terrorist threats. FPS protection and security operations include all-hazards based risk assessments; emplacement of criminal and terrorist countermeasures, such as vehicle barriers and closed-circuit cameras; law enforcement response; assistance to federal agencies through Facility Security Committees; and emergency and safety education programs. FPS also assists other federal agencies, such as the U.S. Secret Service (USSS) at National Special Security Events (NSSE), with additional security. FPS is the lead "Government Facilities Sector Agency" for the National Infrastructure Protection Plan (NIPP). FPS anticipates employing 1,386 FTEs in its base workforce, supplemented by approximately 13,000 contract security guards. Unlike other components of DHS, FPS is fully funded by offsetting collections rather than appropriations. Fees are charged to FPS's customers for security services, and the use of those fees is authorized by the appropriations legislation. Because the cost of FPS operations is offset in this way, the resources provided to FPS do not add to the net discretionary budget authority in the legislation, although they do appear in calculations of gross budgetary resources available to the department. The Administration requested $1,443 million for FPS for FY2016, $101 million (7.5%) more than was provided in FY2015. Both Senate- and House-reported bills included the requested authorization to use fees collected to support FPS operations. The Senate-reported bill required the submission of a human capital resource plan, while the House-reported bill did not. However, H.Rept. 114-215 required a certification from OMB that FPS operations would be fully funded by the collected fees. If the collected revenues proved inadequate, an expenditure plan would be required that described how security risks would be addressed. Division F of P.L. 114-113 included the requested authorization to use fees collected to support FPS operations, and a requirement for submission of a strategic human capital plan. The explanatory statement did not contradict or amend the House report's requirement for the OMB certification that collected fees would fully fund FPS operations. The Office of Biometric Identity Management (OBIM) is responsible for collecting, maintaining, and sharing biometric data with the law enforcement and intelligence communities and strategic foreign partners. As part of this mission, it maintains the Automated Biometric Identification System (IDENT)—DHS's central repository for biometric data. The Administration requested almost $284 million for OBIM, $31 million (12.5%) more than was provided in FY2015. The net increase was driven largely by an increase of almost $66 million for the first increment of the replacement for IDENT. Senate-reported S. 1619 included $283 million for OBIM, less than $1 million below the requested funding level, and $31 million more than was provided in FY2015. Report language indicates the Senate Appropriations Committee expected the request for the first increment of IDENT replacement to be fully funded, and that OBIM provide semiannual briefings to the committee on its work and progress on specific projects, including coordination of biometric systems across government. House-reported H.R. 3128 included $283 million for OBIM, less than $1 million less than requested, $31 million more than was provided in FY2015, and $208,000 more than was proposed by the Senate Appropriations Committee. Like the Senate committee report, the House Appropriations Committee report supported the requested level of funding for the first increment of IDENT replacement, and directed OBIM to continue its briefings on coordination of biometric systems. Division F of P.L. 114-113 included $282 million for OBIM. The explanatory statement noted that almost $66 million was for the first increment of funding for the successor system to the IDENT automated biometric identification system. The explanatory statement further noted the current estimates for the next three follow-on increments, and directed OBIM to "find cost savings wherever possible and brief the Committees on any anticipated cost changes." The Office of Health Affairs (OHA) coordinates or consults on DHS programs that have a public health or medical component. These include FEMA operations, homeland security grant programs, and medical care provided at ICE detention facilities. OHA also has operational responsibility for several programs, including the BioWatch program, the National Biosurveillance Integration Center (NBIC), the department's occupational health and safety programs, and the department's implementation of Homeland Security Presidential Directive-9 (HSPD-9), "Defense of United States Agriculture and Food." The Administration requested $124 million for OHA for FY2016, $5 million below the amount appropriated for FY2015. The proposed allocation among OHA's activities was $83 million for the BioWatch program; $8 million for NBIC; almost $1 million for the Chemical Defense Program; $5 million for Planning and Coordination (under which leadership and coordination activities are implemented); and $27 million for Salaries and Expenses. The Senate Appropriations Committee recommended $123 million for OHA for FY2016, $1 million below the amount requested and $6 million below the FY2015 level. The committee proposed the amount requested for all activities except Salaries and Expenses, as follows: $83 million for the BioWatch Program; $8 million for NBIC; almost $1 million for the Chemical Defense Program; $5 million for Planning and Coordination; and $26 million for Salaries and Expenses. The House Appropriations Committee recommended $125 million for OHA for FY2016, $1 million above the amount requested and $4 million below the FY2015 level. The committee proposed $82 million for the BioWatch Program; $11 million for NBIC; almost $1 million for the Chemical Defense Program; $5 million for Planning and Coordination; and $27 million for Salaries and Expenses. The committee proposed sustaining the FY2015 level for NBIC to continue work to operationalize pilot programs. Division F of P.L. 114-113 included $125 million for OHA for FY2016, slightly more than the level recommended by the House Appropriations Committee (0.1%), with the same distribution of resources recommended in the explanatory statement, except for a slight increase (0.6%) in Salaries and Expenses. Table 3 presents the enacted funding amounts for OHA components for FY2015, the Administration's request for FY2016, and the Senate- and House-reported numbers for the same. The BioWatch program deploys sensors in more than 30 U.S. cities to detect the possible aerosol release of a bioterrorism pathogen, in order that medications could be distributed before exposed individuals became ill. Operation of BioWatch accounts for most of OHA's budget. The program had sought for several years to deploy more sophisticated autonomous sensors that could detect airborne pathogens in a few hours, rather than the day or more that is currently required. However, after several years of unsuccessful efforts to procure a replacement for the existing system, DHS announced the termination of further procurement activities in April 2014. The Senate Committee recommended the requested amount for BioWatch for FY2016, to continue current operations, including routine replacement of equipment. However, the committee states that the "current gaps in timeliness and agent detection should be addressed," and directs that OHA and S&T brief the committee within 180 days of enactment regarding DHS plans for future BioWatch detection capabilities. The House Committee recommended $1 million less than the requested amount for BioWatch, saying that additional amounts provided for FY2015 funded equipment replacement costs sufficiently, so that the funding need for FY2016 was reduced. The committee also stated its continued support for efforts to improve the timeliness of detection, and recommended that OHA collaborate with DOD, among other partners, in this effort. The explanatory statement specified $1 million was for replacement and recapitalization of BioWatch equipment, and directed OHA to brief the Appropriations Committees on its response to a GAO report that found DHS lacked information about certain capabilities of the BioWatch system. The primary mission of the Federal Emergency Management Agency (FEMA) is to reduce the loss of life and property, and protect the nation from all hazards. It is responsible for leading and supporting the nation's preparedness for manmade and natural disasters through a risk-based and comprehensive emergency management system of preparedness, protection, response, recovery, and mitigation. FEMA executes its mission through a number of activities. It provides incident response, recovery, and mitigation assistance to state and local governments, primarily appropriated through the Disaster Relief Fund (DRF) and the Pre-Disaster Mitigation Fund. It also supports disaster preparedness through a series of homeland security and emergency management grant programs. The Administration requested $4,462 million in net discretionary budget authority for FEMA overall, $115 million (2.6%) more than in FY2015. FEMA's budget includes two large elements that do not count towards the total net discretionary budget authority: funding for major disasters under the Stafford Act, which is paid for under an adjustment to the discretionary spending limits; and the National Flood Insurance Fund, which is considered mandatory spending. The Senate-reported bill included $4,554 million in net discretionary budget authority for FEMA for FY2016, $92 million (2.1%) more than requested and $207 million (4.8%) more than was provided in FY2015. The House-reported bill included $4,437 million in net discretionary budget authority for FEMA for FY2016, $26 million (0.6%) less than requested and $89 million (2.1%) more than was provided in FY2015. Division F of P.L. 114-113 included $4,616 million in net discretionary budget authority for FEMA for FY2016, $154 million (3.5%) more than requested and $269 million (6.2%) more than was provided in FY2015. Details of select individual FEMA appropriations are provided below. State and local governments have primary responsibility for most domestic public safety functions. When facing difficult fiscal conditions, state and local governments may reduce resources allocated to public safety and, consequently, homeland security preparedness, due to increasing pressure to address tight budgetary constraints and fund competing priorities. Since state and local governments fund the largest percentage of public safety expenditures, this may have a significant impact on the national preparedness level. Prior to 9/11, three federal grant programs were available to state and local governments to address homeland security: the State Domestic Preparedness Program administered by the Department of Justice, the Emergency Management Performance Grant (EMPG) administered by the Federal Emergency Management Agency (FEMA), and the Metropolitan Medical Response System (MMRS) administered by the Department of Health and Human Services. Since then, several additional homeland security grant programs were added to amplify state and local preparedness, including the State Homeland Security Grant Program (SHSGP), Citizen Corps Program (CCP), Urban Area Security Initiative (UASI), Driver's License Security Grants Program (REAL ID), Operation Stonegarden grant program (Stonegarden), Regional Catastrophic Preparedness Grant Program (RCPG), Public Transportation Security Assistance and Rail Security Assistance grant program (Transit Security Grants), Port Security Grants (Port Security), Over-the-Road Bus Security Assistance (Over-the-Road), Buffer Zone Protection Program (BZPP), Interoperable Emergency Communications Grant Program (IECGP), and Emergency Operations Center Grant Program (EOC). While some of these programs still receive explicit mention in appropriations reports, others have become allowable uses for funding provided under a larger umbrella grant program, without explicit congressional action. The Administration requested $1,211 million for state and local grant programs and training in FY2016. This is $289 million less than was appropriated in FY2014 and FY2015 ($1,500 million). Additionally, the Administration proposed several structural changes, including a single block grant for preparedness grants—the National Preparedness Grant Program (NPGP). Senate-reported S. 1619 and House-reported H.R. 3128 included a total of $1,500 million for state and local grant programs and training for FY2016, the same level provided in FY2014 and FY2015. The Senate- and House-reported bill and report recommended maintaining the current structure of the grant programs, rejecting the proposed block grant. Division F of P.L. 114-113 included $1,500 million in net discretionary budget authority for state and local grant programs and training for FY2016. Table 4 includes the distribution of those resources among programs as provided in the law and explanatory statement. As has occurred in previous year, legislative language has been included in the annual appropriation for FEMA's state and local grant programs establishing timelines for applications, limiting the use of grant resources for administrative costs, and allowing for installation of communications towers. Guidance included in the explanatory statement accompanying the act encouraged FEMA to consider applications "which will enhance physical security of large venues and for early warning systems." FEMA is also directed to review its grant activities in coordination with the Department of Justice to determine how they can be best used to help address emergent and cross-cutting challenges at state and local levels. Specific direction is provided in the explanatory statement in regards to the Urban Area Security Initiative (UASI). The explanatory statement notes that under P.L. 110-53 , FEMA is to conduct risk assessments for the 100 most populous metropolitan statistical areas. The statement notes that "it is expected that UASI funding will be limited to urban areas representing up to 85 percent of [cumulative national terrorism] risk and that resources will continue to be allocated in proportion to risk." The Administration first proposed the National Preparedness Grant Program (NPGP) in its FY2013 budget request to Congress, and again in FY2014 and FY2015. Congress denied the request all three times. The Administration proposed the NPGP once again in FY2016. The Administration indicated that its latest proposal includes adjustments that responded to congressional and stakeholder concerns. The committee-reported bills and Division F of P.L. 114-113 continued to carry general provisions barring the establishment of the National Preparedness Grant Program or similar structures without explicit congressional authorization. The Administration's FY2016 budget proposed $670 million for firefighter assistance, including $335 million for AFG and $335 million for Staffing for Adequate Fire and Emergency Response (SAFER) grants, a 1.5% reduction from the FY2015 level. As in previous years, funding for management and administration of these grants would be drawn from a separate FEMA account (Salaries and Expenses). The Firefighter Assistance Grants would be categorized under First Responder Assistance Programs (FRAP), which is part of FEMA's State and Local Programs (SLP) appropriation. The Administration requested that all previous SAFER waivers again be enacted for FY2016. The Senate Appropriations Committee bill provided $680 million in firefighter assistance, including $340 million for AFG and $340 million for SAFER. This matched the FY2015 level. The committee continued to fund firefighter assistance under its own account, and declined the Administration's request to place firefighter assistance under the State and Local Programs account. Section 552 of the reported bill continued to grant FEMA waiver authority from certain SAFER requirements. Since FY2009, waiver authority in annual appropriations bills has allowed SAFER grants to be used to retain firefighters, and has allowed DHS to waive cost-sharing and other requirements. In the accompanying report, the committee directed FEMA to work with stakeholders and present a recommendation to the committee no later than the submission of the FY2017 budget on the feasibility of removing these waivers in future appropriations. The committee also stated its expectation that funding for rural fire departments remain consistent with their previous five-year history, and directed FEMA to brief the committee if there is a fluctuation. The House Appropriations Committee bill provided $680 million in firefighter assistance, including $340 million for AFG and $340 million for SAFER. This matched the FY2015 level as well as the Senate Appropriations Committee level. As did the Senate-reported bill, the House-reported bill continued to fund firefighter assistance under its own separate account. However, unlike the Senate-reported bill and the Administration's budget proposal, the House bill did not provide for SAFER waiver authority in FY2016. Under current law (Fire Grant Reauthorization Act of 2012, Title XVIII of P.L. 112-239 ), FEMA has permanent authority to grant SAFER waivers, but only in cases of demonstrated economic hardship. The Homeland Security Appropriations Act, 2016 provided $690 million for firefighter assistance in FY2016, including $345 million for AFG and $345 million for SAFER. Firefighter assistance continued to be funded under its own separate appropriations account. Similar to the House bill, the omnibus did not include a SAFER waiver provision. The Disaster Relief Fund (DRF) is the main account used to fund a wide variety of programs, grants, and other forms of emergency and disaster assistance to states, local governments, certain nonprofit entities, and families and individuals affected by disasters. The DRF is a no-year account—unused funds from the previous fiscal year are carried over to the next fiscal year. The Administration generally requests funding for the DRF based on what FEMA plans to spend on all past declared catastrophic events, plus the 10-year average for non-catastrophic events, and a reserve to prevent shortfalls. Funding currently provided to the DRF can be broken out into two categories. The first is funding for activities not directly tied to major disasters under the Stafford Act (including activities such as assistance provided to states for emergencies and fires). This category is sometimes referred to as the DRF's "base" funding. The second (and significantly larger) category is for disaster relief costs for major disasters under the Stafford Act. This structure reflects the impact of the Budget Control Act ( P.L. 112-25 , hereinafter referred to as the BCA), which allows these costs incurred by major disasters to be paid through an "allowable adjustment" to the discretionary spending caps, rather than having them count against the discretionary spending allocation for the bill (see insert below). The Administration's FY2016 budget proposed $7,375 million for the DRF—a 5% increase compared to the enacted level of $7,033 million from FY2015. $662 million was requested for the base, while $6,713 million was requested for the costs of major disasters. In addition, the Administration requested a $24 million transfer from the DRF to the DHS Office of Inspector General (DHS OIG) for oversight of disaster relief activities. Transfers from the DRF are a long-standing means of supporting the DHS OIG's annual budget for oversight of disaster relief, first occurring in FY2004, the first annual appropriations act for the department. The Administration also requested a $250 million rescission from prior-year DRF appropriations not designated as emergency funding or disaster relief under the BCA. The House- and Senate-reported bills included the amount requested by the Administration for the DRF ($662 million for the base, and $6,713 million for disaster relief) including the $24 million transfer to the DHS OIG. Both Senate- and House-reported bills included deeper rescissions than were requested by the Administration, with the Senate-reported bill rescinding $1,025 million and the House-reported bill rescinding $1,266 million from the DRF. Division F of P.L. 114-113 , the Homeland Security Appropriations Act, 2016 provided $7,374 for the DRF, including transfer of $24 million for the DHS OIG. A general provision included in Title V of the omnibus rescinded almost $1,022 million in unobligated balances from the DRF—balances that were carried over from FY2015 and amounts recovered from previous disasters upon completion of recovery projects. After the rescission, the amount provided for the DRF was $6,713 million, the same amount initially requested by the Administration and recommended by the House- and Senate-reported bills. The amount provided by Division F of P.L. 114-113 was slightly more (4.3%) than what Congress appropriated for the DRF in FY2015. Prior to the enactment of the BCA, funds in the DRF often ran too low to meet federal disaster assistance needs before being replenished by annual appropriations. When the account neared depletion, Congress usually provided additional funding through supplemental appropriations. In some fiscal years, Congress passed two or three supplemental appropriations to fund the DRF. Since the passage of the BCA, an increase in the annual funding level for the DRF may have decreased the need for supplemental funding. As demonstrated in Table 5 , annual appropriations for the DRF have been significantly larger since FY2011, the last year appropriations were provided for the DRF without benefit of the mechanisms of the BCA. Only one disaster relief supplemental appropriations bill has passed Congress since the FY2012 appropriations cycle— P.L. 113-2 , which provided relief in the wake of Hurricane Sandy. Even then, when Hurricane Sandy made landfall, the existing balance in the DRF helped fund the immediate assistance needs in the wake of the storm without a supplemental appropriation. The larger balance provided the Administration and Congress with more time to assess the need for federal assistance and target it rather than requiring immediate legislative action to fund the DRF. Existing balances in the DRF are also attributable in part to FEMA's efforts to recover unused relief funds. Initial obligations of disaster relief funding are based, in part, on initial cost estimates. In some cases FEMA later determines the project will cost less than anticipated. FEMA then "deobligates" the excess funds, returning them to the DRF, and counting the deobligation as a recovery. Monthly FEMA reporting indicates that FEMA currently recovers an average of $67 million a month. This same reporting noted that for FY2015, a total of $14,206 million was available in the DRF: $2,594 million for the base and $11,612 million for the costs of major disasters. The report stated that as of the end of June 2015, there was $7,936 million in unobligated funds remaining in the DRF: $2,095 million in the base, and $5,743 million for the cost of major disasters. FEMA projected that by the end of the year, $3,267 million would be left unobligated. Some may argue a relatively healthy balance is beneficial compared to years prior to the BCA where a large disaster or active hurricane season (or both) could have quickly depleted the remaining unobligated amount, necessitating a supplemental appropriation for additional funds for disaster relief. Others may point at the recoveries and the large DRF balance and question the budgetary practices used to appropriate funds for the DRF. They might conclude the account is being funded at too high a level and any excess funds not used for an emergency or disaster could be transferred or rescinded for purposes other than disaster assistance. From FY2014 through FY2016, rescissions were made from the DRF that offset the cost of the Homeland Security Appropriations Act. These rescissions were limited to unexpended balances that were not designated as being for the costs of major disasters under the Stafford Act or as emergency appropriations. Thus, the funds were either appropriated to the base, or recovered from projects that were funded prior to the BCA's impact on appropriations. The Administration actually requested such rescissions for FY2015 and FY2016, seeking $200 million and $250 million in rescissions respectively. Congress chose to make larger rescissions of the unobligated balances in the DRF, rescinding $375 million in FY2015, and almost $1,022 billion in FY2016. The budget request for the PDM program for FY2016 was $200 million. The Senate-reported bill included $100 million for PDM, while the House-reported bill included $25 million. The Administration's request represented a dramatic increase for the program, as the program had been zeroed out by the Administration in their base budget request in three previous budget cycles. However, the FY2015 budget request, while not suggesting funding for the program itself, did use the PDM Fund as a potential receptacle for funds as part of its "Opportunity, Growth and Security Initiative." That initiative, which was not realized, would have provided significant funding for the PDM fund, although not for the PDM program as currently understood. As the budget request noted, the initiative "would provide $400 million to this fund" for a separate pre-disaster mitigation initiative. Though the Administration was not requesting new funding for PDM in previous years, Congress was providing a base level of $25 million to $30 million during those years. The Administration had previously justified the lack of a funding request on two points: one, a backlog of PDM projects that had created a substantial balance in the PDM fund and two, the existence of the Hazard Mitigation Grant Program (HMGP). The $200 million request for FY2016 may indicate that the project backlog has been reduced. It may also indicate that the program is again being recognized as a logical home for mitigation and resilience initiatives. Division F of P.L. 114-113 included $100 million for PDM. The President's budget for FY2016 requests $100 million for the EFS program, a reduction of $20 million. The Senate Appropriations Committee concurred with the Administration's funding request while the House Appropriations Committee recommended funding the EFS program at the FY2015 level of $120 million. The committees also differed on the Administration's proposal to shift the program from FEMA to the Department of Housing and Urban Development (HUD). The EFS program was established in 1985, and placed at FEMA. The rationale at that time was that the charitable groups that make up the National Board of the program wanted to emphasize that homelessness was a daily emergency. In addition, those same organizations had an established working relationship with FEMA through their disaster response and recovery work. While previous Administrations have suggested moving the EFS program to HUD, the Senate Appropriations Committee's approval of such a transfer in their committee-reported FY2015 appropriations legislation was the first time the move gained any approval in Congress. While authority for the transfer was not included in the final annual appropriation for DHS that year ( P.L. 114-4 ), the explanatory statement accompanying the act indicated that "[s]hould such a transfer be proposed in future budget requests, it is expected that FEMA and HUD will have a comprehensive outreach strategy as well as a full transition plan as part of such proposal." For FY2016, the Senate Appropriations Committee bill mandated the transfer of the program to HUD. The House Appropriations Committee report notes the expected outreach strategy and transition plan has not been provided, and therefore, "[p]ending the receipt of such a transition plan based on stakeholder outreach, the Committee does not recommend the transfer of funding and administrative authority...." Legislative language in P.L. 114-113 directed FEMA and HUD to provide a transition plan within 90 days of the submission of the FY2017 budget. The plan is expected to include administrative details of the transition, demonstrate outreach to stakeholders, and display recognition and maintenance of the original purposes of the program.
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This report is part of a suite of reports that discuss appropriations for the Department of Homeland Security (DHS) for FY2016. It specifically discusses appropriations for the components of DHS included in the third title of the homeland security appropriations bill—the National Protection and Programs Directorate (NPPD), the Office of Health Affairs (OHA), and the Federal Emergency Management Agency (FEMA). Collectively, Congress has labeled these components in the appropriations act in recent years as "Protection, Preparedness, Response, and Recovery." The report provides an overview of the Administration's FY2016 request for Protection, Preparedness, Response, and Recovery, and the appropriations proposed by Congress in response, and those enacted thus far. Rather than limiting the scope of its review to the third title, the report includes information on provisions throughout the proposed bill and report that directly affect these functions. Protection, Preparedness, Response, and Recovery is the second largest of the four titles that carry the bulk of the funding in the bill. The Administration requested $6,222 million for these components in FY2016, $267 million more than was provided for FY2015. These three components made up 15.0% of the Administration's $41.4 billion request for the department in net discretionary budget authority, and the proposed additional funding was 15.5% of the total net increase requested. Most of the proposed net discretionary increase was for NPPD ($157 million, or 10.5% more than last year) and its work in cybersecurity and communications. The Administration also requested an additional $6.7 billion not reflected above for the Federal Emergency Management Agency (FEMA) in disaster relief funding, as defined by the Budget Control Act (BCA, P.L. 112-25). Senate-reported S. 1619 would have provided the components included in this title $6,291 million in net discretionary budget authority. This would have been $69 million (1.1%) more than requested, and $336 million (5.6%) more than was provided in FY2015. The Senate-reported bill also included the requested disaster relief funding. House-reported H.R. 3128 would have provided the components included in this title $6,122 million in net discretionary budget authority. This would have been $100 million (1.6%) less than requested, and $167 million (2.8%) more than was provided in FY2015. Like the Senate-reported bill, the House-reported bill also included the requested disaster relief funding. On December 18, 2015, the President signed into law P.L. 114-113, the Consolidated Appropriations Act, 2016, Division F of which was the Department of Homeland Security Appropriations Act, 2016. The act included $6,353 million for these components in FY2016, $398 million (6.8%) more that was provided for FY2015, and $131 million (2.1%) more than was requested. Additional information on the broader subject of FY2016 funding for the department can be found in CRS Report R44053, Department of Homeland Security Appropriations: FY2016, as well as links to analytical overviews and details regarding appropriations for other components. This report will be updated if supplemental appropriations are provided for any of these components throughout the FY2016 appropriations process.
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The estate and gift tax debate focuses on issues of equity and long-term economic efficiency. Many observers opposed to the estate tax on grounds of equity suggest that taxing the assets of decedents is unfair because the decedent has already paid taxes on the assets as they accumulated value. There is also a perceived need to provide heirs of family farms and businesses a tax preference for family assets that are transferred at death. Opponents of the estate tax on economic efficiency grounds cite research that suggests the estate tax is a tax on saving and investment, which, like other taxes on capital, would tend to impede long-term economic growth. Those in favor of retaining some type of estate tax counter that many estates include assets with accumulated capital gains that have not been subject to income taxes. For example, publicly traded stock transferred at death would avoid taxation on the increased value from the time of purchase to the date of transfer. Estate tax proponents maintain that other assets, such as family business assets and family farm assets, should not be afforded special preferences in the tax code. Repeal or modification of the estate and gift tax for all estates would achieve the policy objective of tax relief for farm and small-business estates. However, farm assets and business assets represent a relatively small share of total taxable estate value, approximately 17.1% of gross taxable estate value in 2009. Thus, repeal or modification of the estate tax would benefit more estates with a variety of different asset types. Examining the asset distribution of estates that paid at least some estate tax more closely will provide some guidance for policy makers about the current impact of estate taxes on business-type assets and farms. The Internal Revenue Service (IRS) annually publishes data on the distribution of assets in estate tax returns filed in a tax year. This report uses data for returns filed in 2009 and 2010. The 2009 data are more representative of the estate tax burden in 2012 than the 2010 data. The estate tax was repealed for those who died in 2010, thus the data for the returns filed in 2010 do not reflect the impact of the tax. The 2010 data are provided as an Appendix to this report. These data are from estates from decedents who died before 2010 and those estates that chose to file using the pre-EGTRRA law. Data from returns filed in 2009 include the returns of many decedents who died in 2008. The biggest difference between 2008 and 2009 is the exemption amount, which was $2 million in 2008 and rose to $3.5 million in 2009. For 2011 and 2012, the exemption amount is $5 million ($10 million for married decedents). On December 17, 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ) reinstated the estate tax beginning with 2010 decedents and sunsets after 2012. Executors of estates of decedents who died in 2010, however, may also choose to file under the EGTRRA laws in place before passage of P.L. 111-312 . The new law sets the estate tax exemption level at $5 million per decedent in 2010 (indexed for inflation) and establishes a top marginal tax rate of 35%. Any unused exemption amount is transferrable to a surviving spouse, yielding an effective exemption amount of $10 million for married decedents. The Joint Committee on Taxation estimates the temporary estate tax modifications to reduce revenue by approximately $136.7 billion over 10 years. The number of decedents that will be affected by the estate tax will rise significantly in 2013, as the law will return to the pre-EGTRRA parameters. The estate and gift tax minimum filing requirement is $5,120,000 for deaths occurring in 2012. Generally, estates valued below the threshold are not required to file a return. Estates valued over the threshold amount calculate their tax liability based upon the entire (or gross) value of the estate inclusive of the $5,120,000. Deductions from the gross estate value, such as bequests to a surviving spouse (the marital deduction), state estate and inheritance taxes, and donations to charitable organizations, are then subtracted from the gross estate value. The tentative tax liability is determined by the progressive rate schedule provided for in the tax code. The next step in the calculation of estate tax liability, and perhaps the most important, is the applicable credit. The applicable credit is set such that an estate has the equivalent of a $5,120,000 exemption (for deaths occurring in 2012 the amount is $1,772,800, see Table 1 below). In many cases, the marital deduction combined with the deduction for charitable contributions can eliminate all estate tax liability. Before 2005, estates were allowed to claim a credit for state death taxes paid. EGTRRA, however, gradually repealed the credit for state death taxes, eliminating it in 2005 and replacing it with a deduction for taxes paid. Many states have relied on the federal credit for their estate tax and will need to modify their tax laws to continue collecting their estate and inheritance taxes. According to a January 2012 evaluation of state laws by the Center on Budget and Policy Priorities, "Some 22 states—continue to collect either an estate or inheritance tax." The data utilized in this report are from the Internal Revenue Service (IRS), Statistics of Income (SOI) Division. The SOI data report the assets held by estates by gross estate value classes. For this report, farm returns are defined as estates reporting farm assets. Business returns are defined as those estates that include assets typically held by businesses: "closely held stock," "limited partnerships," "real estate partnerships," and "other non-corporate business assets." Estates reporting one or more of the four assets were termed business returns. This methodology is imperfect and likely double counts many estates. As a result, the number of business estates would be significantly overstated by this estimate. Of the approximately 2.43 million deaths in 2008 of people 25 years old and over, 0.6% incurred estate and gift tax liability. Further, in 2009 only 1,846 decedents with taxable estates included farm assets (0.08% of all deaths), and 8,055 taxable estates listed assets of the type typically held by businesses (0.34% of all deaths). The primary reason for the low number of filers relative to the number of deaths in 2008 is the high gross estate value filing threshold. In tax year 2008, only estates valued at greater than $2 million were required to file an estate and gift tax return. (The 2008 decedents would likely file returns in 2009.) This makes the estate tax a relatively progressive tax source. Table 2 suggests the progressivity of the estate and gift tax in 2009. Taxable estates worth over $10 million accounted for 11.2% of the total taxable estates, yet 61.0% of all estate tax revenue. The 4,296 estates (29.2% of taxable estates) larger than $5 million generated over 81.9% of total estate tax revenue. Recall that only 0.7% of deaths generated any estate tax liability. The SOI data do not distinguish estate tax returns by detailed occupation of the decedent, such as farmer or business person. However, the data do provide significant detail on the distribution of the decedent's assets. Table 4 summarizes estate tax return asset data from the returns filed in 2009. Generally, assets that represent more of the taxable estate shoulder a greater share of the tax burden. The value of taxable estates is concentrated in the following asset categories: publicly traded stock, cash assets, state and local bonds, other real estate, and closely held stock. These five assets represent 66.2% of total taxable estate value in 2009. Thus, eliminating the estate tax will reduce the tax burden chiefly on these assets. Table 3 reports that the value of total farm assets is approximately 3.25% of total taxable gross estate value. The business assets in Table 3 represent approximately $14.1 billion of total taxable estate value (or 13.9%). The largest is closely held stock, worth approximately $7.2 billion. However, total business assets as reported do not explicitly indicate the portion of those assets held in small businesses. Though farm and business decedents may have other taxable assets—such as equities and cash—the burden on farm and business assets alone is quite small relative to other assets. Thus, removing the estate and gift tax or lowering the rates in general will have a much greater effect on non-farm and non-business assets. Table 4 presents detailed data on farm and business assets by gross estate value. Relatively large farm estates, those valued between $2 million and $3.5 million, comprise a relatively larger share of total estate value for that estate size category. Overall, however, farm estates appear to be evenly distributed across the estate size categories. Note that farm assets account for approximately 3.25% of total taxable estate value. In contrast to farm estates, assets typically associated with non-farm businesses are concentrated in estates valued over $10 million. In fact, of the $14.1 billion in total business assets in estates, over $11.0 billion (77.7%) is held in those estates valued over $10 million. As a consequence, smaller-business taxable estates, those valued at less than $10 million, contribute very little to the estate and gift tax base. In summary, repeal of the estate and gift tax would clearly achieve the policy objective of relief for estates composed of farm and small-business assets. Farm assets and business assets, however, represent a relatively small share of total taxable estate value, approximately 17.1% at the most.
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This report provides data on the distribution of assets in estates as reported on estate tax returns filed in 2009 and 2010. The data for 2010 are unique, as the estate tax was repealed for those who died in calendar year 2010. Thus, the 2010 data are presented as an appendix to this report. Based on the 2009 data, this report finds that farm and business assets represent a small share of the total value of taxable estates that filed tax returns in 2009 (3.25% and 13.86%, respectively). That share is concentrated in estates valued over $10 million. For an overview of the estate tax, see CRS Report RL30600, Estate and Gift Taxes: Economic Issues, by [author name scrubbed] and [author name scrubbed]. This report will be updated as new data become available.
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While the primary focus of this report is on conditions in the U. S. market, analyses shouldbe carried out in the context of the larger world market. Few actions by consuming, or producingnations, can be properly evaluated independently of the world market. Oil is a fungible, internationalcommodity whose ownership and ultimate destination is determined by market forces once it leavesthe producing country. No country can effectively isolate itself from changes elsewhere in themarket, nor is it likely that any nation can take actions that do not indirectly affect other nations. Oil prices are linked, like those of other commodities, to the levels of economic activity inthe industrial nations. Demand, both from consumers and industrial users, tends to pick up whengrowth rates of gross domestic product increase and slow down when those growth rates decline. As a result, oil prices tend to be volatile, at least partly due to variations in the business cycle. While oil markets may behave like other commodity markets much of the time, the oil marketdoes have unique features. First, few commodity markets have an institution like the Organizationof Petroleum Exporting Countries (OPEC). Since its creation in 1960, OPEC has had a variableinfluence on the price of oil through its member nation quota system. Second, oil has been subjectto supply disruption due to political instability as well as technical factors. Third, psychological orexpectations effects, tied to real or perceived probabilities of market disruption, may lead to pricevolatility. Finally, world oil transactions are settled in U.S. dollars, which affects the value of thedollar in world currency markets, as well as the magnitude of international reserves held bypetroleum importing and exporting nations around the world. Spot market price data for West Texas Intermediate (WTI) at Cushing, Oklahoma, is shownin Figure 1 . (1) During thetime period covered in Figure 1 , the OPEC price band for crude oil was at $22 to $28 per barrel. Accounting for quality and location differences between the OPEC reference crude (Saudi ArabianLight) and WTI, prices in the U.S. spot market during 2003 remained close to, or were above, theupper end of the OPEC price band. However, prices moderated for several months after thebeginning of the Iraq War in March 2003. Figure 1. U.S. Spot Price of Oil, 2003-2005 Price increases began in the late fall of 2003, and continued into 2004, reaching a yearlypeak of over $53 per barrel in October 2004. Although prices fell by $10 per barrel by December2004, they began to rise again in January 2005, and peaked again at nearly $53 per barrel in April2005. (2) Some insight intofuture spot market prices might be gained by examining NYMEX futures market prices. (3) For example, in the five daysbefore it terminated trading on July 20, 2004, the August 2004 contract on WTI at Cushing,Oklahoma was trading at over $40 per barrel. As of July 23, 2004 the September and October WTIfutures contracts continued to trade at over $41 per barrel on the NYMEX. (4) On August 10, 2004 theNYMEX futures price for crude oil traded above $45, a first in the history of the exchange. On thesame day, the spot market price for WTI was at $44.48. (5) These data accurately suggested that high crude oil prices werelikely to continue for the remainder of 2004. By the end of May 2005, futures prices for the August2005 contract were trading at nearly $50 per barrel and the September 2005 contract was trading at$50.41 per barrel. These prices suggest that, while the crude oil price might remain volatile, reactingto current market conditions, it is unlikely that prices will return to pre-2003 price increase levelsfor the remainder of 2005. Figure 2 shows the behavior of spot market prices for reformulated regular gasoline at NewYork Harbor. The price of gasoline has shown a pattern of movement somewhat similar to that ofoil prices. Figure 2. U.S. Spot Market Price for Reformulated Regular Gasoline, New York Harbor, 2003-2005 Gasoline prices peaked in February and August of 2003. They then lagged oil prices, notshowing price increases in the fall of 2003. However, they did follow oil price increases throughoutthe spring of 2004, also peaking in May of 2004. Gasoline prices were volatile for the remainder of2004. After the May peak, the price remained approximately 12 cents per gallon lower for the nextfour months. Although the price went above $1.37 per gallon in October 2004, it finished the yearat $1.07, about 24% off the May peak. Gasoline spot prices increased in 2005. By April 2005, theprice peaked at over $1.52 per gallon. On June 3, 2005 the NYMEX future prices for gasoline inJuly, August, and September were above $1.50 per gallon. (6) As in the oil market, these futures prices suggest that there is likelyto be only modest, if any, moderation in gasoline prices for the rest of the year. Conclusions concerning projected spot prices based on the trading value of current futurescontracts may or may not be accurate. Futures prices process new information and market conditionsquickly and prices can change direction on a daily basis. The futures price on the NYMEX and othermarkets is conditional on information available today. As more information becomes available,futures prices will adjust. However, futures markets are providing little indication that either oil orgasoline prices might decline in the near term. The long term ability of the oil market to meet demand depends on the magnitude ofavailable reserves. An important category of reserves are proved reserves. Proved reserves are thosequantities that geological and engineering analysis suggest can be recovered with high probabilityunder existing technological and economic conditions. Proved reserves can be augmented throughexploration and development of new discoveries, through technological improvements, as well asthrough the existence of more favorable economic conditions. In the past, all of these factors havecontributed to augmenting the proved reserve base. Whether the proved reserve base grows over time or not depends in part on the level ofproduction. As production proceeds, the level of proved reserves declines. As new oil discoveriesare made, recovery technologies improve, or as the price of oil rises, the stock of proved reservesincreases. A standard measure of the potential availability of oil over time is the reserve toproduction ratio (R/P). The R/P can be interpreted as the number of years that the existing reservebase can sustain the current level of production. Since both proved reserves and production canchange year-to-year, the value of the R/P is more descriptive as a measure of potential marketviability when considered over time. Table 1 shows the R/P over the past 20 years for the world aswell as various regions. Table 1 shows that on the world level there appears to be little cause for concern that oil isphysically running out. While the R/P is lower in 2003 than in 1993 it is actually higher than it wasin 1983. (7) A reasonableestimate, given the political changes since 1983 might be that the ratio has remained roughlyconstant over the past 2 decades, leading to the inference that 2003 levels of consumption seem tobe about as sustainable as 1983 and 1993 levels of consumption were at those times, even though2003 world consumption levels were 17% greater than those of 1993. Table 1. Oil Reserve/Production Ratios, SelectedYears Source: For 2003 and 1993, BP Statistical Review of World Energy, June 2004. pp. 4, 6; and for1983, U.S. Energy Information Administration. International Energy Annual 1983 . Tables 14, 30. pp. 30, 84. * Europe and Eurasian data incomplete because of lack of USSR data for 1983. The reserve portion of the ratio shows that the world had access to more reserves in 2003than in 1993 or 1983. Reserves in 2003 totaled 1.147 trillion barrels. Reserves in 1993 were 1.023trillion barrels, and in 1983 were 723 billion barrels. These data represent over a 12% increase inreserves for the decade since 1993, and a 36% increase compared to 1983. Similarly, worldproduction is greater in 2003, at 76.7 million barrels per day (b/d), than in 1993 when production was66 million b/d, or 1983 when production was 57.9 million b/d. This represents an increase inproduction of over 32% compared to 1983. (8) On a regional level, the most important change between 1993 and 2003 is the weakeningreserve position of North America, and the reserve position of the United States. On one level, thedata suggest that the U.S. position is improving. The U.S. R/P has increased from 7.7 years in 1993to 11.3 years in 2003 and total U.S. reserves have also increased to 30.7 billion barrels from 30.2billion barrels in 1993. However, the U.S. R/P has increased because U.S. production has declined,from 8.6 million b/d in 1993 to 7.4 million b/d 2003. As U.S. total consumption has increased overthe period, the result has been that U.S. imports of oil have increased along with our dependence onother nations and the world oil market. The declining reserve position of North America in generalmeans that, absent new major discoveries, the United States will continue to depend on the worldmarket, and the OPEC, Persian Gulf nations for a large part of its supply. (9) The Middle East, and especially Saudi Arabia, continue to be the largest holders of reservesin the world. Some of the other regional changes in the data reflect changing national and politicalborders as well as oil positions. European reserves are now dominated by members of the formerSoviet bloc, including Azerbaijan, Kazakhstan, Romania, and others. Overall, the data suggest thecontinuation of an integrated world oil market. Any region, or nation, might well experiencedifficulty in trying to implement a singular oil policy, independent of the world market. Another conclusion that might be drawn from the R/P data is that it provides little supportfor the escalated prices of the first quarter of 2004. Since little has changed in the long term balancebetween reserves and production, it is unlikely that the R/P has been the source of upward pricepressures. Long term oil prices might be affected by reserve and production positions in the future,but R/P ratios do not appear to be a major cause of recent oil price increases. The world R/P has stayed roughly constant over the past 2 decades because investments havebeen made in exploration, development, and production. The International Energy Agency estimatesthat over $3 trillion, or $103 billion per year will need to be invested in the oil sector through 2030if its projections for increased demand materialize. It estimates that 70% of this total will be spenton exploration and development, with the remainder in refining, transportation and the developmentof non-conventional oil sources. (10) Oil industry investment is only partly required to meet new demand. Only 16% of totalinvestment is projected to meet new demand growth. The remaining 84% is required to compensatefor declining production from the reserve base. The reason so much investment is needed tocompensate for declining fields lies in the decline rates observed in producing fields. Decline ratesdepend on a wide variety of factors, including geology, extraction technology, field age, andproduction policies. Decline rates range from 4% to over 11% per year. If production levels are tobe maintained, new reserves and production must continually be developed to compensate, financedby investment in exploration and development. (11) After averaging about $23 per barrel for the five year period 1998 to 2002, the average priceof oil increased to $31 in 2003. For 2004, price remained high, reaching a peak of $53.28 per barrelin October. (12) As ofApril 2005, the price of oil continued to remain over $50 per barrel, and peaked at $54 per barrel inMarch 2004. (13) R/Panalysis showed that there has been little change in the underlying long term balance in the oilmarket that might be used to justify high prices. However, a number of short term economicfundamentals as well as the coincidence of a set of singular events affecting the market may haveinteracted in such a way that prices were pushed up. Economic growth in oil consuming nations increases the demand for oil and pushes up oilprices. The world economy continued its recovery in 2003 and 2004 with gross domestic product(GDP) growth rates increasing in many regions. The strongest growth performances were in oilimporting United States and China, but better performance was also observed in Japan and Russia,as well as the emerging growth nations of Asia. U.S. growth was 3.1% in 2003, and forecast to reach4.6% during 2004. Chinese economic growth was 7.4% in 2003 and projected to be 6.8% in 2004,moderating only slightly for 2005. (14) In the United States, economic growth has been linked to highlevels of oil consumption, of which increasing gasoline demand is an important component. InChina, expanding exports have increased the industrial demand for oil, and rising consumer incomehas increased consumers' demand for gasoline. U.S. oil demand increased by 1.9% in 2003 to over20 million b/d. Chinese oil demand increased by 11.5% in 2003 to almost 6 million b/d. (15) In both the United States and China the increase in GDP growth, and economic activity ingeneral, has led to increases in energy demand. However, a feedback relationship exists which canmitigate this effect. To the extent that oil prices rise, reflecting increased oil demand, GDP growthrates might decline for two reasons. (16) If the monetary authorities interpret increasing oil costs asgeneralized price inflation, they may adopt restrictive monetary policies which could slow theeconomy's growth. Also, if oil product prices rise, and consumers are unable or unwilling to reduceoil product consumption, consumers may reduce expenditures on other goods and services, againpotentially slowing the rate of GDP growth. (17) While the United States and China increased their demands for crude oil and petroleumproducts as a result of their GDP growth, Russia, an oil exporter, improved its GDP growth rate asa result of the expansion of the petroleum industry. For Russia, it is likely that expansion of the oilsector led the growth in Russian GDP. This behavior is typical of nations whose oil exporting sectoris a major component of their GDP. For nations in this category, high oil prices, based on rising oildemand, create an inflow of oil derived revenue, increasing GDP growth. The danger for thesenations is that if prices go too high, and stay high, GDP growth in the consuming nations mightdecline, reducing the demand and price of oil. An additional factor is that high prices lead toincreases in exploration and development budgets around the world. As new oil is found andbrought to market, supply increases and prices might be reduced, damaging the oil exporting nation'sgrowth or high oil prices can make alternative fuels more competitive potentially reducing thedemand for oil. Changes in the exchange rate of the U.S. dollar can affect the level and distribution of worldoil demand. The U.S. dollar achieved a recent peak value in February of 2002. Since that time, theindex measuring the value of the dollar has declined by over 20%. (18) The decline in the dollar'svalue has not been uniform against all currencies. Most of the change has been against nations inthe Euro area. The Japanese and some of our other Asian trading partners have intervened in thecurrency markets in an attempt to prevent the dollar from declining in value relative to theircurrencies. China maintains a fixed exchange rate against the dollar; as a result, the yuan hasexperienced no appreciation against the dollar. Exchange rate variations in the U.S. dollar can affect the world price of oil because oil ispriced in dollars and generally paid for in dollars. Several results may follow from this relationship. First, if the value of the dollar declines against other currencies the dollars received by oil exportingnations are worth less in terms of world purchasing power. If oil exporters are able to exert marketpower in setting prices, or if market conditions permit oil exporters to dictate higher prices, they haveincentives to increase the money price of oil in an attempt to preserve the purchasing power they earnthrough selling a barrel of oil. The effect of a declining dollar on oil importing consumer nations varies with respect to howtheir currency has adjusted to the changing value of the dollar. For the United States, of course, anyincrease in the dollar price of oil is immediately felt as an increased price burden, possibly leadingto decreases in demand. For the Euro area consumers, the situation is different. Since the value ofthe euro has increased in terms of dollars, the effect of any increase in dollar denominated oil pricesis offset by the amount of euro appreciation. For example, if the euro appreciates by the samepercent that the price of oil in dollars increases the two effects cancel each other. The result is thatthe demand for oil in the euro area is less likely to be affected by high oil prices as long as the euroappreciates. (19) Nations that intervene in world currency markets to prevent the dollar from falling relativeto their currencies, for example, Japan, Korea and Taiwan, are implicitly choosing to forego theassociated real reduction in oil prices an appreciating currency would bring, to preserve the exportadvantage for their goods that a lower exchange rate brings. Since these nations are both large oilimporters as well as major exporters on world markets, the choice can have important implicationsfor their economies. China, which maintains a fixed exchange rate against the U.S. dollar, alsoforegoes any exchange rate based benefit with respect to oil purchases in favor of supporting exportindustries. Crude oil is the major physical input in the production of gasoline and accounts for over 40%of its cost. (20) As aresult, changes in the cost of crude oil will be reflected in gasoline prices. Recently, it might be thatthe relationship has been reversed: the high price of gasoline may have become a factor in keepingthe price of oil at elevated levels, especially on the New York Mercantile Exchange (NYMEX). Gasoline prices have achieved record levels since they began increasing in the first quarterof 2004. Although the rising price of crude oil is one factor, other factors exist which areindependent of the oil market in general. The high utilization rates of refinery capacity in the UnitedStates, the lack of investments in new refining capacity, the extra costs associated with producingthe variety of different gasoline mixes to satisfy environmental requirements in various regions ofthe country, low inventories as the summer driving season 2004 approached, and the high cost ofrefinery investment to meet both product and site environmental requirements all contribute to therecord levels of gasoline prices. Additionally, on the NYMEX a condition known as"backwardation" was common during the first half of 2004. In this situation the near-month futurescontract, in this case regular grade gasoline delivered to New York harbor, is persistently pricedhigher than the price level of the same gasoline, scheduled for delivery months further in the future. The effect of this pricing condition is to make the acquisition of inventories in the present monthmore expensive than acquiring them further in the future. Backwardation provides an incentive tokeep current inventories low. The low current inventory position then acts as a factor keeping priceshigh, because low inventories are taken to be indicative of a tight supply situation in the market. It is possible that the high price of gasoline, a price that is highly visible in the U.S. market,might contribute to keeping the price of oil high through an expectations based effect. Traders could hypothesize that since the price of gasoline is high, this might be the result of tight oil markets. Ifnot, there would be more oil refined, and gasoline produced, driving down the price. Theseexpectations could be acted upon through the NYMEX futures markets. This position ignores theimportance of the independent factors, cited in this report, that suggest that gasoline prices in theUnited States would likely have risen even if the price of crude oil moderated. A recent study by the Government Accountability Office (GAO) asserted that a total of over2,600 merger transactions took place in the oil industry from 1991 through 2000. These mergers fellinto two main classes: asset mergers and corporate mergers. Asset mergers accounted forapproximately 80% of the total, and the remaining 20% were corporate mergers. Asset mergers aredefined by the GAO as one company purchasing a part, or a specific asset from another company. For example, Tosco Petroleum's acquisition of Unocal's refining and marketing assets on the WestCoast in 1997 was an asset merger. Corporate mergers are defined as those in which one companyacquires the other company's total assets, resulting in one company. Examples include Exxon-Mobiland Chevron-Texaco, which produced two of the super major oil companies. (21) A possible outcome of mergers and acquisitions is that the resulting companies, larger andmore capable of exerting market power, raise prices to the detriment of consumers. GAO carriedout econometric analysis on a set of these mergers and found that mergers and the resulting higherconcentration ratios observed in the oil industry resulted in wholesale price increases of about 2 centsper gallon in six of the eight specific cases it examined. (22) The Federal Trade Commission and its staff have challengedthe GAO finding on methodological grounds and question the validity of their conclusions. (23) If the mergers that took place in the U.S. oil industry did raise wholesale gasoline prices, itis possible that retail gasoline prices also increased as a result. If that was so in a period when oilmarkets were perceived to be tight, those price increases might have fed back through the futuresmarket process described in a previous section of this report to help support high oil prices. OPEC seeks to create favorable oil prices for its members by assigning production quotasto its member nations with the goal of limiting the supply of crude oil available on the world market. The ability of the quota system to control price has been questioned because of the well knownpropensity for OPEC members to produce beyond their assigned production levels. Even so, thevery existence of OPEC has influenced conditions in the petroleum market as buyers and sellersawait decisions taken at OPEC meetings, and monitor the institution's behavior. At certain times inits history OPEC has had relatively clear influence on oil prices, as in 1996, when a flood of Saudicrude oil came on the market and drove down prices . In response to recent price increases, OPEC has maintained that a shortage of crude oil onthe world market is not the reason. OPEC has asserted that the market is well supplied, and its actualproduction has exceeded quota levels. OPEC official production for June 2004 was announced as25.5 million b/d by the OPEC 10, to increase to 26 million b/d on August 1, 2004. (24) Actual OPEC productionfor June was thought to exceed 29 million b/d. (25) Although gross volumes are consistent with a market that is not suffering from supplytightness, the effects of product segmentation must be considered. A fundamental breakdown in thecrude oil market exists between sweet, or low sulfur content, and sour, high sulfur content, oil. Itmay be that OPEC volumes of sour crude make the over-all market appear in balance while atightness in the sweet crude market underlies this over-all balance. Sweet crude oil is useful inefficiently producing the low sulfur transportation fuels, both gasoline and diesel, that environmentalregulations increasingly require, and is important to nations with relatively strict air qualitystandards. The role of OPEC in the 2004 market price may be more traceable to actions taken in 2002. In 2002, OPEC production declined from an average of over 30 million b/d to approximately 28.5million b/d, a decline of some 5%. This production cutback changed the nature of the market in2003, as economic growth began to recover and enhance oil demand growth. Production in 2003not only had to satisfy the growing demand requirements of 2003, but also to compensate for thereduced availability in 2002 which reduced inventories. The result of these conditions is that as themarket evolved in late 2003 and into 2004 with economic growth strengthening, persistent shortfallsin inventory levels were observed. The United States holds petroleum stocks in three ways. The oil industry holds stocks ofcrude oil in inventory as well as stocks of petroleum products. These stocks are held to insure theefficient operation of refineries in the face of shifting seasonal product demand and potentialdisruptions in crude oil supply. Seasonal fluctuations in product demand are managed throughvarying the stocks of petroleum products, mainly gasoline. If inventories of either crude oil orgasoline are low relative to the past average, or in the perception of market traders, this is taken tobe an indication that the market is tight, implying that demand is nearly equal to, or might evenexceed, potential supply at current price levels. As a result, upward pressure on price occurs, evenif there is no physical shortage observable. Figure 3 shows the behavior of crude oil stocks in the United States, excluding the StrategicPetroleum Reserve. The level of reserves in 2003 is relatively low compared to 2002. Stocks areincreasing in 2004 on a month to month comparative basis with 2003, but satisfying growing demandat the same time that stocks are growing contributes to the strong demand that has been a majorfactor in oil price increases. It has been reported that U.S. crude oil inventories during the last weekof July 2004 reached 298.6 million barrels, which on its own was judged to be consistent with a priceof oil of around $26 per barrel. (26) Several factors have contributed to the decline in stocks held by the private sector. A longterm trend in the refining sector particularly, and the oil industry in general, is cost reduction. Inventory is expensive to hold, and one way to minimize costs is to reduce the size of inventory andexpand the use of efficient inventory Figure 3. U.S. Crude Oil Stocks Excluding Strategic Petroleum Reserve management techniques. While this strategy benefits theprofitability of the companies, it has the side effect of providing less of a buffer in times of surgingdemand. Second, when the futures market for commodities is in a "normal" price relationship, pricesfor future delivery tend to be somewhat higher than current prices, making inventory accumulationeconomically viable. Recently, oil future markets have reversed the more typical price structure, andthe future price has been lower than the current price, providing a disincentive to accumulateinventories at current prices. The third factor contributing to low inventories in the private sectoris the tight market. Refineries are near full capacity production, and supplies of light, low sulfurcrude oil are perceived to be tight on the world market. (27) Taken together, this is a difficult set of circumstances withinwhich to expand stocks of oil for inventory. However, since inventories remain low in the view ofsome market traders, they are one more factor contributing to the high price of oil. The third way the United States holds stocks, in this case crude oil, is in the StrategicPetroleum Reserve (SPR). This government-held reserve was established to provide a buffer againsta physical disruption in the delivery of imported crude oil. Recently, there have been calls to eithersuspend deliveries to the SPR, or to release oil from the SPR to the market with the intent ofincreasing market supply, reducing speculation, and moderating prices. (28) This section briefly identifies and discusses a set of factors that may exert an influence onoil prices, but seem to be more in the nature of a "one time" event rather than a trend or cyclic factor. The effect of each of these factors tends to be made more important by the general tightness of themarket. In some cases, there is an interactive relationship between two or more of these factors,again possibly increasing the over-all effect on price. The war in Iraq has contributed to high oil prices in different ways as events have progressed. The predominant effect of the conflict on oil prices has been an increase in uncertainty. During theearly stages of the conflict, concerns about a possible disruption of oil supply out of the Persian Gulfand disruption of Iraqi production due to military operations were prominent, until it became clearthat the military would quickly oust the government of Saddam Hussein. Later, market uncertaintyrevolved around the ability of Iraq to export oil in the midst of political transition in which pipelineand other oil facilities were attacked by hostile groups within the country. Uncertainty with respectto terrorist attacks, both in Iraq, and spilling over to other Gulf nations, including Saudi Arabia,continue to unsettle the oil market and contribute to a "fear factor" being built into the price of oil. Recent terrorist attacks in Saudi Arabia, directed at the oil industry and its personnel, aremore than a psychological influence on the market. Recent reports have asserted that as of July2004, world spare production capacity was between one and two million b/d, almost all in SaudiArabia. (29) This levelof spare capacity is close to the minimum amount required to cover a supply disruption from oneexporting nation. A major disruption in Saudi oil production would cause that cushion to disappearand would likely cause upward volatility in world oil markets. The concern the market has shown regarding supply disruption has been borne out by events. Political unrest and strikes have disrupted oil exports from both Nigeria and Venezuela. Indonesianoil production has been declining, leaving it unable to meet its OPEC quota. The legal conflictbetween Yukos, the major Russian oil company and the Russian government over back taxobligations threatens to bankrupt the company, or force the sale of producing assets. Markets areconcerned that bankruptcy, or significant asset sales, might lead to an oil supply cutoff, or reduction,of exports from Russia, the world's largest non-OPEC producer. (30) Another factor that some feel might be influencing the price of oil is the influence of financialinvestors and financial instruments. At the time of the first oil shock in 1973/1974, the primarymarket for oil price formation was the Rotterdam spot market, where physical cargoes of oil for nearterm delivery were bought and sold, generally by traders who had a real commodity interest in themarket. (31) Today, theprimary market in price formation may be the NYMEX, supplemented by the InternationalPetroleum Exchange (IPE). In these markets, the focus is not on physical supply for current delivery,but on the open interest in a financial contract, generally a future or options contract, that will expirein the near month, generally the month after the current month. The goal of financial traders is tomake a profit on the contract, which may necessitate the price of the contract rising or fallingdepending on the trader's position in the market and current prices. The implication of this is thatfinancial traders may have an interest in the price moving either up or down, almost without regardto the underlying fundamentals of the market. The rationale for this view is that financial traders have entered the NYMEX oil market inlarge numbers seeking profits that stock and bond markets have not produced since the boom yearsof the late 1990s. Profits can be earned on futures and options markets when prices of the underlyingcommodities go steadily up, or down, stay the same, or even when they exhibit more or less randomvolatility, depending on the strategic position the trader has created. Global oil demand was over 79 million b/d in 2003, an increase of about 1.8% over 2002levels. Demand for 2004 was over 82 million b/d, an increase of about 3% compared to 2003 levels. Demand projections for 2004 were increased for nine consecutive months by the IEA since itsestimate in November 2003. World oil demand is expected to exceed 84 million b/d in 2005. (32) Within this pattern ofworld growth, differences among regions, as well as individual countries, exist. In addition,increased demand is not evenly spread across the product mix that is produced at refineries. As shown in Table 2 , North America was the largest oil consuming region in the world, withthe United States accounting for about 83% of the total. However, growth in the region was less thanworld growth, and the growth in Canada, at 4.5%, was more than double that of the United Statesat 1.9%. Asia Pacific was the second largest consumer of oil, with China moving ahead of Japanin total consumption, to be the second largest oil consuming country in the world. The Asia Pacificregional growth of 4% was the highest in the world, and China had the highest yearly growth indemand of any of the major consuming countries at 11.5%. Table 2. World Demand for Oil, 2003 (millions of barrel per day) Source: BP Statistical Review of World Energy, June 2004 . p. 9. European/Eurasian oil demand growth was roughly flat, with demand falling in Germany,Italy, and the United Kingdom, by -1.8%,-0.9%, and -1.8%, respectively. Within the region, mostof the large gains in demand are in nations with small initial consumption levels led by Azerbaiijan,Belarus, Austria, and Poland. These nations account for 1.2% of world demand. Although lowerthan average European oil demand growth may be tied to levels of economic activity, they may alsobe tied to changing consumption patterns and conservation, especially in Western Europe wheremotor vehicle transportation costs are very high. Russian oil consumption grew by 23,000 b/d, to 2.5 million b/d in 2003, while productionrose by 845,000 b/d, to over 8.5 million b/d, enhancing the nation's role as a major exporter. However, the Russian economy has been in trouble for many years. If economic growth picks upand the economy restructures and stabilizes, consumption might return to levels similar to those in1993 when 3.8 million b/d were consumed. Russian consumption at that level might reduce theamount of oil available for export, pushing other consuming nations to become increasinglydependent on Middle Eastern supplies. The Asia Pacific region includes some nations with the highest year-to-year growth rates inthe world, while other nations in the region experience declining demand. In 2003, Chinastrengthened its position as the second largest oil consuming nation in the world by increasing itsmargin over Japan from only 20,000 b/d in 2002, to 431,000 b/d in 2003. Given the disparity ofeconomic growth rates, geographic and population factors, as well as the comparative density oftransportation, it seems that the Chinese lead over Japan may widen. At current growth rates, a morerelevant question might be when China will overtake the United States as the world's largestconsumer. This is most likely not a competition either nation will directly benefit from winning. The United States imported about 63% of the oil it consumed in 2003, and production has fallenevery year since 1993. China imported about 45% of the oil it consumed, and production increasedby only 1.5% for 2003, less than the 11.5% increase in demand. The growing demands in both theUnited States and China make it likely that the world oil market will become increasingly dependenton Middle Eastern oil in the coming years and keep exerting upward pressure on price. Product demand analysis reveals that there are regional and country differences in the mixof oil based products consumed. Gasolines, middle distillates, fuel oil, and other products are themain groups. (33) At theworld level, gasolines comprise 31.6% of consumption, middle distillates 35.7%, fuel oil 12.2%, andother products 20.5%. (34) , (35) The consumption pattern in the United States differs from the world averages. The U.S.demand is 46.2% gasoline, 29.3% middle distillates, 3.8% fuel oil, and 20.7% other products. (36) This mix reflects the U.S.use of oil as a transportation fuel, with car and light truck use responsible for the relatively highgasoline percentage. The U.S. refinery industry is unable to supply adequate gasoline to thedomestic market. As a result, imports of finished gasoline and gasoline blendstocks have increasedto almost one million barrels per day. U.S. refineries operate at near full capacity, but a lack of newcapacity expansion by the industry suggests further increases in imported gasoline, if available onthe world market. (37) Europe has different preferences in transportation fuels than the United States. Middledistillates dominate the European product slate at 44%, with gasoline at 24.4%. These values reflectthe on-going shift to diesel engines in European passenger vehicles. As product demand shifts,refiners are following by investing in the technology needed to produce greater proportions of middledistillates and less gasoline. As this transformation proceeds, European refiners may find that theyhave less surplus gasoline available for export to the United States. This outcome could lead totightening U.S. gasoline markets, keeping an upward pressure on the price of gasoline, and indirectlysupporting high oil prices. The Asian pattern of product demand, especially China's, includes a larger portion ofdemand, 13.8% in the case of China, dedicated to fuel oil. This percentage is approximately threetimes that of the United States. The use of fuel oil in industry accounts for the difference, as wellas the lower requirements for gasoline for private automobile use. The International Energy Agency recently reduced its forecast for global oil demand in 2005. It estimated that world demand would be 84.3 million barrels per day in 2005. This value representsa growth of 1.77 million barrels per day, or 2.2% above 2004 levels. (38) In a typical manufacturing or service market, demand growth of this magnitude might bewelcomed, and met with increased job creation and facility expansion, or more intensive use ofexisting facilities. Conditions in the oil and oil products industries might not be so accommodating. Excess capacity in the crude oil market is low, with most estimates averaging less than 1.5 millionbarrels per day. If we add the increased estimate of consumption in 2004 to the projected increasein 2005 it is clear that the crude oil industry is likely to be at full production capacity through 2005. It has been reported that Aramco (Saudi Arabia) has a plan in place to expand production by1 million barrels per day within a year. Non-OPEC production is expected to increase by about 1.4million barrels per day in 2004, but only smaller increases are expected in 2005. (39) High prices, if they persist,can be expected to increase exploration and ultimately production in the longer term if the currentmarket follows past patterns. The EIA's Annual Energy Outlook, 2004 (AEO) provides a projection of U.S. energy balanceout to 2025, and includes scenarios based on different market price assumptions. Price is taken tobe an assumption, rather than a predicted value, because it is assumed to be determined on the worldmarket. For the base case, the AEO assumes a crude oil price of $23.61 per barrel in 2010 and$26.71 per barrel in 2025. For the high price case, AEO assumes a price of $32.80 per barrel in 2010and $34.90 per barrel in 2025. (40) If the factors that are influencing the current market continue inthe future, it may be that even the high price case assumptions are too low. The world oil market, as a result of the convergence of a number of factors, has experiencedsignificant tightness since the end of 2003, continuing through 2004 and the first half of 2005. Someof the factors influencing the market might be temporary, some may be cyclical, and others maypossibly be permanent. While the high prices that resulted from the tight balance between oildemand and supply caused increased energy expenditures for consumers, business, and industry, italso led to higher incomes for energy producers. It is possible that the economy as a whole mightexperience macroeconomic effects, not only from the high oil prices themselves, but as a result ofthe monetary and fiscal policy responses that might be taken if the high prices persist and aredetermined to constitute inflation. Although it has been under pressure in 2003, 2004, and into 2005, the oil market has shownthat the market process is functioning. The factors discussed in this paper that affected oil andgasoline demand as well as the supply response of OPEC and other producers caused prices to rise,but there has been little, or no, evidence of physical shortage or supply disruption. Effective policies to mitigate high oil prices are difficult to define at the national level. Theprice of oil is determined on a world market. It is unlikely that any consuming nation can insulateitself from the forces driving the world market. For example, if a nation decided to reduce oreliminate its direct dependence on the Persian Gulf, it might succeed in doing that by buying oil fromother nations. However, this would reduce the total amount of non-Persian Gulf oil available toother nations, increasing their dependence on the region and leaving the level of world dependenceunchanged. If political events in the Persian Gulf caused the price of oil to rise, that price increasewould be transmitted to all oil produced around the world. It is not possible to isolate oneself fromthe world market, except perhaps by cutting domestic consumption to the level of domesticproduction. The market in 2004 was likely affected by a "fear factor" premium on the price of oil, raisingits price above that indicated by market fundamentals. Some estimates of the "fear factor" run ashigh as $15 per barrel, while others rate it at only a few dollars, or nothing at all. (41) The threat of supplydisruption due to potential terrorism or political instability appears to be the source of this pricefactor. An important question is, how long this factor will influence price? In the past, fears of political instability, especially in the Persian Gulf, tended to be quelled in relatively shorttime-frames. Today, with the war on terrorism perceived as a long term reality, it may be that oilprices will incorporate a "fear factor" for a significant time. The nature of the exploration and production cycle in the oil industry encourages majorswings in the price of oil even in more politically stable times. This cycle makes it difficult forgovernments to time oil policies effectively. In the past, periods of high oil prices have led to a rapidexpansion of exploration, and given improving technology, have led to substantial oil finds in manyplaces in the world. As newly discovered extra oil comes on the market several years later, theincreased supply tends to overwhelm demand, causing price to drop. While demand tends toincrease incrementally, by a few percent per year, supply tends to increase discrete amounts inresponse to a period of high prices. This relationship leads to cyclic price volatility. Set against thisrecord is the opinion of some that world oil production is soon to peak as a result of geologicalfactors and the likelihood that the largest oil reserves have already been discovered. (42) A major continuing factor in the market is the emergence of China as a major importer ofcrude oil. In addition, the possibility exists that India, and perhaps other Asian nations, might expandtheir imports of oil as industrial production expands in those nations. Although the 2005 projectionof Chinese import growth moderates to approximately 7% from the 2003 level of 11.2%, in thelonger term much depends on whether oil use for private automobiles in China expands very quicklyor is moderated by the government. However, either of these yearly growth rates imply stress forthe world oil market. Based on China's consumption of almost 6 million barrels per day in 2003, itmay generate increases of demand of 500 thousand b/d or more in the next few years. In a marketwith very limited excess capacity, and possibly facing the discovery of fewer giant fields, increasesin demand of these magnitudes promise to contribute to an upward pressure on price. The 2004, and potentially for 2005, oil market reflects the influence of a number of factorsall of which have led to upward pressure on price. Although some of these factors might have beenjudged temporary in the past, there is a danger that in the current political environment they mayperpetuate themselves, keeping oil prices well above the OPEC price target.
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The price of oil began rising in October 2003 and reached record levels in 2004 and againin 2005. As a result of these price increases, consumers' budgets have been under pressure, businesscosts have risen, and oil producers' profits have increased. The 109th Congress is considering broadenergy legislation ( H.R. 6 ), that addresses conditions in the oil and petroleum productsmarkets. A long term explanatory factor for increasing oil prices could be the decline of the worldreserve base. The reserves to production ratio is the measure which indicates the world's ability tomaintain current production, based on proved reserves. Over the past decade there has been littlechange in the reserve to production ratio, suggesting that, at least for now, long term forces are notdriving up the price of oil. A wide variety of cyclic and short term factors have converged in such a way that the growthof demand has been unexpectedly high causing upward pressure on oil prices. Those factors whichhave been identified as contributing to the high price of oil include the resumption of relatively rapidgrowth rates of gross domestic product in many countries around the world, a declining value of theU.S. dollar, gasoline prices, the changing structure of the oil industry, OPEC policies, and thepersistently low levels of U.S. crude oil and gasoline inventories. Expectations concerning future market conditions are quickly embodied in oil prices formedin futures markets like the New York Mercantile Exchange. The fear of terrorism and war,uncertainty concerning the relationship between the Russian government and the oil company Yukos,and other political factors are quickly reflected in price along with real political unrest like thatexperienced by oil producing Venezuela and Nigeria. Speculative buying and selling might alsoaffect prices as financial traders adjust their investment portfolios to reflect expected marketconditions. Demand patterns for world oil and oil products show significant diversity by country, region,and product groupings. As a result of this diversity it is not possible to attach blame for the currentlevel of price to any one nation, region, or product segment. The view that the oil market isinternational in scope and tightly interrelated is enhanced by the demand data. As a result of the integrated nature of the world oil market it is unlikely that any one nationacting on its own can implement policies that isolate its market from broader price behavior. As newmajor oil importers, notably China, and potentially India, expand their demand, the oil market likelywill have to expand production capacity. This promises to increase the world's dependence on thePersian Gulf members of the Organization of Petroleum Exporting Countries, especially SaudiArabia, and maintain upward pressure on price. This report will be updated.
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FY2002 Request. The Andean Regional Initiative(ARI) was launched in April 2001, when the Bush Administration requested $882.29 million inFY2002 economic and counternarcotics assistance, as well as an extension of trade preferences andother measures, for Colombia and six regional neighbors (Peru, Bolivia, Ecuador, Brazil, Panama,and Venezuela). Of this amount, $731 million was designated as International Narcotics Control andLaw Enforcement (INCLE) assistance in a line item in the budget request known as the AndeanCounterdrug Initiative (ACI). A central element of the program was the training and equipping ofcounternarcotics battalions in Colombia. According to the Administration, the distinctive features of the program, compared to PlanColombia assistance approved in 2000, (3) were that a larger portion of the assistance was directed at economicand social programs, and that more than half of the assistance was directed at regional countriesexperiencing the spill-over effects of illicit drug and insurgency activities. In a mid-May 2001 briefing on the Andean Regional Initiative, Administration spokesmenset out three overarching goals for the region that could be called the three D's -- democracy,development, and drugs. The first goal was to promote democracy and democratic institutions bysupporting judicial reform, anti-corruption measures, human rights improvement, and the peaceprocess in Colombia. The second was to foster sustainable economic development and tradeliberalization through alternative economic development, environmental protection, and renewal ofthe Andean Trade Preference Act (ATPA). The third was to significantly reduce the supply ofillegal drugs to the United States from the source through eradication, interdiction and otherefforts. (4) Underconsideration by the Congress in 2001, critics of the initiative argued that it overemphasized militaryand counter-drug assistance, and provided inadequate support for human rights and the peace processin Colombia. Supporters argued that it continued needed assistance to Colombia, while providingmore support for regional neighbors and social and economic programs. By the end of 2001, the FY2002 Foreign Operations Appropriation Act ( H.R. 2506 / P.L. 107-115 ) provided a total of $782.82 million for the ARI of which $625 million wasdesignated for the ACI, a reduction of $106 million from the President's request. It further allowedfor the transfer of an additional $35 million from the State Department's International NarcoticsControl and Law Enforcement account to the ACI. (5) FY2002 Emergency Supplemental Request. OnMarch 21, 2002, the Administration proposed an Emergency FY2002 Supplemental forcounter-terrorism purposes that included a request for $4 million of State Department internationalnarcotics control (INCLE) funding for Colombia police post support, $6 million of FMF funding forColombia and $3 million for Ecuador for counter-terrorism equipment and training, and $25 millionfor counter-kidnapping training in Colombia. Also included in the submission were requests tobroaden the authorities of the Defense and State Departments to utilize FY2002 and FY2003assistance and unexpended Plan Colombia assistance to support the Colombian government's"unified campaign against narcotics trafficking, terrorist activities, and other threats to its nationalsecurity." Congress fully funded the President's request for Colombia, with various human rightsconditions, and it granted broader authority to pursue new activities in Colombia, but withmodifications that blended the House and Senate provisions. The measure provided identicalauthority for the use of INCLE and Department of Defense (DOD) funds, including prior year funds,to support "a unified campaign against narcotics trafficking, against activities by organizationsdesignated as terrorist organizations" such as the FARC, ELN, and AUC, "and to take actions toprotect human health and welfare in emergency circumstances, including undertaking rescueoperations." Legislators approved the FY2002 Emergency Supplemental Appropriations Act( H.R. 4775 ) in late July 2002, and the President signed it into law ( P.L. 107-206 ) onAugust 2, 2002. (6) Extension of Andean Trade Preference Act. InApril 2001, President Bush requested the extension and broadening of the Andean TradePreferences Act (ATPA) expiring in December 2001, that would give duty free or reduced-ratetreatment to the products of Bolivia, Peru, Ecuador and Colombia. Following committee action inlate 2001 in both houses, and extensive negotiations in mid-2002, Congress completed action on thePresident's request. Following lengthy debate in July 2002, the Trade Act of 2002 was signed intolaw ( P.L. 107-210 ) on August 6, 2002. Title XXXI of the act, entitled the Andean Trade Promotionand Drug Eradication Act, extended preferential tariff treatment to designated Andean countriesthrough December 31, 2006, and broadened coverage to include products previously excluded. (7) FY2003 Request. On February 4, 2002, PresidentBush submitted a FY2003 budget request of $979.8 million for the Andean Regional Initiative(ARI), with $731 million in counternarcotics assistance under the Andean Counterdrug Initiative(ACI). This request included $537 million in ARI funding for Colombia, with $439 million in ACIfunding and $98 million in Foreign Military Financing (FMF) to train and equip a Colombian armybrigade to protect an oil pipeline in northeastern Colombia. By the end of 2002, both the House and Senate Appropriations Committees reported theirversions of an FY2003 Foreign Operations Appropriation bill, but this and other appropriations billshad not been enacted. Congress incorporated the 11 unfinished bills into an omnibus spendingpackage, H.J.Res. 2 (for continuing appropriations). The House passed H.J.Res 2 onJanuary 8, 2003, and the Senate followed suit on January 28, 2003. Both chambers approved theconference report ( H.Rept. 108-10 ) on February 13, 2003, and the measure was signed into law ( P.L.108-7 ) on February 20, 2003. (8) Provisions relating to the Andean Regional Initiative and Colombia included both fundingand reporting requirements. Overall ARI funding totaled $835.5 million. Of that amount, Congress provided $700 million for the Andean Counterdrug Initiative, a reduction of $31 million from thePresident's request. However, the conference agreement allowed for the authority to transfer up to$31 million from the State Department's International Narcotics Control and Law Enforcementaccount to the Andean Counterdrug Initiative. The conference agreement provided that up to $93million in Foreign Military Financing funds may be transferred to the Andean Counterdrug Initiativefor helicopters, training and other assistance for the Colombian Armed Forces for security of theCaño Limón Coveñas pipeline, a reduction of $5 million from the President's request. Theagreement also included a number of conditions and reporting requirements. Expanded Authorities. Following the pattern of the FY2002 supplemental,Congress provided authority for a unified campaign against narcotics trafficking, terroristorganizations and to take actions to protect health and human welfare. This was done, theConference Report notes, in recognition that "the narcotics industry is linked to the terrorist groups,including the paramilitary organizations in Colombia." However, the Conference Report alsowarned that this authority "is not a signal...for the United States to become more deeply involved inassisting the Colombian Armed Forces in fighting the terrorist groups, especially not at the expenseof the counternarcotics program, but to provide the means for more effective intelligence gatheringand fusion, and to provide the flexibility to the Department of State when the distinction betweencounternarcotics and counterterrorism is not clear cut." Expanded authorities would end if theSecretary of State has credible evidence that the Colombian military is not "conducting vigorousoperations to restore government authority and human rights in areas under the effective control ofparamilitary and guerrilla organizations." The Report also calls for the Secretary of State to report,within 90 days of enactment, the changes in policy, including new procedures and operations, as aresult of implementing expanded authorities. Caps on Personnel. Congress maintained the existing caps on militarypersonnel and civilian contractors that can be assigned to duty in Colombia at 400 each, withexceptions for search and rescue operations. This cap applies to U.S. personnel in Colombia "insupport of Plan Colombia," but does not include U.S. personnel assigned as part of their regularduties to the U.S. Embassy. As of late November, there were 278 temporary and permanent U.S.military personnel and 373 U.S. citizen civilian contractors in Colombia in support of PlanColombia. These numbers vary as programs are begun, expanded, or completed. During 2003, theyhave varied between 208 and 396 military personnel and 247 to 400 civilian contractors. The U.S.civilian contractor number was 400 on November 18 but was reduced to 373 the following day dueto departures. During November, there were about 600 foreign national contractors present inColombia who are not covered by the personnel caps, most of whom were Colombiannationals. Human Rights. Section 564 allows for the distribution of 75% of the fundsfor Colombia's military, after which the Secretary of State must certify that Colombian members ofthe armed forces alleged to have committed human rights violations are being suspended,prosecuted, and punished, and that the Colombian military is severing ties with and apprehendingleaders of paramilitary organizations. Such a certification by the Secretary would release 12.5% ofassistance to the Colombian military. The remaining 12.5% would be available after July 31, 2003,if the Secretary certifies that the Colombian military is continuing to meet its obligations requiredin the first certification and trying to gain authority and protect human rights in areas under controlof paramilitary and guerrilla organizations. On July 8, 2003, the Secretary issued the firstcertification which released approximately $30 million. As of November, the second certificationwas reported to be near completion. Congress also maintained a prohibition on the issuance of visasto any alien who the Secretary of State determines has willfully provided support to the FARC, ELN,or AUC, or has participated or ordered the commission of gross violations of humanrights. Aerial Fumigation. The Secretary of State is required to certify that aerialfumigation of drug crops is occurring within a series of guidelines for health, environment,compensation for those unjustly sprayed, and availability of alternative development programs "where security permits." Until such a report is issued, 80% of funding for herbicides is withheld.The conference report ( H.Rept. 108-10 ) states that Congress expects that "every reasonableprecaution will be taken in the aerial fumigation program to ensure that the exposure to humans andthe environment in Colombia meets Environmental Protection Agency standards for comparable usein the United States." According to the State Department, this report will be issuedsoon. Helicopters. Language is also maintained from previous legislation whichrequires the return of any helicopters procured with ACI funds that are used to aid or abet theoperations of any illegal self-defense organizations. Air-Bridge Denial Program. Following the shooting down of an airplane inPeru on April 20, 2001, which was found not to be associated with drug trafficking and whichresulted in the deaths of several individuals, including two American missionaries, Congressmaintained language prohibiting the resumption of U.S. support for a Peruvian air interdictionprogram. In order to resume U.S. support, the Secretary of State and the Director of CentralIntelligence must certify to Congress, 30 days prior to any resumption of U.S. involvement, that theability of the Peruvian Air Force to shoot down aircraft will include enhanced safeguards andprocedures to prevent similar accidents. The United States and Colombia announced the resumptionof the program in August of this year after an agreement was reached on protocols to ensure againstaccidental shootdowns. FY2003 Emergency Wartime Supplemental Aid. On March 25, 2003, the Bush Administration requested some $75 billion to provide funds to "covermilitary operations, relief and reconstruction activities in Iraq, ongoing operations in the global waron terrorism, enhancements to the safety of U.S. diplomats and citizens abroad, support for U.S.allies in the war, and homeland security protection and response measures." Of the total amount, theAdministration requested $34 million for the Andean Counterdrug Initiative, $34 million inDepartment of Defense Drug Interdiction and Counter-drug Activities in Colombia, and anunspecified portion of $2.059 billion in Foreign Military Financing for 19 countries, one beingColombia. FY2004 Funding Request. On February 3, 2003,President Bush requested $990.7 million for the Andean Regional Initiative countries in the accountscomprising ARI funding, including military funding for Colombia. The Administration made itsrequest under the title of "Andean Counterdrug Initiative" (ACI) with no reference to AndeanRegional Initiative (ARI). ACI funding forms part of the State Department's International NarcoticsControl and Law Enforcement (INCLE) account while ARI has included ACI plus development aid,child survival and health aid, and foreign military financing. For comparative purposes, adistinction between ACI and ARI is maintained in this report. For ACI, $731 million was requested,to be distributed as follows in descending order: Colombia: $463 million, consisting of $150 million for alternativedevelopment, humanitarian assistance and institution building, and $313 million for narcoticsinterdiction and eradication programs. The overall request also includes $110 million in FMFfunding, and $1.6 million in International Military Education and Training (IMET)funds. Peru: $116 million, consisting of $50 million for alternative development,humanitarian assistance and institution building, and $66 million for narcotics interdiction anderadication programs. The overall request also includes $2.5 million in FMF funding, and $700,000in IMET funds. Bolivia: $91 million, consisting of $42 million for alternative development,humanitarian assistance and institution building, and $49 million for narcotics interdiction anderadication programs. The overall request also includes $4 million in FMF funding, and $900,000in IMET funds. Ecuador: $35 million, consisting of $15 million for alternative development,humanitarian assistance and institution building, and $20 million for narcotics interdiction anderadication programs. The overall request also includes $15 million in FMF funding, and $650,000in IMET funds. Brazil: $12 million, all in narcotics interdiction and law enforcement programs,and $500,000 in IMET funds. Panama: $9 million, all in narcotics interdiction and law enforcementprograms. The overall request also includes $2.5 million in FMF funding, and $200,000 in IMETfunds. Venezuela: $5 million, all in narcotics interdiction and law enforcementprograms, and $700,000 in IMET funds. FMF for Colombia is intended to "support counter-terrorism operations and protect keyinfrastructure such as the oil pipeline," according to the request. The funding is proposed to providetraining, weapons, and night vision goggles and communications equipment to the Army's elitemobile brigades and the Special Forces brigade, as well as to support the Colombian Navy and AirForce, including the provision of interdiction boats, training and infrastructure improvements, thepurchase of two additional AC-47 gunships and a C-130 support plan that will procure four C-130eaircraft and maintenance support. The request also noted that FY2004 FMF funding will continueto provide munitions, equipment, and training for the 5th and 18th Colombian Army Brigades, taskedwith protecting the Caño-Limón Coveñas oil pipeline. Other requested assistance included $47.8 million in Development Aid for Bolivia, Brazil,Ecuador, Panama, and Peru, $43.4 million in Child Survival and Health programs for Bolivia, Brazil,Ecuador, and Peru, and $35 million in Economic Support funds for democratic institution buildingand economic growth programs in, Bolivia, Ecuador, Panama, Peru, and Venezuela. The requestalso included $21 million for Migration and Refugee Assistance for the Western Hemisphere, anunspecified portion of which is assistance for Internally Displaced Persons (IDP) in Colombia. Further, the State Department estimates that it will spend some $45 million in Colombia from thecentral State Department Air Wing Account. In addition to International Affairs accounts, the Administration requested $817.4 millionin Department of Defense (DOD) counternarcotics funds for worldwide programs. The DefenseDepartment does not provide country breakdowns of the requested amount. As in previous years,it requested a lump sum for all counternarcotic programs worldwide under Sections 1004 and 1033,and under Section 124, which provides DOD with the lead role in detection and monitoringprograms. The Defense Department can reallocate these funds throughout the year in accordancewith changing needs. In FY2000, DOD allocated $128.5 million in addition to the $300 millionappropriated under Plan Colombia legislation ( P.L. 106-246 ). In FY2001, DOD allocated 190.2million, $119.1 million in FY2002, $165 million in FY2003, and is proposing to spend $122 millionin FY2004. The Andean Regional Initiative was designed to provide assistance to seven countries in thebroadly defined Andean region (9) : Bolivia, Brazil, Colombia, Ecuador, Panama, Peru, and Venezuela.The ARI built on the Clinton Administration's 2000 "Plan Colombia" legislation, which sought toaddress the increasing cultivation of coca and heroin crops in Colombia through the creation of aColombian Army counternarcotics brigade, and sharply increased assistance for eradication andalternative development programs in the country's two southern provinces of Putumayo and Caquetá,the region where illegal coca production and a leftist guerrilla presence was expanding most rapidly. The ARI expanded assistance to help counter possible spill-over effects in six nearby countries: Peruand Bolivia, where past successes in reducing cocaine production could be threatened by expectedprogress in eradicating crops in Colombia; Ecuador, the most exposed neighbor because of its borderwith Colombia's Putumayo province; and Brazil, Venezuela and Panama, where the threat isprimarily confined to common border areas with Colombia. The region is important to the United States because it includes the three major drugproducing countries (Colombia, Bolivia, and Peru) where virtually all the world's cocaine and 60%of the heroin seized in the United States are produced. It also includes two major oil producingcountries (Venezuela and Ecuador), members of the Organization of Petroleum Exporting Countries(OPEC), which supply significant quantities of oil to the United States. While the designatedcountries have diverse trading relationships, the United States is the major trading partner by far forall of them. For the five traditional Andean countries (Colombia, Venezuela, Ecuador, Peru, andBolivia), the Andes mountain range that runs through South America poses geographical obstaclesto intra-state and inter-state integration, but the countries are linked together in the AndeanCommunity economic integration pact. The ARI countries are some of the most heavily populatedin Latin America, including the first (Brazil), third (Colombia), fifth (Peru), sixth (Venezuela), andeighth (Ecuador) most populous. Although Colombia and Venezuela have largely European-Indianmixed race (mestizo) populations, Bolivia, Peru, and Ecuador have significant Amerindianindigenous populations. Colombia's spacious and rugged territory, whose western half is transversed by three parallel mountain ranges, provides ample isolated terrain for drug cultivation and processing, and contributesto the government's difficulty in exerting control throughout the nation. With a population of 41million, Colombia is the third most populous country in Latin America after Brazil and Mexico. Itis known for a long tradition of democracy, but also for continuing violence, including a guerrillainsurgency dating back to the 1960s, and persistent drug trafficking activity. Recent administrations have had to deal with a complicated mix of leftist guerrillas, rightist paramilitary (or"self-defense" forces), both associated with many groups of independent drug traffickers. The twomain leftist guerrilla groups are the Revolutionary Armed Forces of Colombia (FARC) and theNational Liberation Army (ELN) both of whom regularly kidnap individuals for ransoms, and reapprofit from their participation in the drug trade. The rightist paramilitaries are coordinated by theUnited Self-Defense Forces of Colombia (AUC) which has been accused of gross human rightsabuses and collusion with the Colombian Armed Forces in fighting the FARC and ELN. The AUChas also been accused of participating in narcotics trafficking. There are additional paramilitariesnot under the AUC umbrella, such as Metro Block, a former AUC faction that withdrew from peacenegotiations with the government in late 2002. Pastrana Administration. During the presidencyof Andres Pastrana (August 1998-2002), U.S. involvement in Colombia deepened. Pastrana waselected largely on the basis of pledges to bring peace to the country by negotiating with the guerrillas,strengthening the Colombian military and counternarcotics forces, and seeking international supportfor these efforts and other reforms to address the country's unusually serious economic difficulties. Months after Pastrana's inauguration, he initiated peace talks with the country's largest guerrillagroup, the FARC, and later with representatives from the smaller ELN. In 1999, in cooperation withthe United States, Pastrana developed a $7.5 billion plan called "Plan Colombia," with $4 billion tocome from Colombia and $3.5 billion from international donors, although funding from Colombiaand the international community has fallen far short of these goals. To support Plan Colombia (10) , the Clinton Administration developed, and the U.S. Congressapproved, a $1.3 billion package of assistance in 2000. Most of the funding was to support programsin Colombia, with $416.9 million for helicopters, training, and other assistance to three ColombianArmy counternarcotics battalions. The focus of most of the funding, while incorporating alternativedevelopment and governance programs, was to support counternarcotics objectives. Pastrana's efforts were largely frustrated by a variety of factors, including, according to avariety of analysts, the lack of a consistent negotiation strategy, the poor implementation of elementsof Plan Colombia, and a lack of interest by the guerrillas in negotiating peace. An early Pastranaconcession to the FARC was the creation of a sanctuary area ("despaje") for the FARC as anincentive to enter into negotiations. The outcome, however, was the consolidation of FARC forcesin the area after the withdrawal of government security forces. Prompted by an intensification ofguerrilla activities, President Pastrana decided in February 2002 to terminate peace talks with theFARC, and ordered the military to retake the despaje. Days later, the FARC kidnaped Senator IngridBetancourt, a presidential candidate with a small following. She remains a captive to this day. Bythe end of Pastrana's term, there was a strong perception that peace talks had failed, guerrilla activity(fed by the drug trade) had increased, and the security situation in major cities had deteriorated. Uribe Administration. (11) Alvaro Uribe ran for thepresidency on a platform focusing on defeating the guerrilla insurgents, eliminating theparamilitaries, and ending narcotics trafficking. He won 53% of the vote in an eleven-candidate fieldin the May 26, 2002 presidential elections. He is the first president since the 1991 Constitution towin by an outright majority, thus avoiding a run-off election. Upon taking office on August 7, 2002,he announced a hard-line approach to negotiations, declaring that the government would onlynegotiate with those groups who are willing to "give up terrorism and agree to a cease-fire,"including paramilitary groups, with whom President Pastrana had refused to negotiate. The FARCincreased its armed activities by threatening with death all mayors who did not resign their posts, andconducting relatively large armed confrontations with rightist paramilitary groups, resulting inmassacres of civilians in several locations. FARC also was responsible for bombings in urban areasof MedellÃn and Cartegena, as well as a deadly mortar attack in Bogotá close to the Congressbuilding where Uribe was being sworn in. These attacks signaled FARC's new-found, andlong-threatened, ability to take their fight to the cities. In order to address the complex problems facing Colombia, Uribe took a number of steps,some of which have proven to be controversial. He promulgated a decree invoking emergencypowers, allowing the security forces to make arrests without warrants and imposing controls onmovements in war-torn parts of the country. Under Colombia's 1991 Constitution, states ofemergency may be declared for 90 days, and then can be renewed for two additional 90-day periods. The country's constitutional court has, on several occasions, ruled components of the state ofemergency unconstitutional that give security forces increased powers. In response, the UribeAdministration introduced legislation in April of 2003 to change the Constitution to give securityforces permanent powers to tap phones and to search homes without warrants in all parts of thecountry. President Uribe also announced plans to increase the size of the military and police, largelythrough a one-time 1.2% war tax on wealthy individuals and businesses, and to create of a "civilianinformers" program. This effort also entails the augmentation of Colombia's regular armed forceswith "peasant soldiers" who receive less training than regular troops, and are based near their ownhometowns. The Uribe Administration has inducted 10,000 peasant soldiers, each serving for twoyears, with plans to have a total force of 20,000. Further, Uribe authorized the widespread aerialfumigation of coca crops, that under the Pastrana administration, had been limited to small plots ofgrowers who had signed eradication pledges. On June 26, 2003, a Colombian court ruled that theColombian government should immediately suspend its aerial fumigation program until theEnvironment Ministry charts an Environment Management Plan. Officials of the UribeAdministration have stated that fumigation will continue while it appeals the decision. Two previousappeals have been won by the government. Uribe has also received approval from the Constitutional Court for a referendum to cutgovernment spending and pension payments, to prohibit the re-election of corrupt officials, and torestructure the Colombian Congress by reducing the number of representatives, restricting itsbudgetary powers, and allowing it to be dissolved by popular vote. The referendum was scheduledfor October 25, 2003, to coincide with mayoral and gubernatorial elections slated for the followingday. In the weeks leading up to the elections, the FARC threatened to kill all candidates and theirfamilies for the October 26 municipal elections. In total, 25 candidates were killed and 160withdrew their names from the balloting. (12) In order for the referendum to succeed, the law required 25%(6.3 million) of Colombian voters to participate. Not having received sufficient turnout, thereferendum items failed even though all received majority support by those voting. President Uribehas since taken some of the same issues to the Colombian Congress for support, especially thoserelating to the budget. In late December 2002, Uribe appointed a commission to explore the possibility of a dialoguewith the AUC. This initiative grew out of an October 2002 meeting of Colombia's HighCommissioner for Peace and five Roman Catholic bishops with the AUC leadership, after which theAUC declared an indefinite cessation of hostilities, in part because of Uribe's more forceful stanceagainst the guerrillas. The Bush Administration, which on September 25, 2002, requested theextradition of two top AUC leaders, Carlos Castaño and Salvador Mancuso, announced on January8, 2003, that it would not withdraw the request. On July 15, 2003, the Uribe Administrationannounced that an agreement had been reached with leaders of the AUC that would result in theirdemobilization by the end of 2005. It is estimated that there are between 10,000 and 13,000members of the AUC operating in the country. Formed in the 1980s by wealthy cattle ranchers tofight leftist guerrilla groups, the AUC is a loose coordinating body, leading some observers toquestion whether negotiations with the AUC will result in the demobilization of self-defense groupsnot under the AUC umbrella. It is estimated that as many as 6,500 fighters operate outside of theAUC, (13) some of whomare negotiating separately with the government, and others who are not participating at all. Relatedto this effort is a controversial legislative proposal by the Uribe administration to grant conditionalamnesties to illegal combatants in exchange for their demobilization and reparations to victims. Coca Cultivation and Eradication. Colombia isthe source for 80% of the world's cocaine hydrochloride (HCI), and significant quantities of highquality heroin entering the United States. While noting the ill effects of the drug trade on the livesof Colombians, President Uribe linked the drug trade and the guerrilla insurgency as intertwinedproblems that must be addressed in a coordinated fashion. Reflecting this sentiment, the UnitedStates began, in 2002, providing Colombia with the flexibility to use U.S. counterdrug funds for aunified campaign to fight drug trafficking and terrorist organizations. (The State Department hasdesignated the FARC, ELN, and AUC as terrorist organizations.) Upon taking office, Uribe announced that aerial eradication and alternative developmentwould form a significant basis of the government's efforts. The Plan Colombia eradication sprayingprogram began in December 2000 with operations by the U.S. funded counternarcotics brigade inPutumayo. (14) Despiteearly indications that coca cultivation had increased by 25% in 2001 even though a reported 22,200acres had been sprayed, Colombian and U.S. officials have reported decreases of 15% in 2002. During 2002, acres devoted to coca cultivation decreased from nearly 420,000 acres in 2001 to357,000 acres in 2002. Colombia reported that an additional 160,000 acres had been sprayed in thefirst five months of 2003. Similarly, cultivation of opium poppy declined by 24% in 2002, with anadditional 4,000 acres sprayed in the first five months of 2003. Aerial fumigation has been controversial. (15) Critics charge that it has unknown environmental and healtheffects, and that it deprives farmers of their livelihood, particularly in light of a lack of coordinationwith alternative development programs. The alternative development program, in which farmers canget assistance to grow substitute crops after agreeing to the eradication of their illicit crops, has beenplagued with delays. A U.S. General Accounting Office (GAO) report attributed the program'sobstacles to inadequate security in coca-growing areas, where the Colombian governments lackscontrol, and to the government's limited ability to carry out sustained interdiction operations. TheState Department's annual International Narcotics Control Strategy Report for 2002 claims that sincethe inception of the Alternative Development program in December 2000, 20,128 families havebenefitted and nearly 39,000 acres of licit crops have been planted in previous coca and poppy areas.The Colombian government reported that 38,000 families in 33 municipalities signed voluntaryeradication pacts. As of early 2002, media reports noted that less than a third of those families havereceived any compensation and many were still growing coca. (16) Proponents argue that both eradication and alternative development programs need time towork. In its response to the GAO report, AID argued that alternative development programs do notachieve drug crop reduction on their own, and that the Colombia program was designed to supportthe aerial eradication program and to build "the political support needed for aerial eradication effortsto take place." At the start of his Administration, Uribe announced that increased Colombianresources would be devoted to alternative development. With regard to environmental and health consequences, the Secretary of State certified in2002, as required by Congress, that the herbicide, glyphosate, is not considered to pose unreasonablehealth or safety risks to humans or the environment. In the certification, the U.S. EnvironmentalProtection Agency confirmed that application rates of the aerial fumigation program in Colombiaare within the parameters listed on U.S. glyphosate labels. (A certification required under theFY2003 Consolidated Appropriations Bill has not yet been released.) However, press reportsindicate that many Colombians believe the health consequences of aerial fumigation are grave. (17) Furthermore, Ecuador,neighboring Colombia, has complained that the fumigation program is damaging Ecuadorean crops,rivers, soil and people's health, according to its Foreign Minister, Nina Pacari. (18) U.S. Policy Debate. The U.S. policy debate hasfocused on a number of related issues, such as the effectiveness and implementation of the programin general, respect for human rights, the expansion of U.S. support to address what many considerto be a purely civil conflict, and the level of resources that Colombia, and other countries are willingto contribute. Supporters argue that Colombia is a friendly democracy under siege by powerfularmed forces of the left and right fueled by drug money. In the context of the global war onterrorism, and with the growing recognition of the relationship between drug trafficking and theguerrilla insurgency, proponents argue that Colombia and its neighbors should be supported withcounterterrorism assistance before the situation deteriorates further. They favored expanding thescope of military assistance to strengthen the ability of Colombian security forces to combat theleftist guerrillas and to expand their control throughout rural areas, thereby undercutting the rationaleand support for paramilitary groups. Opponents of U.S. policy argue that the counterdrug program uses a repressive and militaryapproach to curbing drug production. They argue for halting aerial fumigation of coca crops and aidto the Colombian military, believing that coca farmers cannot be expected to abandon coca farmingvoluntarily until adequate economic alternatives are in place. They fear that forcing such farmersto give up coca growing will only drive many to the ranks of the armed groups, or to becomedisplaced persons dependent on the state. (19) Instead, they support a policy that focuses largely on economicand social aid to combat the conflict's root causes, curbs the still rampant human rights abuses byparamilitary groups, provides vigorous support for a negotiated end to the fighting, and emphasizesillicit drug demand reduction in the United States. They also argue that assisting Colombia to fightits leftist guerrillas will involve the United States in a major guerrilla conflict of indeterminateduration. Others, some of whom support current U.S. policy, argue for a "Colombianization" of theprogram in that they believe that Colombians should be conducting the aerial spraying and othercounternarcotics activities, not U.S. government contractors, and for Colombia itself to do more tofight its own war against terrorism and drug trafficking. They have argued that any expansion ofU.S. involvement should await a greater commitment by Colombia's government and elites to thewar effort, including a larger budget for the Colombian military. Still others argue that assistanceto Colombia should have the effect of improving its economy and providing employment forColombians, maintaining that the current implementation in which U.S. contractors are hired doesnot contribute to the economy or employment. Debate in the United States has also focused on allegations of human rights abuses by theColombian Armed Forces, the FARC and ELN, and the paramilitary groups. The Colombiansecurity forces have often turned a blind eye to paramilitary activities, considering these groups asaugmenting their fight against the FARC and ELN, despite a record of human rights abuses. Manypolicymakers, both supporters and opponents of U.S. policy, have worked to break the ties betweenthe Colombian military and the AUC, and President Uribe has vowed that paramilitary activities willnot be tolerated. U.S. policy has supported the creation and assistance for a Human Rights Unitwithin the Attorney General's office. Some non-governmental groups have claimed that the unit isineffective and has poor leadership. (20) They argue for full enforcement of legislative conditions thatrequire concrete steps to prosecute members of the armed forces who commit human rightsviolations, or who tolerate activities of paramilitary organizations. Requirements for the U.S.Secretary of State to certify that the Colombian military is prosecuting human rights violators, andbreaking ties with the paramilitaries, are longstanding provisions in legislation. These certifications,one issued on July 8, 2003, and the latest issued on January 21, 2004, are criticized by human rightsorganizations as not adequately reflecting the human rights situation. (21) Concerns in the United States have also been fueled by several incidents in which U.S.citizens have been killed or kidnaped in the region. On April 20, 2001, a private aircraft flying overPeru and carrying American missionaries was shot down, killing two, after the Peruvian military,working with U.S. support, identified it as a possible drug trafficking flight. As a result, theso-called "Air-Bridge Denial Program" was halted in both Peru and Colombia, until the Secretaryof State certified that a renewed program would incorporate safety enhancements. Thisdetermination was made on August 18, 2003. Having reached an agreement with Colombianauthorities on operational aspects that would provide greater safeguards against accidentalshootdowns, the program was operationally capable of resuming as of August 22. Concern alsoheightened that greater U.S. involvement will result in a protracted commitment in a civil conflictoccurred in response to the loss of five U.S. civilian contractors and aircraft operating in Colombiasince February 2003. In the first incident, in February, a Cessna 208 aircraft carrying both U.S. andColombian personnel crashed in a FARC controlled region. One American and a Colombian werekilled, and three are being held by the FARC. Another Cessna 208, with U.S. civilian contractors,crash landed in March during a subsequent search and rescue operation, killing three Americans. Afifth American contractor was killed on April 7 when his T-65 air tractor crashed during a sprayingoperation. While these flights were considered crashes, fumigation flights have been fired on, andsince August 2003, two planes have been downed by hostile fire. On August 25, a spray aircraftpiloted by a U.S. citizen was shot down, injuring the pilot. An OV Bronco aircraft was downed onSeptember 21, reportedly by hostile fire, killing its pilot which in some press reports was identifiedas a naturalized American citizen from Costa Rica. A further concern of policymakers has centered on current U.S. policy opposing theapplication of jurisdiction of the International Criminal Court to U.S. citizens. Countries who hadnot agreed to sign so-called "article 98 agreements" referring to Article 98 of the Rome Treaty onthe International Criminal Court, preventing the ICC from proceeding with a request for surrenderof U.S. personnel present in the country, are subject to a cutoff of U.S. military assistance. OnAugust 8, 2003, an article 98 agreement was signed with Colombia. This action was required underthe American Service Members Protection Act of 2002, which was incorporated as Title II of H.R. 4775 , the FY2002 Supplemental Appropriations Bill ( P.L. 107-206 ). Funding and Requests for Colombia. Under the P.L. 106-246 Plan Colombia funding, Colombia received $860.3million. Of that, $424.9 was State Department funding and $91.8 was Department of Defensefunding to assist Colombian military anti-drug efforts through interdiction support and the trainingand equipping of the Colombian counternarcotics battalions. The remaining $435.4 was StateDepartment funding for assistance to the Colombian police, economic and alternative developmentassistance, assistance for displaced persons, human rights, administration of justice and othergovernance programs. Under ARI allocations for FY2002, Colombia received $379.9 million in ACIfunding, with $243.50 million in counternarcotics assistance, and $137 million in economic andsocial programs. Under the Emergency FY2002 Supplemental, the Administration requested $4million of International Narcotics Control and Law Enforcement (INCLE) funding for police postsupport in areas of weak government control, $6 million of FMF funding (which Congress directedto be transferred to the INCLE account) for counter-terrorism equipment and training, and $25million of Nonproliferation, Anti-Terrorism and Demining (NATD) funding for counter-kidnappingtraining. The enacted legislation specifically provided $6 million for infrastructure protection forthe Cano-Limón Coveñas oil pipeline, and fully funded the other accounts. For FY2003, the Administration requested $537 million in ARI funding forColombia, including $439 million in ACI funding, and $98 million in FMF funding to train andequip a Colombian army brigade to protect an oil pipeline in the country. Congress reduced thisrequest by $5 million, providing $93 million in FMF funds for the oil pipeline, as well as $433million in ACI funding. In the FY2003 Emergency Wartime Supplemental, the President requestedadditional funding for Colombia. Congress approved $105.1 million, consisting of $34 million ofState Department for the Andean Counterdrug Initiative, $34 million of DOD funds for DrugInterdiction and Counter-Drug Activities, and fully funded the Foreign Military Financing Program,out of which it provided that $20 million could be transferred to the ACI account. TheAdministration advised Congress that it had designated another $17.1 million in FMF funds forColombia. For FY2004, the Administration requested a total of $573 million of which$463 million is for the ACI, consisting of $150 million for alternative development, humanitarianassistance and institution building, and $313 million for narcotics interdiction and eradicationprograms. The overall request also included $110 million in FMF funding. In addition, theAdministration proposed $1.6 million in International Military Education and Training (IMET)funds. Congress provided $731 million for the ACI in the FY2004 Consolidated Appropriations Bill( H.R. 2673 / H.Rept. 108-401 ), passed by the House on December 8, 2003, and stillpending in the Senate. Peru, which shares its northern border with Colombia, is the fifth most populous country inLatin America, with 27.5 million inhabitants. President Alejandro Toledo was elected on June 3,2001, with 53% of the vote, against former left-leaning President Alan Garcia with 47%. A longtime opposition leader to previous President Alberto Fujimori who fled the country on corruption charges,Toledo was inaugurated as President on July 28, 2001. (22) President Toledo promised to end corruption and to stabilize theeconomy through orthodox policies, but observers have worried that tangible results will not meetthe expectations of the populace, especially poor, indigenous groups. The President has had to dealwith many strikes and protests, his party fared poorly in the November 2002 elections for newregional governments, and his popularity reached new lows in 2003. (23) President Toledo labeleddrug trafficking a national security problem for Peru and established a drug czar for the country tobetter coordinate counternarcotics initiatives. When President Bush visited Peru on March 23, 2002,the two Presidents agreed to enhance cooperation on counternarcotics and counter-terrorism issues. However, U.S. military aid to Peru was suspended on July 1, 2003, because Peru had not signed anagreement exempting U.S. citizens from the jurisdiction of the International Criminal Court, whichwould result in the loss of $2.7 million in military equipment and training requested forFY2004. (24) Representatives of Peru and the United States launched an investigation into thecircumstances and procedures leading to an incident on April 20, 2001, in which a Peruvian militaryplane shot down a small plane, killing an American missionary woman and her infant daughter, aftera CIA surveillance plane had indicated that the small craft might be involved in drug traffickingactivities. As a result of this accident, U.S. surveillance of drug-related flights in Peru and Colombiawas suspended pending clarification of procedures. The State Department released a report of theU.S.-Peruvian investigative team on August 2, 2001, concluding that "communications systemsoverload" and "cumbersome procedures" played a role in the accident. President Bush indicatedduring his March 2002 trip to Peru that talks were continuing between the countries on appropriateprocedures before the renewal of the anti-drug surveillance flights. Current U.S. law requires theSecretary of State to notify Congress 30 days prior to resuming U.S. support for the air interdictionprogram and to provide assurances that greater safety enhancements are in place. When the WhiteHouse announced the resumption of the aerial interdiction program with Colombia on August 19,2003, Administration spokesmen stated that arrangements with Peru had not been completed and thatthe proposed program with Peru would be more limited. (25) Peru is the second largest cocaine producer in the world and exports high purity cocaine andcocaine base to markets in South America, Mexico, Europe, and the United States. Nevertheless,it has been viewed as a success story in counternarcotics efforts because six years of joint U.S.-Peruair and riverine interdiction operations, aggressive eradication efforts, and alternative developmentprograms have significantly reduced coca production. However, while coca production remainedconstant in 2001, the State Department's International Narcotics Control Strategy Report noted an8% increase in production during 2002, although this level is still 36,000 hectares (88,956 acres)below 1995 levels. Facing mounting protests, the Peruvian government temporarily suspended thedrug eradication program in the Upper Huallaga Valley in early July 2002, but resumed the programin September 2002 once concerns were addressed, in part to be eligible for Andean Trade PreferenceAct benefits. Peruvian spokesmen have worried about spillover effects of illicit drug activities fromColombia into Peru, and the increase in coca production. They have denounced illicit plantings ofcoca and poppies in Peru, and international trafficking of arms through Peru to FARC guerrillas inColombia. Responding to press reports that FARC forces have penetrated into Peruvian territory,Peruvian officials stated in early 2002 that there are no permanent FARC forces in Peru, but theyconceded that they may cross temporarily into border areas. Because of these threats, Peru hasmoved military bases from its border with traditional rival Ecuador, where tensions have diminished,to the border with Colombia. The March 20, 2002 bombing of a shopping center near the U.S.Embassy in Lima, three days before President Bush's visit to Peru, raised fears of a resurgence ofguerrilla groups. Funding and Requests for Peru. As part of the FY2000 Plan Colombia emergency supplemental funding, Perureceived $25 million for KMAX helicopters for the Peruvian National Police, and benefitted fromregional interdiction funding. Under ARI allocations for FY2002, Peru received $142.5 million in ACI funds,with $75 million in counternarcotics aid and $67.5 million for alternative development. In addition,Peru received $23.7 million in Child Survival and Health funds, $15 million in DevelopmentAssistance, and $14.5 million in Economic Security Funds. No funds were requested for Peru in theFY2002 supplemental. Under the ARI allocation for FY2003, Peru is to receive $128.1 million in ACIfunds, with $59.5 million in counternarcotics aid and $68.6 million for alternative development. In addition, it would receive nearly $22 million in Child Survival and Health funds, $16.3 millionin Development Assistance, and $9 million in Economic Support Funds. For FY2004, the Administration requested $116 million in ACI funds, with$66 million in counternarcotics aid and $50 million for alternative development. In addition, theAdministration proposed $16.7 million in Child Survival and Health funds, $15.3 million inDevelopment Assistance, and $9 million in Economic Security Funds. Landlocked Bolivia shares no border with Colombia, but Bolivia's significant gains inreducing illegal coca production could be threatened by any successes in controlling production inColombia. Once the world's foremost producer of coca leaf, Bolivia made great strides in reducingcoca cultivation under the Banzer-Quiroga administration (1997-2002). (26) However, forcibleeradication of coca has become a source of social discontent, exacerbating tensions over class andethnicity that may foment political instability in Latin America's poorest country. With a population of 8.3 million, Bolivia is the eleventh most populous country in LatinAmerica. Despite a long past history of instability, Bolivia has, since the mid-1980s, experienceda period of unprecedented political stability as a series of elected governments institutedextraordinary political changes and economic liberalization, and peacefully transferred power to theirsuccessors. Beginning in the mid-1990s, governments have carried out major privatization programsand reforms that were heralded as putting the country on a sound macroeconomic footing, but havealso led to significant social dislocations. Economically, it is tied to the region through twoorganizations: the Andean Community and as an associate member of the Southern CommonMarket (Mercosur) formed by Brazil, Argentina, Paraguay and Uruguay. President Gonzalo Sánchez de Losada, of the National Revolutionary Movement (MNR) a72-year old wealthy businessman who had served once before as president (1993-1997), began hisfive-year term on August 6, 2002, with only 22% of the vote in an eleven candidate field. EvoMorales, a 42-year old Aymara, who is head of the Movement Towards Socialism (MAS) party andleader of the Bolivian coca growers union, ran a close second. Under the Bolivian constitution, thelack of a majority victory sent the election to the Bolivian Congress, where Members of the upperand lower chambers (27 senators and 130 representatives) selected between the two top vote getters.To secure the presidency, the MNR formed a coalition with the Movement of the Revolutionary Left(MIR), led by fourth place winner Jaime Paz Zamora, Sánchez de Lozada's traditional adversary andalso a former president (1989-1993). During his first year in office, President Losada had to dealwith numerous protests and demonstrations. Shortly after Sánchez de Lozada's inauguration, his Interior Minister announced thegovernment would resume the eradication efforts of the previous government. Perhapsforeshadowing challenges to come, both domestically and in relations with the United States,confrontations erupted the next day between peasants and police in the coca-growing Chapare andYungas regions. More recent political unrest led to the resignation of Sánchez de Lozada on October17, 2003, just fifteen months after he was elected. Succeeding him as President is his former VicePresident, Carlos Mesa, a popular former television journalist, historian, and political independent. This change in leadership came about after months of protests led by indigenous and workers groupswho carried out strikes and road blockages that paralyzed most of the country and resulted in up to80 deaths. The focus of the protests was the continued economic marginalization of the poorersegments of society especially in response to government plans to export natural gas via a port inChile, an historic adversary of Bolivia. The new President faces many difficulties in governing apolitically fractured society, one of the poorest nations in the hemisphere, within the context of ahighly mobilized indigenous community, and the uncertainty of obtaining consensus on natural gasexports as a basis for the country's future economic development. For some 20 years, U.S. relations with Bolivia have centered largely on controlling theproduction of coca leaf and coca paste, which was usually shipped to Colombia to be processed intococaine. In support of Bolivia's counternarcotics efforts, the United States has provided significantinterdiction and alternative development assistance, and it has forgiven all of Bolivia's debt fordevelopment assistance projects, and most of the debt for food assistance. Not until President HugoBanzer set a goal in his "Dignity Plan" of eliminating illegal coca cultivation and narco-traffickingby the end of his five-year term in 2002 was there much success. Bolivia, like Peru, has been viewedby many as a counternarcotics success story, with joint air and riverine interdiction operations,successful eradication efforts, and effective alternative development programs reducing illegal cocacultivation to the lowest level in five years, with a net reduction of approximately 70% between 1996and 2001. Others, however, view the forced eradication as a social and political disaster: in placesit was implemented regardless of the availability of alternative development programs funding, andin some places the Dignity Plan's mandated use of the military to carry out the eradications hasgenerated charges of human rights abuses. (27) According to the State Department's International Narcotics Control Strategy Report, cocacultivation increased 23% in 2002. Nearly 12,000 hectares (29,652 acres) was eradicated, but theauthorities have had little success in preventing replantings. Yet, Bolivia's coca cultivation is abouthalf of its 1995 levels. It should also be noted that Bolivian law allows up to 12,000 hectares of cocacultivation for traditional use. Although President Jorge Quiroga had promised to carry out theDignity Plan program, he relented after violent protests by coca growers in the Yungas and theChapare regions. The latter was once the country's primary illegal coca-growing region. Much of theillegal commercial crop had been eliminated there, but some has been replanted. Bolivia has signed an article 98 agreement exempting U.S. citizens from the jurisdiction ofthe International Criminal Court. The agreement is pending consideration before the BolivianCongress. In July 2003, and previous to an agreement being signed, the Bush Administration hadwaived the withholding of U.S. military aid from the country. Funding and Requests for Bolivia. As part of the FY2000 Plan Colombia emergency supplemental funding,Bolivia received $25 million for regional interdiction assistance and $85 million in alternativedevelopment assistance. Under ARI allocations for FY2002, Bolivia received $87.6 million in ACIfunds, consisting of $52 million in drug interdiction and eradication, and $35.6 million in alternativedevelopment. In addition, Bolivia received $19.7 million in Child Survival and Health funds, $12.9million in Development Assistance, $10 million in Economic Support Funds, and $500,000 inForeign Military Financing. Under the FY2003 ARI allocation, Bolivia is to receive nearly $91 million inACI funding, consisting of $49 million in interdiction and eradication, and $41.7 million inalternative development. In addition, Bolivia would receive $18.5 million in Child Survival andHealth funds, $12.2 million in Development Assistance, $10 million in Economic Support Funds,and $2 million in Foreign Military Financing. For FY2004, the Administration requested $91 million in ACI funds,consisting of $52.5 million in interdiction and eradication, and $38.5 million in alternativedevelopment. In addition, the Administration proposed $14.4 million in Child Survival and Healthfunds, $11.4 million in Development Assistance, $8 million in Economic Support Funds, and $4million in Foreign Military Financing. On Colombia's southern border, Ecuador is the most exposed of Colombia's neighborsbecause it is situated adjacent to areas in southern Colombian that are guerrilla strongholds andheavy drug producing areas. With a population of 13.2 million, Ecuador is the eighth most populouscountry in Latin America. President Lucio Gutierrez, a retired colonel and a leader of the January2000 uprising which toppled the previously elected President, Gustavo Noboa, was elected onNovember 20, 2002, and inaugurated on January 15, 2003. He has embarked upon a very ambitiousprogram to cut government expenditures, and in March 2003, he obtained a $205 million stand-byarrangement from the International Monetary Fund and the extension of repayments on pastobligations to help the country deal with its debt problems. According to press reports, Colombian guerrillas pass into Ecuadoran territory for rest,recuperation, and medical treatment, and there are reports that Colombians are buying ranches andfarms in the Ecuadoran border region, possibly for drug cultivation. Ecuadoran officials say theyhave uncovered and destroyed several small cocaine processing labs in the area. The Ecuadoranborder region is experiencing a constant flow of Colombian refugees into the poor areas, and fighterswith Colombian paramilitary organizations have been arrested for running extortion rings inEcuadorian border regions. The FARC has been accused of kidnaping people in Ecuador, althoughthe FARC denies the allegations. Ecuador reinforced its northern border with Colombia in early2002 as Colombian anti-guerrilla operations intensified following the breakdown of the peace talks,and Ecuador was said to be seeking additional international assistance. (28) President Gutierrez hassaid that the armed conflict in Colombia is having an adverse affect on Ecuadoran peasants in borderareas, and he has claimed that the aerial fumigation in Colombia is harming the Ecuadoranenvironment and negatively affecting Ecuadorans' health. (29) Colombian President Uribe thanked Ecuadoran for taking inColombians fleeing violence when he visited Ecuador, on August 22, 2003, and he promised toeradicate terrorism in Colombia so that it would not spread to Ecuador. (30) As a major transit country for cocaine and heroin from Colombia and Peru, Ecuadorcooperates extensively with the United States in counternarcotics efforts. In November 1999, theUnited States signed a 10-year agreement with Ecuador for a forward operating location (FOL) inManta, on the Pacific Coast, for U.S. aerial counterdrug detection and monitoring operations. Although the agreement is solely for the detection of drug trafficking flights in the region, somehuman rights groups and politicians in Ecuador fear that the facility could be used to supportoperations against guerrillas in neighboring Colombia. Ecuador has not signed an agreement to exempt U.S. citizens from the jurisdiction of theInternational Criminal Court, and it became subject to U.S. sanctions on July 1, 2003, with thepossible loss of $15.7 million in FMF funding and IMET education in FY2004. Press reports at thetime of the announcement of the cutoff of military aid quoted some Ecuadoran officials as sayingthey might reexamine the military relationship with the United States, including the Manta facility. Funding and Requests for Ecuador. As part of the FY2000 Plan Colombia emergency supplemental fundingEcuador received $20 million in U.S. assistance, of which $12 million was to support druginterdiction efforts, and $8 million was for alternative development assistance. Another $61.3million has been allocated for the construction of a Forward Operating Location in Manta, Ecuadorfor counternarcotics aerial surveillance. Under ARI allocations for FY2002, Ecuador received $25 million in ACIfunding, consisting of $15 million in interdiction and law enforcement programs, and $10 millionin alternative development. In addition, Ecuador received $6.9 million in Development Assistance,$15 million in Economic Support Funds. Under the Emergency FY2002 Supplemental request, Ecuador received $3million in FMF funding. Under the FY2003 ARI allocations, Ecuador is to receive nearly $30.9 millionin ACI funding, consisting of $15 million for interdiction and law enforcement programs, and $15.9million for alternative development. In addition, Ecuador would receive $7.1 million inDevelopment Assistance, $15.5 million in Economic Support Funds, and $1 million in ForeignMilitary Financing. For FY2004, the Administration requested $35 million in ACI funding,consisting of $20 million for interdiction and law enforcement, and $15 million for alternativedevelopment. In addition, Ecuador would receive $300,000 in Child Survival and Health funds, $7.1million in Development Assistance, $14 million in Economic Support Funds, and $15 million inForeign Military Financing. Brazil's isolated Amazon region, populated largely by indigenous groups, forms Colombia'ssoutheastern border. With a population of 174.5 million, Brazil is the largest and most populouscountry in Latin America, with most of its inhabitants concentrated in the more developedsoutheastern areas of the country and along the Atlantic coast. Luiz Inacio Lula da Silva of the leftistWorkers Party was inaugurated as President on January 1, 2003, after decisively winning the secondround presidential election in October 2002, with support from a wide range of parties. He haspromised to follow sound economic policies, while putting priority on the elimination of hunger inthe country. He is seeking to create a strong South American bloc that would merge the SouthernCommon Market (Mercosur), composed of Argentina, Paraguay and Uruguay (with Bolivia andChile as associate members) with the Andean Community, composed of Venezuela, Colombia,Ecuador, Peru and Bolivia. President Lula da Silva visited Peru on August 25, 2003, and PeruvianPresident Toledo signed a free trade agreement between Peru and Mercosur, and talks for a broaderfree trade agreement between Mercosur and the Andean Community are scheduled to conclude byDecember 2003. Brazil views these integration efforts as facilitating more advantageousnegotiations with the United States in the talks to conclude a Free Trade Area of the Americas(FTAA) by January 2005. In efforts to strengthen ties with the United States, on June 20, 2003, President Lula da Silvamade an official visit to Washington, D.C. and he and President Bush resolved "to create a closerand qualitatively stronger [bilateral] relationship." Leaders agreed on a framework for regularhigh-level discussions on a wide range of issues, including agreements to enhance cooperation inscience and nuclear energy; to jointly promote HIV/AIDS treatment in the Portuguese-speakingAfrican countries of Mozambique and Angola; and to establish an energy partnership for cooperationon alternative energy sources. Brazil has not agreed to exempt U.S. citizens from the jurisdictionof the International Criminal Court, and in July 2003 it became subject to sanctions that could resultin the loss of $500,000 in IMET military education and training funds in FY2004. Brazil is not a significant drug-producing country, but it is a conduit for the transit of cocainebase and cocaine HC1 from Colombia to Europe and the United States. With increasing drug usewithin the country, a major action in 2002 was the passage of an omnibus Brazilian federalcounter-narcotics law. Brazilians have long been concerned about the sparsely populated territory in the hugeAmazon region, and they have been fearful historically of foreign designs and intervention in thisterritory. In an effort to exercise control over this vast territory Brazil has constructed a $1.4 billionsensor and radar project called the Amazon Vigilance System, or SIVAM from its acronym inPortuguese, and it has offered to share data from this system with neighbors and the United States. It has established a military base at Tabatinga, with 25,000 soldiers and policemen, with air forceand navy support, and has launched Operation Cobra with heightened vigilance to deal with spillovereffects from Colombia. Press accounts suggest evidence of Colombian drug traffickers encouraging indigenouscommunities in Brazil to plant coca, Brazilian drug traffickers linked to Colombian traffickers, andFARC incursions along the border. In one example in late 1998, the FARC captured a city on theColombian border, forcing Colombian troops to withdraw into Brazilian territory, before recapturingthe city. In another example, a plane from Suriname with arms for FARC guerrillas was discoveredwhen it was forced to make an emergency landing in Brazil. In another more recent example, FARCforces crossed into Brazil in early March 2002 and exchanged gunfire with Brazilian militaryforces. (31) In late June2003, Brazil announced that it would increase the number of troops in states that share a border withColombia. In another strange incident, it was reported in August 2003 that French officials landeda C-130 plane in Brazilian territory in mid-July 2003, without informing Brazilian authorities, in aneffort to rescue Ingrid Betancourt, a former Colombian presidential candidate who is also a Frenchcitizen, who has been held captive by FARC guerrillas. (32) Funding and Requests for Brazil. Brazil received only a small amount of Plan Colombia assistance, but under ARI allocations for FY2002 Brazil received $6 million in ACI funds, nearly all in law enforcementfunding. Brazil also received $9.2 million in Child Survival and Health funds, and $4.8 million inDevelopment Assistance. Under the FY2003 ARI allocation, Brazil is to receive $6 million in ACI funds,nearly all in law enforcement funding. In addition, Brazil is to receive $9.8 million in Child Survivaland Health funds, and $6.4 million in Development Assistance. FY2004, the Administration requested $12 million in ACI funding, nearly allin law enforcement funding. In addition, the Administration proposed $12 million in Child Survivaland Health funds, and $8.2 million in Development Assistance. Venezuela, Colombia's eastern neighbor, is now the fourth largest supplier of crude oil to theUnited States. With a population of 24 million, Venezuela is the sixth most populous country inLatin America. The country is presently led by President Hugo Chavez, a populist and leader of anunsuccessful military coup in the early 1990s, who was initially elected in 1998 on a campaign torewrite the constitution, rid the country of corruption, and more adequately meet the needs of thepeople. Under President Chavez, Venezuela has undergone enormous political changes, with a newconstitution and revamped political institutions. Although Chavez remained widely popular until mid-2001, his popularity subsequentlyeroded significantly after that, especially among the middle class, because of his perceivedineffectiveness in improving living conditions and concerns that he was imposing a leftist agendaon the country. Following massive anti-Chavez protests in April 2002, the Venezuelan military tookChavez into custody and business leader Pedro Carmona declared himself interim President, butChavez was restored to power in days with the support of the military. From December 2002 untilFebruary 2003, the opposition orchestrated a general strike that disrupted the economy but wasunsuccessful in getting President Chavez to agree to early elections or a non-binding referendum onhis rule. After months of negotiations facilitated by OAS Secretary General Cesar Gaviria, PresidentChavez and the opposition signed an agreement on May 29, 2003, to resolve the political crisis.Implementation of the accord, which could lead to a recall referendum for President Chavez, willnot necessarily be easy, but observers emphasize that it is an important first step for achievingpolitical stability. (33) Under the Chavez government, there has been friction at times in U.S.-Venezuelan relations,and Chavez has at times used anti-U.S. rhetoric. He denounced Plan Colombia as a U.S.-dominatedmilitary strategy, and denied the United States overflight rights over Venezuela territory for druginterdiction. Following the September 2001 terrorist attacks on the United States, Chavez criticizedU.S. military action in Afghanistan, and he visited Libya, Iran, and Iraq, prompting President Bushto exclude him from his March 2002 meeting with Andean leaders in Peru. (34) Venezuelan officials haverefused to exempt U.S. citizens from the jurisdiction of the International Criminal Court, and in July2003, the country became subject to sanctions that could lead to the loss of $700,000 in militaryeducation and training funds in FY2004. There has been increasing concern about the guerrilla conflict in Colombia spreading toVenezuela. At times, Colombian guerrillas and paramilitaries have entered Venezuela territorycausing frictions in Colombian-Venezuelan relations. In April 2003, Venezuela's military exchangedfire with Colombian paramilitaries that had crossed the border pursuing FARC guerrillas; asubsequent meeting between Chavez and Colombian President Alvaro Uribe eased tensions and ledto Venezuelan promises to increase border patrols in order to prevent incursions by armedColombian groups. There also have been long-held suspicions that President Chavez has supportedthe Colombian guerrillas, but President Chavez denies such support. The Senate Foreign OperationsBill for FY2004 contains a provision denying Venezuela assistance if the Secretary of State certifiesthat Venezuela is assisting, harboring, or providing sanctuary to Colombian terrorist organizations. Venezuela is a major transit route for cocaine and heroin from neighboring Colombia to theUnited States and Europe. In 2001, some coca fields were located and eradicated, and processinglabs were detected and destroyed. There were no eradication efforts in 2002. Despite various policydisagreements with the United States, the Chavez government has cooperated with the United Statesin counternarcotics efforts. Funding and Requests for Venezuela. While Venezuela received only a small amount of Plan Colombia assistance,under the final ARI allocations for FY2002, Venezuela received $5 million in ACI funding,consisting of law enforcement and administration of justice programs. Venezuela also received$500,000 in Economic Support Funds. Under FY2003 ARI allocations, Venezuela would receive $2.1 million in ACIfunding, consisting of law enforcement and administration of justice programs. Venezuela wouldalso receive $500,000 in Economic Support Funds. For FY2004, the Administration requested $5 million in ACI funding,consisting of law enforcement and administration of justice programs. The Administration alsoproposed $500,000 in Economic Support Funds. Panama is separated from Colombia along its southern border by the difficult andenvironmentally sensitive wetlands and rain forest of the "Darien Gap." Here, the 16,000 mile PanAmerican highway (stretching from Alaska to the tip of southern Chile) is interrupted for a 60 milestretch. A part of Colombia until 1903, Panama is now the twentieth most populous country in LatinAmerica, with a population of 2.8 million. Panama's history has been heavily influenced by its strategic location and the transit ofcommerce through the Panama Canal in the center of the country, where the major cities are located. It is led by President Mireya Moscoso, elected and inaugurated in 1999, who has been dealing witheconomic difficulties in Panama, and with Panama's new responsibilities for the Panama Canal sincethe U.S. withdrawal on the last day of 1999. Despite considerable effort in the period leading up tothe U.S. withdrawal, Panama was unwilling to allow the United States to retain a formal militarypresence in Panama for counternarcotics surveillance purposes. (35) This forced the UnitedStates to develop the Forward Operating Locations (FOLs) in El Salvador, Aruba/Curacao andEcuador as substitute locations for such activities. U.S.-Panama relations have been very friendly,however, and Panama did agree to exempt U.S. citizens from the jurisdiction of the InternationalCriminal Court shortly before President Moscoso's late June 2003 official visit to Washington, D.C. Panama has been the scene of cross-border incursions by Colombian guerrillas and paramilitary groups. There is some evidence that paramilitary groups are being founded in Panama,with support from Colombian groups, because of the perception that the Panamanian governmenthas left some areas unprotected. Shipments of small arms for the Colombian guerrillas have beenseized in Panamanian territory as well. Panama is not an illicit drug producing country, but it is a major transshipment point forillicit drugs, especially cocaine, smuggled from South America, and it is a major site formoney-laundering activity. In recent years, Panama has cooperated with the United States inbilateral counternarcotics efforts, seizing significant amounts of illicit drugs and enforcing recentlypassed anti-money laundering legislation. In early 2002, a comprehensive U.S.-Panama maritimeanti-drug agreement entered into force. Funding and Requests for Panama. While Panama received only a small amount of Plan Colombia assistance,under allocations for FY2002, Panama received $5 million in ACI funding, consisting largely ofborder control and law enforcement funds. Panama also received $4.5 million in DevelopmentAssistance and $4.2 million in Economic Support Funds. For FY2003, Panama is to receive $4.5 million in ACI funds, consistinglargely of border control and law enforcement funds. In addition, Panama is to receive $4.9 millionin Development Assistance, $3 million in Economic Support Funds, and $1 million in ForeignMilitary Financing. For FY2004, the Administration requested $9 million in ACI funds, consistinglargely of border control and law enforcement funds. In addition, the Administration proposed $5.7million in Development Assistance, $3.5 million in Economic Support Funds, and $2.5 million inForeign Military Financing. In 2003, Congress has acted on a variety of appropriation and authorization measures relatedto the Andean region that are cited below. In April 2003, the Congress passed an FY2003Emergency Wartime Supplemental, to fund continuing operations in Iraq, that also included fundingfor the Andean Counterdrug Initiative. On December 8, 2003, the House passed the FY2004Consolidated Appropriations Bill ( H.R. 2673 / H.Rept. 108-401 ), which combined anumber of individual appropriations measures that had not yet been approved. The bill passed theSenate on Janaury 22, 2004, and was signed into law the next day ( P.L. 108-199 ). By the end of 2002, both the House and Senate Appropriations Committees had reported theirversions of an FY2003 Foreign Operations Appropriation bill, but this and other appropriations billshad not been enacted. As a result, Congress incorporated the 11 unfinished bills into an omnibusspending package, H.J.Res. 2 (for continuing appropriations). The House passed H.J.Res. 2 on January 8, 2003, and the Senate followed suit on January 28, 2003. Bothchambers approved the conference report ( H.Rept. 108-10 ) on February 13, 2003, and the measurewas signed into law ( P.L. 108-7 ) on February 20, 2003. (36) In the omnibus bill, Congress provided $835.5 million for theAndean Regional Initiative, of which $700 million was provided for the Andean CounterdrugInitiative. It further allowed the transfer of $31 million from the State Department's InternationalNarcotics Control and Law Enforcement (INCLE) account to the ACI. On March 25, 2003, President Bush requested $74.7 billion in additional funding for militaryoperations and reconstruction activities in Iraq, and for ongoing operations in the global war onterrorism. It also included requests for counterdrug and military funding for Colombia. House Action. The House AppropriationsCommittee marked up H.R. 1559 on April 2, 2003, providing the President with mostof his request. The House passed the measure on April 3, 2003, by a vote of 414-12. During floorconsideration, an amendment offered by Representative Jim McGovern was defeated by a vote of209-216. The amendment would have decreased by $61 million funding for Interdiction andCounterdrug Activities and the Andean Counterdrug Initiative for Colombia, and would haveincreased funding for the Office of Domestic Preparedness by $34 million. Senate Action. The Senate passed H.R. 1559 on April 7, 2003, by a vote of 93-0, after it struck all after the enacting clauseand inserted the text of S. 762 , the Emergency Wartime Supplemental, reported out bythe Senate Appropriations Committee on April 1. Conference Report. The conference agreementpassed both the House and the Senate on April 12, 2003, and was signed into law on April 16, 2003( P.L. 108-11 ). With regard to the Andean Counterdrug Initiative and Colombia, it provided $34million for the ACI of which $5 million is to assist persons who have been displaced as a result ofthe armed conflict in Colombia. Further, it provided that up to $20 million in Foreign MilitaryFinancing (FMF) funds could be transferred to the ACI for aircraft, training, and other assistance forthe Colombian Armed Forces. Overall FMF funding totaled $2.059 billion, of which theAdministration subsequently allocated an additional $17.1 million for Colombia. The Departmentof Defense was provided with an additional $34 million for its Drug Interdiction and Counter-DrugActivities to fund "increased operational tempo in Colombia's unified campaign against narcoticstrafficking and terrorist activities." Report language directed the Secretary of Defense to submit areport to Congress within 30 days of enactment detailing how these funds are to be obligated insupport of the U.S. Southern Command's Colombia initiative. House Action. The House Foreign OperationsAppropriations Subcommittee marked up the FY2004 bill ( H.R. 2800 / H.Rept. 108-222 )on July 10, 2003, which was followed by full committee consideration on July 16, 2003. TheCommittee approved the President's request of $731 million for the Andean Counterdrug Initiative,and included a number of conditions and reporting requirements. The Committee does not earmarkfunds by country from the Child Survival and Health programs, Development Assistance, ForeignMilitary Financing, and Economic Security Funds (with some exceptions), which comprisecomponents of the Andean Regional Initiative. However, the Committee provided additionalfunding over FY2003 levels for the Child Survival and Health Program, and moderate increases forthe Economic Support Fund, and Foreign Military Financing programs. Development Assistancewas cut slightly. As in previous years, the Committee included a number of funding conditions and reportingrequirements. These provisions include the following: Expanded authority for a unified campaign against narcotics trafficking,activities of terrorist organizations, and to take actions to protect human health and welfare inemergency situations, including rescue operations. The Committee Report notes, as it has inprevious years, that this authority is not a signal for the United States to become more deeplyinvolved in assisting the Colombian military in fighting its terrorist groups, and especially not at theexpense of counternarcotics programs. Expanded authority is meant to provide "more effectiveintelligence gathering and fusion, and to provide the flexibility to the Department of State when thedistinction between counternarcotics and counterterrorism are [sic] not clearcut." Expanded authority shall cease if the Secretary of State determines that theColombian Armed Forces are not conducting vigorous operations to restore government authorityand respect for human rights in areas under the effective control of paramilitary and guerrillaorganizations. This is similar language to previous years. If any helicopters procured with ACI funds are used to aid or abet theoperations of paramilitaries, the helicopters shall be immediately returned to the United States. Thisis similar language to previous years. Support for a Peruvian air interdiction program is denied until the Secretaryof State and Director of Central Intelligence certify to Congress, 30 days prior to any resumption,that such a program will include enhanced safeguards and procedures to prevent any similaroccurrence to the April 20, 2001 incident in which two American missionaries were killed after aplane in which they were flying was shot down. It requires a report from the State Department and Agency for InternationalDevelopment within 45 days of the bill's enactment on the proposed uses of all ACI funds on acountry-by-country basis for each proposed program, project, or activity. It allows for the obligation of 75% of ACI funds without prior certificationfrom the Secretary of State with regard to human rights. To release the remaining 25%, theSecretary must certify that 1) the Colombian Armed Forces are suspending those who have beencredibly alleged to have committed gross violations of human rights, or to have aided paramilitaryorganizations; 2) the Colombian government is prosecuting military personnel accused of humanrights abuses; 3) the Colombian military is cooperating with civilian prosecutors and judicialauthorities in such cases; 4) the Colombian military is severing links with paramilitary organizations;and 5) the Colombian military is executing orders for the capture of paramilitary leaders. TheCommittee directs the Secretary to meet with internationally recognized human rights organizationsprior to making the certification. It directs the Secretary of State to deny visas to any alien who has providedsupport to the FARC, ELN, or AUC or has committed or abetted the commission of gross violationsof human rights. The report recommends $1 million for the Naval Post Graduate School (N.S.)to strengthen public engagement and democratic control of national security inColombia. The report states the Committee's support for USAID's continuing alternativedevelopment strategy, and for the so-called "carabineros" police program to establish a lawenforcement presence in rural and remote areas. The report states the Committee's concern that U.S. assistance is not adequatelyreaching the substantial Afro-Colombian population, which has been significantly affected by theconflict. The report states the Committee's concern with the increase in Colombianheroin and directs the State Department to consult with the Committee on its strategy for heroineradication. During full committee consideration, Chairman Jim Kolbe accepted an amendment proposedby Representative Sam Farr to require the State Department to submit a report no later than 60 daysfrom enactment that describes detailed plans and programs to train Colombian nationals for thepurpose of assuming responsibilities for programs currently being executed by U.S. contractors withfunds provided in the bill. H.R. 2800 passed the House on July 23, 2003. During its consideration, theHouse defeated by a 195-226 margin an amendment by Representative Jim McGovern andRepresentative Ike Skeleton to cut $40 million from the Andean Counterdrug Initiative and $35million from Foreign Military Financing funds, and to transfer this $75 million to Child Survival andHealth programs. Senate Action. The Senate Committee onAppropriations reported out their bill ( S. 1426 / S.Rept. 108-106 ) on July 17, 2003,providing $660 million of the President's ACI request, with the authority to transfer an additional$37 million from the State Department's INCLE account to ACI. Of this total of $697 million, theCommittee directed that not less than $250 million be allocated directly to USAID for alternativedevelopment and institution building programs, including judicial reform. Of the $250 million, $165million is directed to these types of programs in Colombia. In addition, the Committee earmarkedfunding for certain programs in Colombia: $2.5 million to protect human rights defenders; $2.5million for the United Nations Office of the High Commissioner for Human Rights in Colombia; $10million for assistance to the Colombian Attorney General's Human Rights Unit; and $2.5 million forassistance to the human rights office of the Colombian Procuraduria. (During Senate floorconsideration, this amount was increased to $3.5 million by an amendment offered by SenatorLeahy.) The Senate took up H.R. 2800 on October 24, substituting the text of S. 1426 , passing the bill on October 30 by voice vote. Like the House bill, it includes a number of reporting requirements. It provides expanded authority for a unified campaign against narcoticstrafficking, activities of terrorist organizations, and to take actions to protect human health andwelfare in emergency situations, including rescue operations. Expanded authority shall cease if the Secretary of State determines that theColombian Armed Forces are not conducting vigorous operations to restore government authorityand respect for human rights in areas under the effective control of the paramilitary and guerrillaorganizations. If any helicopters procured with ACI funds are used to aid or abet theoperations of any illegal self-defense group or illegal security cooperative, the helicopters shall beimmediately returned to the United States. It requires a report from the State Department, in consultation with USAID,within 45 days of the bill's enactment, on the proposed uses of all ACI funds on a country-by-countrybasis for each proposed program, project or activity. Section 664 allows for the obligation of 50% of ACI funds prior to acertification from the Secretary of State with regard to human rights. The release of the remaining50% would be in two installments: the first after such a certification; the second after July 31, 2004,with an additional certification. Specifically, the Secretary must certify that (1) the ColombianArmed Forces are suspending personnel who have been credibly alleged to have committed grossviolations of human rights, including extra-judicial killings, or to have aided or abetted paramilitaryorganizations; (2) the Colombian government is investigating and prosecuting members of theColombian Armed Forces who have been credibly alleged to have committed gross violations ofhuman rights; (3) the Colombian Armed Forces are cooperating with civilian prosecutors and judicialauthorities in such cases; (4) the Colombian Armed Forces are severing links with paramilitaryorganizations; and 5) the Colombian Armed Forces are dismantling paramilitary leadership andfinancial networks by arresting commanders and financial backers. The Committee directs theSecretary of State to meet with internationally recognized human rights organizations at least 10 daysprior to making these certifications. Section 665 directs the Secretary of State to deny visas to any alien who hasprovided support to the FARC, ELN, or AUC, or has committed or abetted the commission of grossviolations of human rights. It continues previously enacted provisions that would prohibit not more than20% of funds to be used for the procurement of chemicals for aerial coca and poppy fumigationunless the Secretary of State, in consultation with the Administrator of the Environmental ProtectionAgency, certifies that (1) the herbicide mixture is being used in accordance with EPA labelrequirements for comparable use in the United States and with the Colombian EnvironmentalManagement Plan; (2) the herbicide mixture, in the manner it is being used, does not poseunreasonable risks or adverse effects to humans or the environment; and (3) complaints of harm tohealth or licit crops caused by fumigation are evaluated and fair compensation is being paid formeritorious claims. It also states that these funds may not be used unless programs are beingimplemented by USAID, the government of Colombia, or other organizations, to provide alternativesources of income in areas where security permits for small-acreage farmers whose illicit crops aretargeted for fumigation. It prohibits any U.S. Armed Forces personnel or U.S. civilian contractorsemployed by the United States from participating in any combat operation inColombia. It commends the commitment of Colombian President Uribe in tackling thethreats of terrorism and narcotics in Colombia. It includes language maintaining the existing caps on U.S. personnel inColombia at 400 for military and 400 for civilian contractors in support of PlanColombia. It commends the Colombian National Police for reasserting its presencethroughout the country and provides $17 million in FMF funds for three DC-3 aircraft to increasetheir mobility. The Committee report notes that it sees "the Colombian military as a particularlyweak link in the fight against terrorism and narcotics." It requires a report from the Secretary of State, not less than 90 days fromenactment, that describes (1) the budgetary impact for fiscal years 2004 through 2007 of StateDepartment and other relevant agencies of Plan Colombia and Andean Counterdrug Initiativeactivities, including the projected cost per year of maintaining and operating equipment, includingaircraft, that the United States has provided to Colombia; (2) the progress, to date, that the UnitedStates has made in turning over management and implementation of Plan Colombia and the AndeanCounterdrug Initiative programs from U.S. personnel to the Colombian government; and (3) the exitstrategy that would transfer such programs and activities to the Colombiangovernment. It continues the so-called "Leahy Amendment" that prohibits funding for anyunits of security forces if the Secretary of State has credible evidence that such unit has committedgross violations of human rights. It makes U.S. assistance to the Bolivian police or military contingent on areport from the Secretary of State that (1) the Bolivian government is vigorously investigating andprosecuting members of the military and police who have been credibly alleged to have committedgross violations of human rights and is punishing those found to have committed such violations;and (2) the Bolivian military and police are cooperating with such investigations andprosecutions. It prohibits assistance to Venezuela if the Secretary of State certifies that thegovernment of Venezuela is assisting, harboring, or providing sanctuary to Colombian terroristorganizations. It exempts $5 million in Economic Support Funds for democracy and rule of lawprograms. Conference Report. The House and SenateForeign Operations Appropriations Bills were included in the FY2004 Consolidated AppropriationsBill ( H.R. 2673 / H.Rept. 108-401 ). The measure passed the House on December 8,2003, and the Senate on January 22, 2004 ( P.L. 108-199 ). The conference report provides $731million for the Andean Counterdrug Initiative, the same as the President's request. It also providesa total of $4.294 billion in Foreign Military Financing, of which the Administration proposedspending $133.5 million in the Andean nations. The conference report included a number ofprovisions relating to the Andean Region. It maintains language authorizing support for a unified campaignagainst narcotics trafficking and activities by organizations designated as terrorist organizations. Report language notes that counternarcotics, alternative development, and judicial reform shouldremain the principal focus of U.S. policy in Colombia. This authority shall cease if the Secretary of State has credible evidencethat the Colombian Armed Forces are not vigorously attempting to restore government authority andrespect for human rights in areas under the effective control of paramilitary and guerrillaorganizations. It maintains the current cap on the number of U.S. military and U.S.civilian contractors at 400 each, in support of Plan Colombia. It maintains language requiring that if any helicopter procured with ACIfunds is used to aid or abet the operations of any illegal self-defense group or illegal securitycooperative, the helicopter shall be immediately returned to the United States. It requires that the Secretary of State, in consultation with theAdministrator of USAID, provide to the Committees on Appropriations a report within 45 days ofenactment and prior to the initial obligation of funds on the proposed uses of all ACI funds on acountry-by-country basis for each proposed program, project, or activity. It requires that not less than $257 million of ACI funds be madeavailable for alternative development and institution building, of which $229.2 million shall beallocated to USAID. It requires that not less than $25 million be made available for justiceand rule of law programs in Colombia. It requires that not less than $13 million, in addition to the $25 millionreferred to above, be made available for organizations and programs to protect human rights. Accompanying report language states that these funds are to be allocated as follows: $2.5 millionfor protecting human rights defenders in Colombia; $2.5 million for the U.N. Office of the HighCommissioner for Human Rights in Colombia; $6.5 million for the Colombian Attorney General'sHuman Rights Unit; and $1.5 million for the human rights unit of the ColombianProcuraduria. It requires that not more than 20% of funds used for the procurementof chemicals for aerial coca and poppy fumigation be made available unless the Secretary of State,in consultation with the Administrator of the Environmental Protection Agency (EPA) certifies that1) the herbicide mixture is in accordance with EPA label requirements for comparable use in theUnited States and any additional controls recommended by the EPA; and 2) the herbicide mixturedoes not pose unreasonable risks or adverse effects to humans or the environment. Further, theSecretary of State must certify that complaints of harm to health or licit crops caused by fumigationare evaluated and fair compensation is being paid for meritorious claims. These funds may not bemade available unless programs are being implemented by USAID, the Colombian government, orother organizations, and in consultation with local communities, to provide alternative sources ofincome in areas where security permits for small-acreage growers whose illicit crops are targeted forfumigation. It requires that not less than $2.5 million be made available for training,equipment, and other assistance for the Colombian National Park Service. It also provides that fundsmay be used for aerial fumigation in Colombia's national parks or reserves if the Secretary of Statedetermines that it is in accordance with Colombian laws and that there are no effective alternativesto reduce drug cultivation in these areas. It prohibits any U.S. military personnel or U.S. civilian contractors fromparticipating in any combat operations in Colombia. It allows the obligation of 75% of assistance to the Colombian ArmedForces without a determination and certification from the Secretary of State regarding respect forhuman rights and severing ties with paramilitary groups. The remaining 25% can be released in twoinstallments of 12.5% each. The first installment can be made provided that the Secretary of Statecertifies that 1) the Commander General of the Colombian Armed Forces is suspending memberswho have been credibly alleged to have committed gross violations of human rights or to have aidedor abetted paramilitary organizations; 2) the Colombian government is vigorously investigating andprosecuting members of the military who have been credibly alleged to have committed grossviolations of human rights or to have aided or abetted paramilitary organizations; 3) the ColombianArmed Forces have made substantial progress in cooperating with civilian prosecutors and judicialauthorities in such cases; 4) the Colombian Armed Forces have made substantial progress in severinglinks to paramilitary organizations; and 5) the Colombian Armed Forces are dismantling paramilitaryleadership and financial networks by arresting commanders and financial backers. The lastinstallment can be made after July 31, 2004, if the Secretary of State certifies that the ColombianArmed Forces are continuing to meet the above conditions and are conducting vigorous operationsto restore government authority and respect for human rights in areas under the effective control ofparamilitary and guerrilla organizations. It also requires that not later than 60 days after enactment,and every 90 days thereafter, the Secretary of State shall consult with internationally recognizedhuman rights organizations regarding progress in meeting these conditions. It denies visas to anyone who the Secretary of State determines willfullyprovided any support to the FARC, ELN, or AUC, or has participated in the commission of grossviolations of human rights in Colombia. None of the funds can be used to support a Peruvian air interdictionprogram until the Secretary of State and the Director of Central Intelligence certify to Congress 30days prior to resuming the program that enhanced safeguards and procedures have beendeveloped. It requires a report by the Secretary of State that the Bolivian militaryand police are respecting human rights and cooperating with investigations and prosecutions ofalleged violations of human rights before ACI funding for Bolivia can bespent. It provides that $17 million in FMF funds may be transferred to andmerged with ACI funds, and made available for aircraft and related assistance for the ColombianNational Police. House Action. Reflecting continuing concernwith the persistent and complex conflict in Colombia, the spill-over of guerrilla and drug traffickingactivities into neighboring countries, and the ongoing involvement of the United States (includingthe kidnaping and killing of American citizens), the House International Relations Committeereported out H.R. 1950 , ( H.Rept. 108-105 , Part 1) on May 16, 2003, with threereporting requirements similar to provisions in the Foreign Relations Authorization for FY2003( H.R. 1646 / P.L. 107-228 ), and with the provision of additional authority related to theinterdiction of illicit arms trafficking. Section 703 of the bill as reported by the House International Relations Committee wouldrequire the Secretary of State, after consulting with internationally recognized human rightsorganizations, to make a very detailed report to Congress, not later than 30 days after enactment andevery 180 days thereafter, on the specific measures that the Colombian authorities are taking toapprehend and prosecute leaders of paramilitary organizations and other terrorist organizations. TheCommittee report expressed concern about the illegal activities not only of two leftist guerrillagroups, the Revolutionary Armed Forces of Colombia (FARC) and the National Liberation Army(ELN), but also of the rightist paramilitary groups, specifically the United Self Defense Forces ofColombia (AUC), that are reported to be responsible for at least half of all non-combatant killings,torture, and disappearances. Noting that the State Department's March 2003 human rights reportfound some continuing collusion with the AUC by members of the Colombian security forces, theCommittee report stated that Colombia's government has not committed at every level to confrontthe paramilitaries and to protect civilians from paramilitary abuses. Section 709 would require the Secretary of State to submit a report on the impact of the U.S.assistance plan known as Plan Colombia on Ecuador and Colombia's neighboring countries toappropriate congressional committees not later than 30 days after enactment. This report is to setforth a comprehensive strategy for United States activities in Colombia, with specific reference tothe impact of U.S. assistance on Ecuador and other adjacent countries, and it is to provide thereasons for the failure to submit a report on this subject as required by the Foreign RelationsAuthorization Act for FY2003. Stating that a State Department report of March 4, 2003, wasinadequate, the Committee report expressed the expectation that a new report "will address in detailnot only the counter-drug repercussions of Plan Colombia and its successor programs on Ecuadorand other adjacent countries, but also the humanitarian and economic development implications ofincreased eradication efforts for these countries." Section 1801 would provide specific authority for U.S. counter-drug assistance which isbeing used to support the interdiction of aerial trafficking of illicit narcotics to be used to supportthe interdiction of illicit arms in connection with illicit drug trafficking. The Committee reportnotes that "this provision ensures that any and all illegal arms brought into Colombia by aerial meansthat are in any way trafficked in connection with the illicit drug trade, are also clearly eligible forU.S. assistance in interdicting." Section 1802 would require the Secretary of State, acting through the Department of State'sNarcotics Affairs Section (NAS) in Bogotá, Colombia, to ensure, not later than 180 days afterenactment, "that all pilots participating in the United States opium eradication program in Colombiaare Colombians and are fully trained, qualified and experienced pilots, with preference provided toindividuals who are members of the Colombian National Police." The Committee report states thatlocal Colombian police anti-drug pilots are more familiar with the terrain and can be more effectivein locating crops, thereby enhancing efforts to eradicate the small but potent opium crop that makesup nearly two-thirds of U.S. heroin use, according to recent United States estimates, while promotingthe Colombianization of the programs and reducing the involvement of U.S. private contractors. On July 16, 2003, the House passed H.R. 1950 by a vote of 382-42. Senate Action. On April 24, 2003, the SenateForeign Relations Committee reported out S. 925 ( S.Rept. 108-39 ), the ForeignRelations Authorization Act of 2004, with one provision related to Colombia and the Andean region. Responding to a request from the Executive Branch, Section 801 of the bill would repeal therequirement in the Emergency Supplemental Appropriation Act for FY2000 ( P.L. 106-246 ) that theState Department report semi-annually on the extradition of narcotics traffickers from Andeancountries. In floor action on S. 925 on July 10, 2003, the Senate approved twoamendments related to Colombia and Andean region assistance, both by voice vote. Amendment 1162, proposed by Chairman Luger, added Section 815, which would modifythe reporting requirements on U.S. personnel involved in the anti-narcotics campaign in Colombiaby changing the frequency of the reports from bimonthly to quarterly, and by clarifying that thereports were to be provided to appropriate committees of Congress. Amendment 1194, proposed by Majority Leader Frist, added Section 2522, which wouldcommend the leadership and people of Colombia for the progress made against illicit drug traffickersand terrorists, and which supported the efforts of President Uribe and the government and the peopleof Colombia to preserve and strengthen democracy, human rights, and economic opportunity inColombia. Senate Action. On May 29, 2003, the SenateForeign Relations Committee reported out S. 1161 , the Foreign AssistanceAuthorization Act of 2004 ( S.Rept. 108-56 ), with several provisions on assistance to Colombia andthe Andean region. Section 122 would authorize $700 million (rather than the $731 million requested) for theAndean Counterdrug Initiative. It provides that assistance for Colombia for FY2004 and previousyears may be used to support a unified campaign against narcotics trafficking and terrorist activities;and to take actions to protect human health and welfare in emergency circumstances, includingundertaking rescue operations. It further provides that U.S. personnel providing such assistance shallbe subject to the personnel caps in the Emergency Supplemental Act for 2000, shall not participatein any combat operation in connection with such assistance; and shall be subject to the condition that Colombia is fulfilling its commitment to the United States with respect to its human rights practices,including specific conditions set forth in the Foreign Operations Appropriations for FY2003. Section 502 provides that information on the extent of involvement of U.S. businesses incounter-narcotics activities under State or Defense Department contracts, required by the previousForeign Relations Authorization, may be reported in the annual report detailing the counter-narcoticsperformance of drug producing and drug transit countries. House Action. On April 4, 2003, RepresentativeDuncan Hunter introduced H.R. 1588 , authorizing appropriations for FY2004 for theDepartment of Defense. The Committee on Armed Services reported the bill on May 16, 2003, withprovisions relating to Colombia ( H.Rept. 108-106 ). The House considered H.R. 1588 on May 20, and 21, with final passage on May 22. With regard to Colombia, Section 1208 of thebill would increase the cap on the number of U.S. military personnel in Colombia to 500, from 400in existing law. It would provide an exemption from the limitation for any members of the armedforces in Colombia to rescue or retrieve U.S. military or civilian personnel. This limitation couldnot be exceeded for a period longer than 30 days. The provision also exempts from the cap (1)military personnel assigned to the U.S. Embassy in Colombia as attaches, as part of the securityassistance office, with the Marine Corps security contingent, (2) personnel participating in naturaldisaster relief operations, and (3) those involved in non-operational transit through Colombia. TheSecretary of Defense is provided with authority to waive these limitations if he deems it in thenational security interests of the United States, and with notification to congressional defensecommittees within 15 days. Section 1047 of the bill would provide authorization for drug interdiction and counterdrugactivities to provide assistance to Colombia to support a unified campaign against drug traffickingand activities by organizations designated as terrorist organizations. Senate Action. On May 13, 2003, Senator JohnWarner introduced S. 1050 , the National Defense Authorization Act of FY2004. OnJune 4, 2003, the Senate took up H.R. 1588 , striking all after the enacting clause andinserting the text of S. 1050 . The measure passed the Senate by voice vote the same dayand conference committee consideration is pending. With regard to Colombia and the Andeanregion, Section 1207 of the bill extends the authority of Section 1033 of the National DefenseAuthorization Act for Fiscal Year 1998 ( P.L. 105-84 ) which authorizes DOD counternarcoticsprograms. It also would renew authority to support counterdrug activities in Peru which had expiredat the end of FY2002. The section also authorizes counternarcotics support through the end ofFY2006 for seven additional countries, including Bolivia and Ecuador, among others, with $40million for each authorized in any fiscal year. The bill directs the Secretary of Defense to providea comprehensive report on how counterdrug funds are spent in each of these nine countries within60 days following the end of each fiscal year for which the program is authorized. Section 1208 of the bill would extend for two additional years the expanded authority to useDOD funds to support a unified campaign against narcotics cultivation and trafficking, and againstterrorist organizations in Colombia. Conference Report. The conference report( H.Rept. 108-354 ) was agreed to by the House on November 7 and by the Senate on November 12,2003, and signed by President Bush on November 24, 2003 ( P.L. 108-136 ). Section 1021 providesauthority for the Defense Department to provide support for counterdrug activities by extendingauthority in Section 1033 of the National Defense Authorization Act for FY1998 ( P.L. 105-84 ) forcounterdrug support to Colombia and Peru. Section 1022 authorizes the Department of Defensejoint task forces to provide for counterterrorism activities to law enforcement agencies, as it does forcounterdrug activities. Section 1023 extends for an additional two years expanded authority to useDefense Department counterdrug funds to support a unified campaign against narcotics cultivationand trafficking and against associated terrorist organizations in Colombia. House Action. On June 11, 2003, RepresentativePorter Goss introduced H.R. 2417 , the Intelligence Authorization Bill for FY2004. Itwas reported ( H.Rept. 108-163 ) from the Committee on Intelligence on June 17, 2003, and approvedby the House on June 27, 2003, by a vote of 410-9. In regard to Colombia, Section 501 authorizesfunds for counterdrug and counterterrorism activities, with provisions similar to the Senate billregarding a unified campaign, a prohibition on participation of U.S. military and contract employees,and caps on U.S. military and contract personnel. (See below.) The report accompanying the billnotes the Committee's concern with regard to the level of resources and personnel allocated tonarcotics trafficking, transnational organized crime, and terrorist activity in Colombia, as well asAfghanistan, and North Korea. It states the expectation that the FY2005 budget request will include"a reinvigorated strategy to combat narcotics trafficking and other transnational organized crime --with appropriate funding and personnel levels for the Director of Central Intelligence's Crime andNarcotics Center (CEC)." Senate Action. On May 8, 2003, Senator PatRoberts introduced S. 1025 , to authorize appropriations for FY2004 for intelligence andintelligence-related activities, including provisions relating to Colombia. The Committee onIntelligence reported the bill the same day ( S.Rept. 108-44 ) while the Committee on Armed Servicesreported the bill ( S.Rept. 108-80 ) on June 26, 2003. Section 313 of the bill authorizes the use offunds for a unified campaign against narcotics trafficking and activities of designated terroristorganizations such as the FARC, ELN, and AUC. This authority shall cease "if the Secretary ofDefense has credible evidence that the Colombian military is not conducting vigorous operations torestore government authority and respect for human rights in areas under the effective control ofparamilitary and guerrilla organizations." Section 313 also maintains caps of 400 each on U.S.military and contractor personnel stationed in Colombia, and prohibits the participation of U.S.military personnel or civilian contractors in any combat operations except for the purposes of selfdefense or search and rescue operations of U.S. Armed Forces personnel, U.S. civilian employees,or civilian contractors employed by the United States. On July 31, 2003, the Senate took up H.R. 2417 , inserting the text of S. 1025 , and passing it the same day. Conference Report. The conference report( H.Rept. 108-381 ) passed the House on November 20, 2003, and the Senate the following day. Itwas signed into law on December 13, 2003 ( P.L. 108-177 ). Section 502 of the agreement authorizesthe use of intelligence funds for a unified campaign against drug trafficking and terrorism inColombia. It also maintains the prohibition on U.S. military or civilian contractors fromparticipating in combat operations in Colombia. Several bills were introduced to designate Colombian and Peruvian citizens under section244 of the Immigration and Nationality Act as eligible for temporary protected status (TPS). H.R. 2843 , introduced on July 24, 2003, would grant TPS to both Colombians andPeruvians. H.R. 2853 , introduced the same day, would grant TPS to just Colombians. Both bills have been referred to the House Judiciary Committee. In the Senate, S. 986 would designate Colombians as eligible for TPS. The bill has been referred to the Senate JudiciaryCommittee. (37) FY2002 Request and FY2002 Allocations by Purpose and by FunctionalAccounts ($ millions) Source: Office of the Secretary of State. International Affairs Function 150 Fiscal Year 2003 Budget Request Summary andHighlights. These data include funding from accounts that comprise the Andean Regional Initiative: International Narcotics Controland Law Enforcement (INCLE.), Andean Counterdrug Initiative, development aid, child survival and health aid, and foreign militaryfinancing. The ARI has not included (and consequently these figures do not include) International Military Education and Trainingfunds, food aid, peace corps funds, or Department of Defense counternarcotics funds. Prepared by [author name scrubbed] and ConnieVeillette, Updated July 17, 2003. Totals may not add due to rounding. The ARI for FY2002 also did not include Foreign Military Finance Funding (FMF). The small amount for Bolivia is included here,even though it was not specifically for counternarcotics purposes, in order to facilitate comparisons with the FY2003 request, whichincludes FMF for Andean Regional Initiative countries. Amounts for Colombia do not include funds from the FY2002 Supplemental:$4 million for ACI; $25 million in counter-kidnaping training; and $6 million to protect the Cano-Limon oil pipeline. Similarly,amounts for Ecuador do not include $3 million in FMF funds. FY2003 Request and FY2003 Allocations by Purpose and by FunctionalAccounts ($ millions) Source: Office of the Secretary of State. International Affairs Function 150 Fiscal Year 2004 Budget Request Summary andHighlights. February 2003. Estimates for FY2003 were provided to CRS by the Department of State. These data include fundingfrom accounts that comprise the Andean Regional Initiative: International Narcotics Control and Law Enforcement (INCLE), AndeanCounterdrug Initiative, development aid, child survival and health aid, and foreign military financing. The ARI has not included (andconsequently these figures do not include) International Military Education and Training funds, food aid, peace corps funds, orDepartment of Defense counternarcotics funds. Totals may not add due to rounding. Note: Amounts for Colombia include the FY2003 Emergency Wartime Supplemental. Not included here, because it is not part ofthe ARI, is $34 million from DOD's counternarcotics program. Prepared by [author name scrubbed], Analyst in Latin American Affairs, July17, 2003. FY2004 Request by Purpose and Functional Accounts ($ millions) Source: Office of the Secretary of State, Resources, Plans and Policy. International Affairs Function 150 Summary and Highlights,Fiscal Year 2004 Budget Request. Prepared by [author name scrubbed], Specialist in International Security Affairs, and [author name scrubbed],Analyst in Latin American Affairs, updated July 17, 2003. Note: The Budget documents submitted by the Administration make reference to the Andean Counterdrug Initiative only. It does notreference the Andean Regional Initiative, which has since its inception, included funding for development assistance, children survivaland health, and economic support fund programs. For purposes of this report, both are included for comparative purposes withprevious years' funding levels.
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In 2003, Congress considered President Bush's requests for FY2004 and FY2003supplemental assistance for Colombia and six regional neighbors in a continuation of the AndeanRegional Initiative (ARI) launched in 2001. ARI was proposed as an expansion of support for PlanColombia, under the Clinton Administration, with more funding for social and economicdevelopment programs for Colombia and its neighbors, who are affected by Colombia's struggleagainst guerrillas and drug traffickers. From FY2000 through FY2003, Colombia and other ARIrecipients have received more than $3 billion in U.S. funding. In early 2003, an FY2003 Emergency Wartime Supplemental bill ( H.Rept. 108-76 / P.L.108-11 ) provided $105 million in additional assistance for the Andean Counterdrug Initiative andrelated programs. This included $34 million for the State Department's International NarcoticsControl and Law Enforcement account, $34 million for the Department of Defense's DrugInterdiction and Counter-Drug Activities account, and $37.1 million in Foreign Military FinancingProgram funds. The President submitted his FY2004 budget request to Congress on February 3, 2003,including $990.7 million for countries comprising the Andean Regional Initiative, including militaryfunding for Colombia. Of the $990.7 million requested, $731 million is for the Andean CounterdrugInitiative, $133.5 million for the Foreign Military Financing Program, with the remainder of theoverall figure in development, economic, and health programs. The House passed H.R. 2800 , ( H.Rept. 108-222 ) the FY2004 ForeignOperations Appropriations Bill, on July 23, 2003, fully funding the President's request for $731million for ACI. The Senate passed S. 1426 ( S.Rept.108-106 ) on October 24, 2003,providing $660 million for ACI, with authority to transfer an additional $37 million from the StateDepartment's International Narcotics Control and Law Enforcement (INCLE) account to ACI. Theconference report ( H.R. 2673 / H.Rept. 108-401 ), passed by the House on December 8,2003, and the Senate on January 22, 2004, provides $731 million. ( P.L. 108-199 signed January 23,2004.) Both the House and Senate passed the FY2003-FY2004 Foreign Relations Authorization Act( H.R. 1950 / S. 925 ), with provisions relating to Colombia and druginterdiction programs in the Andean region. The Senate Foreign Relations Committee reported outthe FY2004 Foreign Assistance Authorization Act ( S. 1161 / S.Rept.108-56 ) with severalmodifications on assistance to Colombia and the Andean region. Congress completed the FY2004National Defense Authorization Act, ( P.L. 108-136 ) providing authorization for drug interdictionand counterdrug activities for DOD programs. It also passed the FY2004 Intelligence AuthorizationAct ( P.L. 108-177 ) authorizing continuing counterdrug and counterterrorism activities. This reportwill not be updated.
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The House and Senate approved $25.086 billion in appropriations for energy and water developmentprograms, $2.1 billion more than the Administration'srequest. The act funds the Corps at $4.49 billion, Interior at $914 million, and DOE at $14.54 billion. The bill wassigned ( P.L. 107-66 ) by the President onNovember 12, 2001. A point of debate in the final passage of H.R. 2311 was an attempt by some Members to increase funding of DOE's nonproliferation programs by$131 million to help secure nuclear materials in Russia. The bill's managers blocked the move but promised to tryto obtain funding in another bill. OnNovember 28 the House passed H.R. 3338 , the FY2002 Defense Appropriations and EmergencySupplemental bill, without the additionalnonproliferation funding, after blocking a move to include it. However, the Senate-passed version ofthe bill included similar funding, and on December 20 boththe House and the Senate passed a conferenced H.R. 3338 with the Senate nonproliferation funding included($226 million). In addition, thesupplemental bill included $30.3 million in security funding for the Bureau of Reclamation and $139 million forthe Corps of Engineers. Table 1. Status of Energy and Water Appropriations,FY2002 The Energy and Water Development Appropriations Act 2002, P.L. 107-66 , includes funding for civil worksprojects of the Army Corps of Engineers, theDepartment of the Interior's Bureau of Reclamation (BOR), most of the Department of Energy (DOE), and a numberof independent agencies, including theNuclear Regulatory Commission (NRC) and the Appalachian Regional Commission (ARC). The Administrationrequested $22.5 billion for these programs forFY2002, compared with $23.6 billion appropriated for FY2001. The House bill contained $23.7 billion and theSenate bill $25.0 billion. The final bill ( P.L.107-66 ) appropriated $25.086 billion. For the Corps of Engineers, the Administration sought $3.9 billion in FY2002, about $600 million less than the amount appropriated for FY2001. TheHouse-passed bill, H.R. 2311 , contained $4.47 billion. The Senate-passed version of H.R. 2311 contained $4.305 billion. The final billapproved $4.49 billion. The Administration requested $820 million for FY2002 for the Department of the Interiorprograms included in the Energy and Water bill-- the Bureau of Reclamation and the Central Utah Project. This would have been an increase of approximately $3.3million over FY2001. The House-passedversion of H.R. 2311 included $843 million for the DOI programs, and the Senate-passed version included$884 million. The final bill appropriated$914 million. The request for DOE programs was $18.1 billion, about $276 million less than the previous year. The House bill approved $18.75 billion, the Senate bill $20.2billion. The final bill appropriated $19.5 billion. The major activities in the DOE budget are energy research anddevelopment, general science, environmentalcleanup, and nuclear weapons programs. (Funding of DOE's programs for fossil fuels, energy efficiency, and energystatistics is included in the Interior andRelated Agencies appropriations bill, H.R. 2217 . The FY2002 net appropriations request for these programswas $1.5 billion. For details see CRS Report RL31006 , Appropriations for FY2002: Interior and Related Agencies. ) For the NuclearRegulatory Commission and other independent agencies funded inTitle IV of the Energy and Water bill, the net appropriations requested for FY2002 was $182 million, compared to$172 million appropriated for FY2001. TheHouse bill contained $136 million and the Senate bill $197 million. The final bill approved $184 million. Table 2. Energy and Water Development Appropriations, FY1995to FY2002 (budget authority in billions of current dollars*) *These figures represent current dollars, exclude permanent budget authorities, and reflect rescissions. Table 2 includes budget totals for energy and water appropriations enacted for FY1995 to FY2001 and the Administration's request for FY2002. Tables 3-7provide budget details for Title I (Corps of Engineers), Title II (Department of the Interior), Title III (Departmentof Energy) and Title IV (independent agencies)for FY2001 - FY2002. The House-passed version of H.R. 2311 recommended $4.468 billion for the civil projects of the U.S.Army Corps of Engineers (Corps) for FY2002,an increase of $568 million above the Administration's request of $3.900 billion. The Senate-passed versionrecommended $4.305 billion. The final billappropriated $4.486 billion. Table 3. Energy and Water Development Appropriations Title I: Corps of Engineers (in millions ofdollars) *Figures reflect enacted levels for FY2001 as reported by the House Appropriations Committee. **Total reflects $25 million recission for Coastal Emergencies. Funding for the Corps' civil works program has often been a contentious issue between the Administration and Congress, with final appropriations typicallyproviding more funding than requested by the Administration, regardless of which political party controls the WhiteHouse and Congress. For FY2001, forexample, Congress added $480 million (12%) to the $4.08 billion requested by the Clinton Administration. Similarly, the FY2002 bill as passed the House wouldhave funded the Corps at almost 15% more than requested by the Bush Administration, and the final billappropriated slightly more than that. Proposed Corps Reforms. The Corps has come under increasing criticism over the way it evaluates andundertakes its projects. Some have called for major agency "reforms"; others have called for review of Corpsprograms and policies. The 106th Congress, inpassing the Water Resources Development Act (WRDA) of 2000 ( P.L. 106-541 , Section 216), directed theCorps to contract with the NationalAcademy of Sciences to study the feasibility of establishing an independent review panel for Corps project studies. Further legislation proposing changes to theproject development and authorization process was introduced in the 107th Congress. The House Appropriations Committee acknowledged the on-going criticisms in its report accompanying H.R. 2311 , and noted its belief that a studyof navigation improvements on the Upper Mississippi River and Illinois Waterway was "poorly managed by theCorps...." The House Appropriations Committeealso commented on the accusations that Corps officials were improperly trying to expand the civil works program;the report states "[t]he Committee finds thiscriticism to be somewhat absurd." The Senate Appropriations Committee also acknowledged recent criticisms ofthe Corps and stated it "is satisfied that theCorps has responded professionally to the issues raised...." Both Committees note that the Corps has a backlog ofapproximately $40 billion in projects. (Formore information, see CRS Report RL30928, Army Corps of Engineers: Reform Issues for the107th Congress. ) Auburn Dam Study. Section 103 of H.R. 2311 , as reported from the House AppropriationsCommittee, would have directed the Corps to include an "alternatives analysis" of a multipurpose Auburn Dam aspart of its American River watershed long-termstudy. However, as part of the rule adopted for consideration of the bill on the House floor, the provision wasdropped. Congress has repeatedly debated complex measures to increase flood protection along the American River in California, in large part to protect the City ofSacramento. Proposals have included strengthening existing levees and flood warning systems, changing theoperation of an existing dam on the river, andbuilding a large new multi-purpose dam near Auburn. Debates over the Auburn Dam and other water supplyproposals for the area have been particularlycontentious - most recently during consideration of the Water Resources Development Act of 1999. Environmentalists generally oppose construction of a highdam at or near the Auburn site, while others interested in developing water supplies for the area have continued tosupport a multi-purpose Auburn dam. Othersweighing in on the debate have advocated strengthening levees and taking other measures to increase floodprotection for the City of Sacramento in lieu ofbuilding a large, multi-purpose dam. Missouri River Water Flows. After extended debate in both the House and the Senate, Section 116 of the finalbill included Senate language that prohibits the use of funds "to accelerate the schedule to finalize the Record ofDecision for the revision of the Missouri RiverMaster Water Control Manual and any associated changes to the Missouri River Annual Operating Plan." Theprovision was a temporary compromise of anon-going issue that had led President Clinton to veto the previous year's Energy and Water Developmentappropriations bill. The central issue behind the revision of the manual is how to operate dams along the Missouri River. Their operation determines the timing of water releases,which affect competing uses of the river such as barge traffic, threatened and endangered species protection, andupstream recreation. In November 2000, the U.S.Fish and Wildlife Service (FWS) issued a biological opinion pursuant to the Endangered Species Act, whichrecommended altering dam operations to providehigher springtime water releases to benefit the pallid sturgeon. This change is also believed by some to benefit otherthreatened and endangered species affectedby current dam operations. The Corps has issued a draft implementation plan and is currently evaluating the effectsof the proposed spring rise on other MissouriRiver water users. The Corps is scheduled to release the new Master Manual no earlier than 2003. The House-passed version of H.R. 2311 prohibited using funds to "revise" the manual "if such revision provides for an increase in the springtimewater release program during the spring heavy rainfall and snow melt period in the States that have rivers draininginto the Missouri River below the Gavins PointDam." Opponents of the House provision claimed it threatened to stop all work on the manual; the Senate versioncontained a milder prohibition against"accelerating" the process. During Senate floor debate both sides agreed to an amendment to allow the Corps toconsider alternatives for species recovery otherthan the much debated "spring rise" recommended in the FWS biological opinion. The amended provision alsodirected the Corps to consider the views of otherfederal and non-federal agencies and individuals "to ensure that other congressionally authorized purposes aremaintained." This language was included in Section116 of the final bill. Everglades. Implementation of a Comprehensive Everglades Restoration Plan (CERP) was authorized in theWater Resources Development Act of 2000 (Title VI). Funding for CERP activities, as well as other Evergladesrestoration projects is included in both the annualEnergy and Water Development Appropriations Act (for the Corps) and in the annual Department of the Interiorand Related Agencies Appropriations Act (forDOI agencies such as the National Park Service and Fish and Wildlife Service). The Energy and Water bill alsoincludes funding for other Everglades and Southand Central Florida projects. For FY01, approximately $150 million for the South Florida ecosystem was in theAdministration request. In addition, the requestincluded $28 million to fund the first of the WRDA 2000 pilot restoration activities. The final bill includedapproximately $95 million for existing Central andSouthern Florida project construction; $20 million for Everglades ecosystem restoration (for CERP activities); and$26 million for Kissimmee river restoration.(For more information, see CRS Report RL20702, South Florida Ecosystem Restoration and the ComprehensiveEverglades Restoration Plan.) For the Department of the Interior, the Energy and Water Development bill provides funding for the Bureau ofReclamation (BOR) and the Central Utah ProjectCompletion Account. For FY2002 the President requested $783.5 million for BOR and $36.2 million for theCentral Utah Project Completion Account (grosscurrent authority). The final appropriation for FY2001 ( P.L. 106-377 ) included $776.5 million for BOR,approximately $10 million more than enacted forFY2000, and $39.9 million for the Central Utah Project Completion Account, the same as enacted for FY2000. TheHouse-passed version of H.R. 2311 included $36.2 million for the Central Utah Project (CUP) - the same as requested - and $806.7 million forBOR. The Senate-passed version included $884million for both programs: $36.2 million for the CUP, and $848 million for BOR. The final bill appropriated $36.2million for CUP and $878 million for BOR,for a total of $914 million. Table 4. Energy and Water Development Appropriations Title II: Central Utah Project CompletionAccount (in millions of dollars) * Includes funds available for Utah Reclamation Mitigation and Conservation Commission activities and $5 millionfor the contribution authorized by �402(b)(2)of the Central Utah Project Completion Act ( P.L. 102-575 ). Totals do not reflect permanent appropriations ofapproximately $1.2 million. Table 5. Energy and Water Development Appropriations Title II: Bureau of Reclamation (in millions ofdollars) *The Senate Appropriations Committee recommended $40 million for CVP activities that support the CALFEDprogram, but no funding for the program itself. Most of the large dams and water diversion structures in the West were built by, or with the assistance of, the Bureau of Reclamation (BOR). Whereas the Corpsbuilt hundreds of flood control and navigation projects, BOR's mission was to develop water supplies and to reclaimarid lands in the West, primarily forirrigation. Today, BOR manages more than 600 dams in 17 western states, providing water to approximately 10million acres of farmland and 31 million people. BOR is the largest supplier of water in the 17 western states and the second largest hydroelectric power producerin the Nation. The FY2002 request for Water and Related Resources, BOR's primary account for managing water and energy projects and programs, was $648.0 million, $31million less than the FY2001 appropriation. The House recommended $679.0 million for this account, and theSenate recommended $732.5 million. The finalbill appropriated $762.5 million for the Water and Related Resources Account. Included in the Water and Related Resources request was $21million for Garrison Diversion Unit in North Dakota, $20.5 million for Mni Wiconi rural watersupply project in South Dakota, and $12 million for Animas-La Plata in Colorado. The House bill included $21million for the Garrison, $25.5 million for the MniWiconi, and $16 million for Animas-La Plata. The Senate bill included $24 million for Garrison, $26 million forMni Wiconi and $16 million for Animas-LaPlata. The final bill funded Garrison at $22.5 million, Mni Wiconi at $30 million, and Animas-La Plata at $16million. (Figures for these three projects do notinclude funds for operations, management, and rehabilitation or repair.) The House Appropriations Committee did not fund the President's request of $20 million for the California Bay-Delta Restoration Program (Bay-Delta, orCALFED). As it did last year, the Committee stated it would not fund the Administration's request until theprogram received an authorization for suchappropriations. No funds were provided for CALFED in FY2001. When the Senate Appropriations Committeereported out S. 1171 July 12, Senator Reid, Chairman of the Energy and Water Subcommittee, said the bill funded $40 million ofCALFED-related projects under other accounts, in theabsence of authorizing legislation. Although an attempt was made on the Senate floor to cut this funding by $10million (as an offset for another unrelatedprogram), the amendment was tabled on a 56-44 vote ( S.Amdt. 1018 ; vote #238). The final bill included $30million in the Water and RelatedResources account for projects supporting the goals of CALFED; however, it did not fund the CALFED programper se. The Conference Committee report, whilekeeping language similar to the Senate bill, directs funding toward several specific CALFED-related projects,including planning for the Sites Reservoir ($0.75million) and assessment of raising Shasta Dam ($1.9 million). Funding for CALFED was requested in BOR's budget, but the appropriation would be allocated among several federal agencies. According to BOR, there are stillunobligated prior year funds that may be used for some CALFED projects. The final bill also included $15 millionfor the Klamath project in Oregon. (For moreinformation on these issues, see CRS Issue Brief IB10019, Western Water Issues. ) The Energy and Water Development bill includes funding for most of DOE's programs. Major DOE activitiesin the bill include research and development onrenewable energy and nuclear power, general science, environmental cleanup, and nuclear weapons programs. TheAdministration's FY2002 request for DOEprograms in the Energy and Water bill was $18.1 billion, about $200 million less than the amount appropriated forFY2001. The House bill contained $18.7billion and the Senate bill $20.1 billion. The final bill appropriated $19.5 billion for DOE programs in Title III. (The FY2002 appropriation request for DOE'sprograms for fossil fuels, energy efficiency, the Strategic Petroleum Reserve, and energy statistics, included in theInterior and Related Agencies appropriationsbill, was $1.50 billion. The final bill, P. L. 107-63, appropriated $1.77 billion for these programs. For details, see CRS Report RL31006 , Appropriations forFY2002: Interior and Related Agencies. ) Table 6. Energy and Water Development Appropriations Title III: Department of Energy (in millions ofdollars) *Figures reflect enacted levels for FY2001 as reported by the House Appropriations Committee. Funding to Combat Terrorism. The Department of Energy is a major participant in activities to combatterrorism, largely because of its role in producing and maintaining nuclear weapons capability. According to OMB'sAugust 2001 report to Congress (see theonline version at http://www.whitehouse.gov/omb/legislative/nsd_annual_report2001.pdf ), the FY2002 requestincluded $792.5 million for these activities, ofwhich $307 million was concerned with weapons of mass destruction (WMD), in this case nuclear weapons. Thiscompared with $710 million appropriated forFY2001, $324 million of it for WMD defense. (These funds are distributed among several activities listed in Table6 above. The OMB report does not specifyhow much is attributed to individual activities.) The major portion of this funding is for physical security of DOE's facilities, and the increase in requested funding would be directed to this activity: $691 millionrequested for FY2002 compared to $594 million appropriated for FY2001. Other DOE activities, identified by OMB as combating terrorism, include preparing for and responding to terrorist acts, $47 million appropriated for FY2001, $45million requested for FY2002, and research and development, $68 million appropriated for FY2001, $56 millionrequested for FY2002. In its report filed October 30 [ H.Rept. 107-258 ], the Conference Committee said it expected new security requirements that arise because of the September 11attacks to be addressed within the $40 billion emergency supplemental appropriation, or to be included in theFY2003 budget submission. The Committee alsodirected the Secretaries of the Army, Energy and Interior each to submit a report to the Appropriations Committeesby February 15, 2002, identifying all knownphysical security requirements that have surfaced since the attacks, and the degree to which they have been funded. Additional funding for DOE's anti-terrorist activities was included in H.R. 3338 , the FY2002 Defense Appropriations and Emergency SupplementalAppropriations bill, passed by both House and Senate on December 20. $118 million was added to DOE's weaponsprogram accounts to increase security atnuclear weapons complex facilities, and $226 million went to the Nonproliferation and National Security Programs. (See below.) Renewable Energy. In May 2001, the Bush Administration issued its revised FY2002 budget request forRenewable Energy programs at DOE. Despite a "growing need for clean and affordable energy," it proposed to cut Renewable Energy funding from $375.7million in FY2001 to $276.7 million (excluding funding for programs under the Office of Science) -- a decrease of$99.0 million (26%) below the FY2001 level. The final bill provided $396 million for renewable energy programs - $120 million more than the request and $20million, or 5%, above the FY2001 level. For the technology programs, the Administration requested $36.8 million less for photovoltaics, $19.5 million less for wind, $13.1 million less for geothermal, and$11.8 million less for concentrating solar power. Also, for the support and implementation programs, it eliminatedthe Renewable Energy Program for AmericanIndians and cut $2.5 million from the International Renewable Energy Program. The House Appropriations Committee, in reporting out H.R. 2311 , reversed some of the cuts proposed by the Administration. The Committee'sreport language said the request has "no clear rationale to explain the selective budget cuts" and no "apparentcoordination" with the National Energy Policy report. At the same time, the report cited a 2000 study by the National Academy of Public Administration that foundan absence of clear goals, priorities, workprogram, and milestones. The Committee report also stressed that DOE technology programs are designed for long-term energy solutions, not immediate relief tothe energy crisis, which is better addressed by incentives other than appropriations. The House billprovided $376.8 million for renewable energy, which is $100.2million (36%) above the request and essentially level with the FY2001 appropriation. Relative to the FY2001 appropriation, however, the House bill included significant cuts in some individual programs. Under technology programs, there werecuts of $5.9 million for Concentrating Solar Power and $2.0 million for Small Hydro. A $9.1 million cut for supportand implementation programs includedreductions of $6.6 million to eliminate the Renewable Energy Program for American Indians, $2.0 million forInternational Renewables, and $1 million forProgram Support. These funding reductions were offset by proposed increases of $6.0 million for Photovoltaicsand $8.0 million for Electric/Storage, whichincluded $4.0 million for the Transmission Reliability Program and $2.9 million for the Superconductivity Program. In reporting out S. 1171 , the Senate Appropriations Committee, noted that although the Administration's National Energy Policy report recognizedthe importance of renewables, "... the Administration's budget, even as amended, it provided inadequate resourcesto accomplish these goals." Thus, theCommittee recommended, and the Senate approved, $435 million, which is $158.3 million more than the request,and $58.2 million more than the Houserecommendation. Relative to the House recommendation, the Senate bill had $11.8 million less for Photovoltaics,and $1.5 million less for Departmental EnergyManagement. However, it also included $12.0 million more for Biomass Power, $11.0 million more forElectric/Storage, $8.0 million more for Hydrogen, $7.4million more for Concentrating Solar Power, $7.0 million more for the National Renewable Energy Lab (NREL),and $6.3 million more for Small Hydro. Also, the Senate bill had $59.3 million more than the FY2001 appropriation. Further, relative to the FY2001 level, the Senate bill had $5.8 million less forPhotovoltaics, $2.6 million less for Renewable American Indian Resources, and $2.0 million less for InternationalRenewables. However, it also included $19.0million more for Electric/Storage, $12.2 million more for Biomass Power, $8.0 million more for Hydrogen, and $8.0million more for NREL. The funding forNREL included $5.0 million to address electric power needs in the Southwest. The final bill appropriated $396.0 million, which was $19.2 million more than the House recommendation and $39.0 million less than the Senaterecommendation. Also, the final bill level was $20.3 million, or 5%, more (excluding inflation) than the FY2001appropriation. This included increases of $11.0million for Electric/Storage, $6.0 million for Biomass/Biofuels and $4.0 million for Hydrogen. However, the finalbill level also had a $7.1 million, or 33%, cutfor Renewable Support and Implementation, including reductions of $3.6 million for Renewable American IndianResources and $2.0 million for InternationalRenewables. Nuclear Energy. For nuclear energy programs -- including reactor research and development, space powersystems, and closing of surplus facilities -- the Bush Administration requested $223.1 million for FY2002, $35million below the FY2001 appropriation. TheHouse-passed bill provided $224.1 million, while the Senate approved $264.1 million. The enacted measureprovides $250.1 million, about $10 million below theFY2001 level but more than $25 million above the request. The Bush Administration requested $18.1 million for FY2002 for the "nuclear energy research initiative" (NERI), a program to support innovative nuclear energyresearch projects, only about half the FY2001 level. The final FY2002 Energy and Water DevelopmentAppropriations bill provides $32 million for this program. The new "nuclear energy technologies" program would have been reduced in the Administration request from $7.5 million in FY2001 to $4.5 million in FY2002;the enacted bill provides $12 million. The program is designed to produce a "Generation IV Technology Roadmap"for near-term commercial deployment ofadvanced nuclear power plants. Included in the approved FY2002 funding is $3 million for sharing the nuclearindustry's costs of applying to the NuclearRegulatory Commission (NRC) for early site permits, combined operating licenses, and design certifications for newreactors and reactor technology, as well as $2million for testing new reactor designs, fuels, and materials at DOE national laboratories. DOE issued an interimreport on new technology deployment in May2001 under the program. Another $4.5 million was requested for "nuclear energy plant optimization" (NEPO), a research program to improve the economic competitiveness of existingnuclear power plants. That level is $500,000 below the FY2001 appropriation, but the final Energy and Water billincreases the program to $7 million. The DOE budget justification contends that federally funded nuclear power research will help ensure the future availability of "the only proven large-scale powersource that has unlimited potential to provide reliable electricity without producing environmentally damaging airemissions." However, environmental groupsand other members of the "Green Scissors Campaign" have targeted DOE's nuclear R&D for elimination,contending that "the highly dangerous radioactive wastethat results from nuclear power eliminates it as an acceptable alternative." (1) Controversy has also been generated by the "electrometallurgical treatment" of DOE spent fuel, a process in which metal fuel is melted and highly radioactiveisotopes are electrochemically separated from uranium and plutonium. DOE decided in September 2000 that suchtreatment would be the best way to rendersodium-bonded spent fuel -- particularly from the closed Experimental Breeder Reactor II (EBR-II) in Idaho -- safefor long-term storage and disposal. DOErequested $15.8 million for the treatment program in FY2002, plus $10.0 million for further development of theprocess. The $25.8 million total request for thetwo programs, funded under Nuclear Facilities Management, represents a boost of about $1 million over FY2001. The House-passed bill further increased theprograms to $26.1 million, the Senate approved the requested funding level, and the enacted bill adopted the higherHouse level. Opponents of electrometallurgical treatment contend that it is unnecessary and that the process could be used for separating plutonium to make nuclear weapons. They note that the process uses much of the same technology and equipment developed for the plutonium-fueledIntegral Fast Reactor, or Advanced Liquid MetalReactor, which was canceled by Congress in 1993 partly because of concerns about nuclear weapons proliferation. No funding was requested for a DOE program established by Congress last year called Advanced Accelerator Applications (AAA), which received anappropriation of $68 million in FY2001 through the Office of Nuclear Energy and the Office of Defense Programs. The primary purposes of the AAA programare to study the use of powerful particle accelerators for producing tritium for nuclear weapons and for transmutinglong-lived radioactive waste into shorter-livedisotopes. The House-passed bill would have provided no new funding for the program, but the Senate approveda total of $70 million - $55 million under OtherDefense Activities and $15 million to close out the Accelerator Production of Tritium (APT) program. The enactedbill provides $50 million for the AAAprogram, including $4.5 million for research on spent fuel treatment in Nevada. No funding was provided for APT. The bill's conferees directed DOE to preparea report by May 2002 on nuclear waste transmutation options. DOE requested $38.4 million to shut down the Fast Flux Test Facility (FFTF) at Hanford, Washington, the same as the FY2001 funding level. FFTF, asodium-cooled research reactor originally designed to support the commercial breeder reactor program, has notoperated since 1992 and had been maintained instandby condition. The Clinton Administration had considered restarting the reactor for nuclear research andmedical isotope production but decided in January2001 to permanently shut it down. The Bush Administration budget request appeared to concur with that decision. However, after the budget was issued, EnergySecretary Abraham suspended DOE's final decision on closing FFTF until late July 2001 to allow time for furtherstudy. Abraham announced a further review ofthe medical isotope production option on August 1, 2001. The House-passed bill included the funding initiallyrequested for closing the facility. The Senate alsoprovided the full funding request but directed DOE to give the House and Senate Appropriations panels a reportafter the latest FFTF review was completed. Theenacted bill also provides the full funding request, but the conferees specified that the money be used only for FFTFshutdown activities "until 90 days afterreceipt of the Secretary's recommendations for alternative actions at FFTF and the approval of those recommendedalternative actions" by the House and SenateAppropriations Committees. Science. DOE's science programs consist of a wide variety of basic research activities designed to explorefundamental science and engineering issues about energy. The programs are high-energy physics, nuclear physics,basic energy sciences (BES), biological andenvironmental research (BER), fusion energy sciences, and advanced scientific computing. Through the Office ofScience programs, DOE is the third largestsupporter of basic research and the largest supporter of physical science research in the federal government. For FY2002, DOE requested $3.160 billion for Science, 0.6% below the FY2001 level. The House-passed bill provided $3.166 billion, 0.2% over the request, but0.4% below the FY2001 level. The House noted its strong support of most of the research funded by the Office ofScience, but stated that constrained resourcesprevented any significant increase in funding for FY2002. The House also directed DOD to prepare a report thatprovides a strategy for improving the connectionbetween the research funded by the Office of Science and energy technology development. The Senate appropriated$3.269 billion for the Office of Science, 3.4%above the request and the FY2001 level. The Senate expressed concern, however, that this increase was inadequate,and that budget constraints made itimpossible to provide these programs with the funds they deserve. The final bill provides $3.233 billion, $53million above the FY2001 level and $73 millionabove the request. DOE requested an increase in funding for BES by 1.3% as a result of an increase of $17.4 million in construction funding for the Spallation Neutron Source(SNS), a large physics research facility at Oak Ridge National Laboratory. The House provided an increase of $2million over the request for BES for FY2002and the full request for the SNS construction. The Senate approved an increase of $36.0 million above the requestfor BES. The final bill provides $1.004 billionfor BES, $1 million below the request, including full funding for the SNS. For BER, DOE's request is 8.2% below the FY2001 level because of the completion of 24 projects mandated by Congress in the FY2001 appropriations. DOEdid not request additional funds for those projects. The House bill provided an increase of $2.9 million above therequest, which would put the BER program7.6% below the FY2001 level. The Senate approved an increase of $47.0 million above the request for BER. Onenew initiative is being proposed this year, theGenomes-to-Life project, within BER, that follows from the human genome sequencing project. The new projectwould make use of DOE computational andadvanced imaging capabilities to examine the behavior of proteins encoded by DNA, and to build computer modelsof cellular behavior. The House-passed billwould fully fund this project. The Senate approved a $10 million increase over the request for this initiative. Thefinal bill approved a level of $527.4 million forBER, $84.4 million above the request. Most of the increase is for projects specifically identified by Congress. Theconferees did not approve any such projectsincluded in either the separate House or Senate bills. Funding for the nanoscience initiative begun this year is expected to remain at current levels. DOE did request $4 million for the establishment of three to fivenanoscale science research centers. The House indicated its support for this initiative but directed DOE to ensurethat the nanoscience centers be selected on acompetitive, peer review basis. The Senate approved funding to meet the full request for these centers andexpressed its strong support for the program. The finalbill included $3 million to begin engineering and design for these three nanoscience centers. DOE also requestedlevel funding for the advanced scientificcomputing and networking initiative, announced last year, that are housed in the Advanced Scientific ComputingResearch (ASCR) program. The House andSenate bill provided the full request for the Advanced Scientific Computing program. The final bill, however,reduced this amount by $5 million below therequest. In the report accompanying the final bill, Congress expressed its support for the Scientific Discoverythrough Advanced Computing program. It alsourged DOE to ensure maximum involvement of the academic community in the ASCR program. The House directed DOE to provide a rationale linking the programs within the Office of Science and the nations' energy needs. It stated that DOE does not seemto have a clear plan or policy making that connection and that there was little coordination between the Office ofScience and the DOE Energy Resource R&Dprograms. Neither the Senate or the final bill, however, contained this language. The House also directed DOEto prepare an implementation plan to transfersafety and health regulation of its nuclear facilities at the non-defense laboratories to the Nuclear RegulatoryCommission and Occupational Safety and HealthAdministration in FY2003. Currently, DOE is self-regulating as authorized by the Atomic Energy Act of 1954. The facilities that would be affected include all ofDOE's major basic research facilities that generate nuclear reactions. Again, such language did not accompany theSenate or the final bill. Nuclear Weapons Stockpile Stewardship. Congress established this program in the FY1994 National DefenseAuthorization Act ( P.L. 103-160 ) "to ensure the preservation of the core intellectual and technical competencies ofthe United States in nuclear weapons." Theprogram is operated by the National Nuclear Security Administration (NNSA), a semiautonomous agencyestablished by Congress in the FY2000 NationalDefense Authorization Act ( P.L. 106-65 , Title XXXII) within the Department of Energy (DOE). Its central goalis to maintain the safety and reliability of the U.S.nuclear stockpile without nuclear testing. In a 1994 statement that is still in effect, the Department of Defense, asthe customer of DOE's nuclear weapons, did notrequire DOE to undertake "new-design nuclear warhead production," but required DOE to "[d]emonstrate capabilityto refabricate and certify weapon types in[the] enduring stockpile" and "[m]aintain capability to design, fabricate, and certify new warheads." Stockpile stewardship consists of all activities in NNSA's Weapons Activities program, for which $5,300.0 million was requested and $5,429.2 million wasappropriated for FY2002, compared to $5,006.2 million appropriated for FY2001. Appropriations conferees statedthat the FY2002 appropriation was actually$400.9 million above the request. While the request included $271.1 million for program direction activities, thefinal legislation transferred that funding to theOffice of the NNSA Administrator, effectively reducing the Weapons Activities request to $5,028.9 million. Thethree main elements of stockpile stewardship,described below, with their requested and appropriated amounts, respectively, are Directed Stockpile Work,$1,043.8 million and $1,045.8 million; Campaigns,$1,996.4 million and $2,167.1 million; and Readiness in Technical Base and Facilities, $1,447.0 million and$1,553.1 million. The final legislation also provides$200.0 million for a new program to upgrade nuclear weapons complex facilities and infrastructure. In earlier action on the measure, the House-passed bill, H.R. 2311 , funded Weapons Activities at $5,123.9 million. The Senate AppropriationsCommittee reported S. 1171 on July 12 with $6,062.9 million for Weapons Activities. Energy and WaterSubcommittee Chairman Harry Reid saidthe bill's funding was "a huge increase, but necessary to get the NNSA...programs back on track." The committee'sreport ( S.Rept. 107-39 ) noted such concernsas the long time before new components for aging weapons can be certified, an "unacceptable decline in the physicalplants," and the lack of progress towardestablishing an enduring production complex. The Senate passed the bill on July 19 without amending the WeaponsActivities section. NNSA manages two major programs in addition to Weapons Activities: Defense Nuclear Nonproliferation ($773.7 million requested, $803.6 millionappropriated; see below) and Naval Reactors ($688.0 million requested and appropriated). Total funding for NNSA,including the foregoing elements and severalsmaller ones, was $6,776.8 million requested and $7,233.5 million appropriated. Most stewardship activities take place at the nuclear weapons complex, which consists of three laboratories (Los Alamos National Laboratory, NM; LawrenceLivermore National Laboratory, CA; and Sandia National Laboratories, NM and CA), four production sites (KansasCity Plant, MO; Pantex Plant, TX; SavannahRiver Site, SC; and Y-12 Plant, TN), and the Nevada Test Site. NNSA manages and sets policy for the complex;contractors to NNSA operate the eight sites. Directed Stockpile Work (DSW). This program involves work directly on nuclear weapons in the stockpile,such as monitoring the condition of weapons and maintaining them through repairs, refurbishment, life extension,and modifications. It includes R&D to supportactivities to be undertaken for specific warheads. FY2002 activities include refurbishment of the W87 warhead forthe MX (Peacekeeper) missile, developmentengineering to modify the fins on certain B61 bombs, studies to examine aging of the secondary stage(thermonuclear component) of other B61 bombs, a study onlife extension and upgrades to the W80 cruise missile warhead, and engineering on the W76 warhead for Trident missiles to extend the warhead's life, upgradecertain components, and refurbish elements of the nuclear explosive package. Conferees expressed concern thatthe Administration's Nuclear Posture Review,which was nearing completion when the conference bill was passed, could result in funds spent by NNSA in earlyFY2002 being "wasted effort." Accordingly,the conferees instructed NNSA to minimize use of FY2002 Weapons Activities funds for "weapon-uniqueinvestments." They expressed particular concern aboutrefurbishing the W80 warhead given that DOD had not budgeted any funds to extend the life of the air-launchedcruise missile, which carries the W80, andaccordingly required advance approval by the Armed Services and Appropriations Committees for using FY2002funds for long-term life extension of thatwarhead. Campaigns. These are "focused scientific and engineering efforts" that seek to "develop and maintain specialcapabilities and tools needed for continued certification of the stockpile ... in the absence of underground nucleartesting." For FY2002, there are 17 campaigns,with requests ranging from $1.3 million to $747.1 million. Examples (with FY2002 and FY2001 appropriations,respectively) are: Enhanced Surveillance ($82.3million vs. $106.7 million), which seeks to assess lifetimes of weapons components and predict defects resultingfrom aging; Advanced Design and ProductionTechnologies ($75.5 million vs. $75.7 million), which seeks to improve individual manufacturing processes,integrate product information, and develop the abilityto fabricate complex parts in small lots; and Tritium Readiness ($196.9 million, vs. $167.0 million), which isdeveloping means of using a commercial light waterreactor to produce tritium, an isotope of hydrogen that is a key ingredient in nuclear weapons. "Nuclear WeaponsStewardship R&D," below, offers details on keyR&D programs, including some funded by Campaigns. One campaign that has attracted much congressional interest, and the greatest increase above the FY2002 request ($128.5 million requested, $219.0 millionappropriated), is Pit Manufacturing and Certification. Pits are the fissile cores of nuclear warheads that trigger thethermonuclear secondary stage. The UnitedStates has been unable to produce pits for use in stockpiled weapons since 1989, when DOE suspended pitproduction at Rocky Flats Plant (CO). As a result, theUnited States has been unable to make all-new nuclear warheads of existing or advanced new designs. Thecampaign supports two pit projects: installation of alow-capacity pit production facility, and supporting R&D, at Los Alamos National Laboratory; and planningfor a higher-capacity pit facility. R&D, procurement,and construction costs for the two projects might total some $5 billion over two decades. The appropriated amountincludes $213.0 million, which NNSA toldCongress in September 2001 was the projected FY2002 cost for the program; $2.0 million for pit activities notspecifically supporting the W88 warhead for theTrident II missile; and $4.0 million for preconceptual design activities for the higher-capacity pit facility. In earlier action on this issue, the House Appropriations Committee recommended the requested amount for FY2002, but asserted that DOE cannot show "that ithas a viable plan to manufacture and certify pits on the schedule dictated by national security needs," criticized theproject as "years behind schedule and hundredsof millions of dollars over the original cost estimate," and stated that it will judge NNSA's success on how well thepit project succeeds. The SenateAppropriations Committee recommended increasing funding by $109.2 million to $237.7 million. The committeesought to "fully fund" all relevant activities,viewing the current schedule, which would not certify a pit for use in the stockpile until FY2009, as "unacceptable." Readiness in Technical Base and Facilities (RTBF). This program provides infrastructure and operations at thenuclear weapons complex sites. The request included eight categories. By far the largest was Operations ofFacilities ($830.4 million requested, $897.8 millionappropriated). Other large categories include Program Readiness, which supports activities occurring at multiplesites or in multiple programs ($188.1 millionrequested, $192.0 million appropriated), Material Recycle and Recovery ($101.3 million $90.3 millionappropriated), and Construction ($1,447.0 millionrequested, $1,553.1 million appropriated). Specific RTBF items in the final legislation include an additional $25.0million for Pantex Plant, an additional $10.0million for Y-12 Plant, $10.0 million for the National Center for Combating Terrorism at the Nevada Test Site, and$88.9 million for nuclear weapons incidentresponse. Nuclear Weapons Stewardship R&D. An important part of the stockpile stewardship program is aimed atdeveloping the science and technology to maintain the nation's nuclear weapons stockpile in the absence of nucleartesting. Principal activities are thedevelopment of computational capabilities that can simulate weapons explosions and perform other importantcomputations, and experimental facilities tosimulate and test various aspects of weapons behavior without resorting to a full-scale explosion. DOE's weaponsR&D efforts are spread across all threestewardship programs: directed stockpile work, campaigns, and readiness in technical base and facilities (RTBF). (2) For FY2002, DOE requested $2.506 billion for nuclear weapons R&D, an increase of 6.2% above the FY2001 level. Included in the request are $738.0 millionfor Advanced Simulation and Computing (ASC), $467.9 million for Inertial Confinement Fusion (ICF) (including$245.0 million for the National Ignition Facility(NIF)) and $379.7 million for other R&D within the Campaigns account; $305.5 million for StockpileR&D within the Directed Stockpile Work (DSW) account;and $614.5 million for R&D within the RTBF account. All of these amounts are above the current year's levelexcept Advanced Computing, which wouldreceive $9 million less than FY2001. For FY2002, increased activity is expected on assessment and certification of selected weapons within the stockpile. Funding for advanced radiography isscheduled to decline because of the completion of the Dual Axis Radiographic Hydrodynamic Test (DARHT)facility at Los Alamos. Under the AdvancedScientific Computing activity, efforts are expected to focus on developing the 30 TeraOps supercomputer at LosAlamos National Lab and the visual interactiveenvironment for weapon simulation strategy that would permit researchers realtime visualization of the output ofASC computers. Under RBTF, funding addedby Congress for FY2001 in support of pulsed power and microelectronics research at Sandia National Laboratorywould not be requested for FY2002. For the NIF project, construction funding would increase by 24.2%. The FY2002 request meets the requirements of the project "rebaseline" submitted toCongress in September 2000 as a result of the large cost overrun incurred in 1999. The FY2002 request does notmake any change in the scope or mission of thefacility. Currently, first laser light is expected in June 2004 and the project is scheduled to be completed inSeptember 2008. In the ICF request justification, DOEnoted that the level of funding it is requesting for NIF risk reduction and technology development activities is lessthan that recommended in the rebaseline. DOEstates, however, that lower funding is acceptable given the priorities of the entire stockpile stewardship budgetrequest for FY2002. The House bill provided $2.44 billion for nuclear weapons R&D, 2.7% below the request but 3.3% above the FY2001 level. The House cut $100 million from therequest for the Advance Simulation and Computing program. The noted advances in the private sector in highperformance computing technology as well as theCommittee's support of the Advanced Scientific Computing Research (ASCR) program in the DOE Office ofScience in arguing that the ASC program in DOE'sOffice of Defense Programs may need to rethink its current strategy. The House approved full funding for NIFconstruction but did note its concerns about theprogram. In particular, it cited a recent GAO report about the project and directed DOE to address the GAOfindings. (3) The House also added $25 million to theICF program for work on high average power lasers. All other activities within the weapons R&D programwould be funded at full request by the House-passedbill. The Senate approved $2.79 billion for nuclear weapons R&D, 11.3% above the request and 18.3% above the FY2001 level. The Senate noted that whilesignificant progress has been made in developing the science and technology for stockpile stewardship, thecertification capability is still a long way off. The Senate approved an increase of $59.68 million for directed stockpile work R&D, an additional $25.29 million for advanced radiography, an increase of $24.5million for inertial confinement fusion, and an increase of $34.0 million for advanced simulation and computing(ASC). The extra advanced radiography fundsare to be used for design of an advanced hydrodynamic test facility while the additional ASC funds are for variousASC construction projects. The Senate alsoappropriated an increase of $65 million above the request for construction of the microsystems and engineeringscience applications project at Sandia NationalLaboratory. As for NIF, the Senate approved full funding but noted that a high level of oversight and managementattention was still necessary for the project. The Senate also noted the GAO report and expressed concern that individuals with NIF oversight responsibilitywhen it suffered major cost overruns, are still inthat role. In the final bill, Congress provided $2,629.0 million for nuclear weapons R&D for FY2002, 4.9% above the request and 11.4% above the FY2001 level. Included in the appropriation are $349.0 million for directed stockpile work R&D, $1,631.8 million forcampaigns (including $506.4 million for ICF and $729.8million for the ASC program), and $658.1 million for R&D activities within RTBF. An additional $25 millionwas provided for continued R&D and design of theadvanced hydrodynamic test facility. The ICF program was appropriated an additional $39.5 million, and the fullrequest for NIF construction funding wasprovided. Nonproliferation and National Security Programs. DOE's nonproliferation and national security programsprovide technical capabilities to support U.S. efforts to prevent, detect, and counter the spread of nuclear weaponsworldwide. These nonproliferation and nationalsecurity programs are included in the newly established National Nuclear Security Administration (NNSA). The Bush Administration's FY2002 request for these programs was $773.7 million, a decrease of $100.5 million from FY2001. Most of the reductions wouldhave been Research and Development, Arms Control, and International Materials Protection, Control andAccounting (IMPCA) programs, which would have beenreduced 16%, 32% and 18% respectively. Construction of the MOX Fuel Fabrication Facility, which is intendedfor disposing of U.S. surplus weapons plutoniumby using it as fuel in nuclear power reactors, would have received a large increase, from $26 million in FY2001 to$63 million in FY2002. The House bill, H.R. 2311 , restored some of the Administration's proposed cuts, increasing R&D $10 million to $216 million, and boosting IMPCA$51 million to $190 million. Arms control, however, would have been reduced further under the House bill, to$75.7 million. The total nonproliferation andnational security program funding in the House bill was $845.3 million. S. 1171 , as passed by the SenateJuly 19, funded these programs at $880.5million. The final bill appropriated $803.6 million. The Conference Committee voted down a proposal by Representative Edwards to redirect $130 million from other weapons program funding to increasenon-proliferation activities in the Former Soviet Union. Promises were made to seek funding in other appropriationsbills, and during floor debate on the billNovember 1 Energy and Water Development Subcommittee Chairman Callahan repeated the promise toRepresentative Edwards. On November 28 the Housepassed H.R. 3338 , the FY2002 Defense Appropriations and Emergency Supplemental bill, without theadditional nonproliferation funding, afterblocking a move to include it. However, the Senate-passed version of H.R. 3338 contained $226 million forDOE's Defense Nuclear Nonproliferationprograms (Division b, Chapter 5), and that funding survived in the conference bill passed by both House and SenateDecember 20. Included in the additional $226million was $78 million for Nonproliferation and Verification R&D, $15 million for the IPP and NCI programswithin Arms Control, $120 million for MaterialsProtection, Control and Accounting, $10 million for international Nuclear Safety, and $3 million for programadministration. This FY2002 funding is in additionto the $803.6 million appropriated in the Energy and Water Development Appropriations Act, P. L. 107-66. Environmental Management. DOE's Environmental Management Program (EM) is responsible for cleaning upenvironmental contamination and disposing of radioactive waste at DOE nuclear sites. DOE requested $6.33 billionfor the program for FY2002, nearly $450million below the comparable FY2001 level. This includes $5.74 billion for defense-related EM and $592 millionfor non-defense EM. The House-passed billincluded $699 million more than the request, for a total of $7.03 billion. The Senate approved $7.28 billion, nearly$950 million above the request. The enactedbill provides $7.14 billion, $170 million above the FY2001 level and $803 million above the request. The FY2002 EM budget request was based on the program's accelerated cleanup strategy, which attempts to maximize the number of sites that can be completelycleaned up by the end of FY2006. DOE managers contend that substantial long-term savings can be gained byfocusing on completing work at those sites,allowing the earliest possible termination of infrastructure costs. Major sites scheduled for shutdown during thatperiod are included in the "defense facilitiesclosure projects" account, for which $1.05 billion was requested, about $30 million below the FY2001 level; theHouse voted to boost that amount by about $40million and the Senate by $30 million, and the enacted bill provides the higher House level. The largest facilitiesunder that account are the Rocky Flats site inColorado and the Fernald site in Ohio. Another $912 million was requested for "site/project completion," for cleanup activities to be finished by 2006 at DOE sites that will remain in operation. TheHouse voted $1.04 billion for that program, while the Senate approved $1 billion. The final bill provides theSenate-passed level, specifying an additional $77.3million for cleanup projects at the Savannah River Site in South Carolina, the Hanford Site in Washington, and otherDOE locations. Despite the 2006 cleanup goal, the bulk of EM's funding is in the defense and non-defense "post-2006 completion" accounts, plus a separate account for theOffice of River Protection that handles high-level waste disposal at Hanford. This category includes cleanupprojects that are expected to continue significantlyafter 2006. The Administration sought $2.92 billion for post-2006 completion, nearly $300 million below theFY2001 level; the House bill would have provided$3.39 billion and the Senate $3.59 billion. The enacted measure adds $389.5 million to the budget request forprojects at the Idaho National Engineering andEnvironmental Laboratory, Savannah River, Hanford, and other sites, for a total of $3.57 billion. The final bill alsoprovides $1.033 billion for the Office of RiverProtection, $221 million above the request. Civilian Nuclear Waste. DOE requested $445 million for the civilian nuclear waste program in FY2002 - morethan $50 million (14%) above the FY2001 base appropriation of $391 million. The House voted to cut the requestby $2 million. However, the Senate voted tocut the program to $275 million, a move that drew controversy during floor debate. The final bill provides $375million for the program. As required by the Nuclear Waste Policy Act, DOE is studying Yucca Mountain, Nevada, as the potential site for a national waste repository, currently scheduledto open in 2010. In recommending deep cuts in the waste program, the Senate Appropriations Committee contendedin its report that DOE had spent $8 billion onwaste site studies without showing that Yucca Mountain would be suitable. The Senate Committee report describeda number of potential problems with YuccaMountain and recommended that DOE not issue a recommendation to build a repository at the site until completingwork on key technical issues. Senate Energyand Water Subcommittee Chairman Harry Reid of Nevada strongly opposes using Yucca Mountain as a nationalnuclear waste repository. The Senate Appropriations Committee's recommended funding cut for the nuclear waste program drew significant opposition on the Senate floor. SenatorMurkowski warned that the reduction would delay the program by several years and force layoffs of 650 federal andcontractor personnel working on the YuccaMountain project. In response to such criticism, Senator Reid added a Sense of the Senate resolution to the Energyand Water Appropriations bill that urgedSenate conferees to "ensure that the levels of funding included in the Senate bill for the Yucca Mountain programare increased to an amount closer to thatincluded in the House-passed version. . . ." Even with the funding increase sought by the Bush Administration, the next several program milestones would have been pushed back, according to the budgetrequest. A final Environmental Impact Statement (FEIS) for the proposed Yucca Mountain repository and theaccompanying site recommendation by the Secretaryof Energy will be delayed from FY2001 to FY2002, and perhaps further, according to recent press reports. (4) If the site is recommended by the Secretary andapproved by the President, a license application to the Nuclear Regulatory Commission (NRC) would not besubmitted until FY2003, rather than FY2002 aspreviously planned. Energy and Water Conferees directed DOE to submit the site recommendation and FEIS byFebruary 28, 2002, and to begin terminatingYucca Mountain activities if the findings were negative. Funding for the program comes from two sources. Under the FY2002 budget request, $135 million was to be provided from the Nuclear Waste Fund, whichconsists of fees paid by nuclear utilities, and $310 million from the defense nuclear waste disposal account, whichpays for disposal of high-level waste generatedby the nuclear weapons program. The House bill provided the full request for the defense account and cut $2million from the Nuclear Waste Fund appropriation. The Senate would have provided $25 million from the Nuclear Waste Fund and $250 million from the defenseaccount. The final bill provides $95 million fromthe Nuclear Waste Fund and $280 million from the defense account. The 2010 target for opening a permanent repository is 12 years later than the Nuclear Waste Policy Act deadline of January 31, 1998, for DOE to begin takingwaste from nuclear plant sites. Nuclear utilities and state utility regulators, upset over DOE's failure to meet the1998 disposal deadline, have won two federalcourt decisions upholding the Department's obligation to meet the deadline and to compensate utilities for anyresulting damages. Utilities have also won severalcases in the U.S. Court of Federal Claims, although specific damages have not yet been determined. In August2000, a U.S. appeals court ruled that utilities couldsue DOE for damages without first pursuing administrative remedies. Power Marketing Administrations. DOE's four Power Marketing Administrations (PMAs) developed out ofthe construction of dams and multi-purpose water projects during the 1930s that are operated by the Bureau ofReclamation and the Army Corps of Engineers. The original intention behind these projects was conservation and management of water resources, includingirrigation, flood control, recreation and otherobjectives. However, many of these facilities generated electricity for project needs. The PMAs were establishedto market the excess power; they are theBonneville Power Administration (BPA), Southeastern Power Administration (SEPA), Southwestern PowerAdministration (SWPA), and Western Area PowerAdministration (WAPA). The power is sold at wholesale to electric utilities and federal agencies "at the lowest possible rates ... consistent with sound business practice," and priority onPMA power is extended to "preference customers," which include municipal utilities, co-ops and other "public"bodies. The PMAs do not own the generatingfacilities, but they generally do own transmission facilities, except for Southeastern. The PMAs are responsible forcovering their expenses and repaying debt andthe federal investment in the generating facilities. The 104th Congress debated sale of the PMAs and did, in 1995, authorize divestiture of one PMA, the Alaska Power Administration. There has been no press todispose of the remaining PMAs, and none seems likely given the broader uncertainties governing electric utilityrestructuring. The Administration's request for SEPA, SWPA, and WAPA for FY2002 was $205.1 million, a very slight increase over the FY2001 appropriation of $200.1million. The House-passed H.R. 2311 increased the Western PMA by $2.7 million to $172.2 million,bringing the total PMA budget to $207.8million. The Senate approved $205.1 million, consistent with the request. The conferees settled on $207.5, a veryslight reduction from the House-approvedlevel. The conferees stipulated that not less than $200,000 would be provided to WAPA to conduct a technicalanalysis of the costs and feasibility of transmissionexpansion methods and technologies. BPA receives no annual appropriation, but funds some of its activities from a permanent borrowing authority, currently $3.75 billion. For FY2002 BPA plans toborrow $374.5 million, to be used for transmission system construction, system replacement, energy resources, fishand wildlife, and capital equipment programs. BPA also requested an additional $2 billion in permanent borrowing authority "to address critical infrastructureneeds." The Senate bill included the additional $2billion for the permanent authority, but the House Appropriations Committee said it did not have enoughinformation to approve the increase. No increase inpermanent borrowing authority was included in the final bill. Beginning with FY2001, the PMAs were authorized to use power revenues from their customers to fund power purchases to supplement federal generation.Previously, under the Purchase Power and Wheeling Program (PPW), the PMAs used appropriated funds for thesepurchases. One probable reason for the changewas that the money appropriated to the PMAs under PPW was repaid to the Treasury rather than to DOE. Thismeant that the PPW appropriation was fully scoredagainst the caps on discretionary domestic spending with which DOE must comply. The House and Senatecontinued to favor this approach for FY2002. Federal Energy Regulatory Commission (FERC). The appropriations provisions for FERC are generally notcontroversial, since the agency receives in fees the entire cost of operations. In the version of H.R. 2311 reported out by the House AppropriationsCommittee, however, was a provision prohibiting FERC from using funds to authorize construction of theGulfstream Natural Gas Project, which would pipenatural gas from the Gulf of Mexico from Mobile, AL, to Florida. When the bill came up on the floor of the HouseJune 28, an amendment by RepresentativeDavis of Florida to strike the prohibiting language was defeated by a vote of 210 to 213. The provision does notappear in S. 1171 as reported by theAppropriations Committee July 12. Independent agencies that receive funding from the Energy and Water Development bill include the NuclearRegulatory Commission (NRC), the AppalachianRegional Commission (ARC), and the Denali Commission. Table 7. Energy and Water Development Appropriations Title IV: Independent Agencies (in millions ofdollars) *Includes appropriations from the Nuclear Waste Fund, and excludes the NRC Inspector General's Office Nuclear Regulatory Commission. . The Nuclear Regulatory Commission (NRC) requested a total budget of$513.1 million for FY2002, including $6.2 million for the NRC inspector general's office. The funding requestprovided an increase of $25.8 million fromFY2001, including a boost of nearly $700,000 for the inspector general's office. Major activities conducted by NRCinclude safety regulation and licensing ofcommercial nuclear reactors, licensing of nuclear waste facilities, and oversight of nuclear materials users. The House-passed bill added $10 million to the NRC budget request to help cover the anticipated costs of reviewing new reactor designs and applications for earlysite permits for potential new reactors. According to the House Appropriations Committee report, "Industry hasrecently indicated intent to submit at least oneearly site permit application . . . in fiscal year 2002, and several firms have already initiated preliminary discussionswith the NRC regarding new reactor designs." Following the House action, the Senate also provided a $10 million increase from the budget request to cover thecosts of new license reviews, designcertifications, and site permits. The enacted Energy and Water bill provides the $516.9 million approved by bothHouses. The House approved NRC's requested increase for the NRC inspector general's office, but the Senate voted to hold the office to the FY2001 level of $5.5 million. The final bill includes the higher House figure, bringing total NRC funding to $523.1 million. The House and Senate Appropriations Committees sharply criticized NRC in 1998 for allegedly failing to overhaul its regulatory system in line withimprovements in nuclear industry safety. The committees contended, among other problems, that NRC's regionaloffices were inconsistent with one another, thatNRC was inappropriately interfering with nuclear plant management, and that numerous NRC review processeswere outdated and unnecessary. But the panelspraised NRC for changing its regulatory process during the FY2000 budget cycle, and have continued supportingthe agency's regulatory initiatives. On the otherhand, industry critics have raised concerns that NRC's new procedures may result in relaxed safety oversight. For most of the past decade, NRC's budget has been offset 100% by fees on nuclear power plants and other licensed activities, including the DOE nuclear wasteprogram. The nuclear power industry had long contended that the fee structure required nuclear reactor owners topay for a number of NRC programs, such asforeign nuclear safety efforts, from which they did not directly benefit. To account for that concern, the FY2001Energy and Water Appropriations Bill includedan NRC proposal to phase down the agency's fee recovery to 90% during the subsequent 5 years - two percentagepoints per year. As a result, 96% of theFY2002 NRC appropriation - minus $23.7 million transferred from the Nuclear Waste Fund to pay for licensingactivities involving the proposed YuccaMountain, Nevada, nuclear waste repository - is to be offset by fees on licensees. However, the bill approved bythe Senate would have required that fees coveronly half of the $10 million added to the NRC request to pay for reviews of new licenses, permits, and certifications. The Energy and Water Conferees did not goalong with the Senate position, so the enacted bill requires that fees recover 96% of the additional $10 million, aswith the rest of the NRC budget. CRS Issue Brief IB88090. Nuclear Energy Policy CRS Issue Brief IB92059. Civilian Nuclear Waste Disposal. CRS Issue Brief IB10041. Renewable Energy: Tax Credit, Budget, and Electricity Restructuring Issues CRS Issue Brief IB10019. Western Water Issues. CRS Report RL30307(pdf) . Department of Energy Programs: Programs and Reorganization Proposals. CRS Report 96-212. Civilian Nuclear Spent Fuel Temporary Storage Options. CRS Report RL30445. Department of Energy Research and Development Budget for FY2001: Description and Analysis. CRS Report RS20702 . South Florida Ecosystem Restoration and the Comprehensive Everglades Restoration Plan. CRS Report RL30928. Army Corps of Engineers: Reform Issues for the 107th Congress. CRS Report RS20569 . Water Resource Issues in the 107th Congress. CRS Report RS20866 . The Civil Works Program of the Army Corps of Engineers: A Primer.
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The Energy and Water Development appropriations bill includes funding for civil works projects of the Army Corps of Engineers, the Department of the Interior'sBureau of Reclamation (BOR), most of the Department of Energy (DOE), and a number of independent agencies. The Bush Administration requested $22.5billion for these programs for FY2002 compared with $23.6 billion appropriated in FY2001. The House bill,( H.R. 2311 ), passed on June 28, 2001,allocated $23.7 billion for these programs. The Senate approved its version of the bill July 19, 2001, with $25.0billion. The final bill appropriating $25.086billion was approved by both houses on November 1, 2001 and enacted on November 12, 2001 as P.L. 107-66 . Key issues involving Energy and Water Development appropriations programs included: authorization of appropriations for major water/ecosystem restoration initiatives for the Florida Everglades and California"Bay-Delta"; general provisions concerning operation of federal water projects on the Missouri River; proposed reductions in spending for solar and renewable energy; the electrometallurgical treatment of nuclear spent fuel for storage and disposal, a process that opponents contend raises nuclear proliferationconcerns; cost and management of the National Ignition Facility (NIF) in DOE's Nuclear Weapons Stewardship program; restricted funding of physical sciences research in DOE contrasted with major increases in life sciences research in the National Institutes ofHealth; and proposed higher funding for DOE's civilian nuclear waste management program as the Department nears a decision on building a wasterepository under Nevada's Yucca Mountain. Key Policy Staff Division abbreviations: RSI = Resources, Science, and Industry; FDT= Foreign Affairs, Defense, and Trade.
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"Rhetoric," wrote Aristotle, "is the power of determining in a particular case what are the available means of persuasion." This report reviews some effective means for the rhetoric of persuasive communication in speeches written by congressional staff for Senators and Representatives. By speeches, this report means draft statements prepared for oral delivery by Members. Such speeches are often prepared under the pressure of deadlines that leave minimal time for extensive revision. Moreover, they must often be drafted in whole or part for Members who may have little opportunity to edit and amend them. The burdens of public office (as well as of campaigning) and the insistent demand for speeches of every kind for a variety of occasions require some degree of reliance on speechwriters, a reliance that is heightened by the limitations of time and the urgencies of the media. A speech thus "ghostwritten" should nevertheless reflect the intention and even the style of the speaker. The best ghostwriters are properly invisible; they subordinate themselves to the speaker in such a way that the final product is effectively personalized in the process of actual communication. The only ways to achieve or even approach this ideal are practice and experience. This report seeks to provide some guidance for congressional staff on the principles and practice of speechwriting. The suggestions offered herein, when combined with practice, attention to audience and occasion, and, most importantly, the Member's attitudes, convictions, and style, can help create a speech that can be a "seamless garment" when delivered by the Member. Writing effective speeches requires a constant awareness of the distinction between the written and the spoken word: the speechwriter must learn to "write aloud." While the best speeches read as well as they sound, the novice speechwriter should give priority to the ear and not the eye. His or her speech must be written to be heard, not read. This means that easy intelligibility should be a paramount concern, so that the listening span is not strained. One of the first rules of the speechwriting profession is that a sentence written to be heard should be simple, direct, and short. When the speechwriter "writes aloud," George Orwell's advice to cut out any word that can possibly be cut is helpful, so long as the resulting effect is clarity, and not verbal shorthand. Ciceronian oratory on the one hand and Dick-and-Jane simplicity on the other are extremes to be avoided. The speechwriter thus faces the challenge of crafting words that convey the speaker's meaning clearly, but that also draw on the rich nuance and texture of spoken English. The average spoken sentence runs from eight to 16 words; anything longer is considered more difficult for listeners to follow by ear, and according to one expert, may be too long for the average listener to absorb and analyze quickly. By comparison, written sentences of up to 30 words are easily understood by average readers. Given these generally accepted limitations, what devices are available to the writer to make more complex sentences and speech wording accessible to the listener? Complex sentences can be clarified by repeating key words and using simple connections. By numerous rhetorical techniques, the speaker states, restates, and states again in different ways, the central themes of the speech. Repetition with variation is a basic speechwriting tool used by many of the greatest speakers to emphasize key elements while avoiding monotony. Some examples follow. Martin Luther King's "I have a dream" speech was a striking example of this technique, using that phrase to introduce a series of his visions for a better future. Lincoln at Gettysburg emphasized the significance of the day's events by restating the solemnity of the occasion in not fewer than three variations: "We cannot dedicate, we cannot consecrate, we cannot hallow this ground, ..." Similarly, Winston Churchill's World War II speeches used repetition with variation to build a powerful climax: "We shall fight in France and on the seas and oceans, we shall fight with growing confidence and growing strength in the air. We shall defend our island whatever the cost may be; we shall fight on the beaches and landing grounds, in fields, in streets and on the hills, ... we shall never surrender." Franklin D. Roosevelt's 1937 "One third of a Nation" speech imparted a sense of urgency by his deliberate repetition of a "here are" construction to describe conditions in the country, followed again and again with "now": Here is one-third of a nation ill-nourished, ill-clad, ill-housed—NOW. Here are thousands upon thousands of farmers wondering whether next year's prices will meet their mortgage interest—NOW. Here are thousands upon thousands of men and women laboring for long hours in factories for inadequate pay—NOW. Another venerable rhetorical device is the use of cadence and balance in the spoken word. This is a part of speechwriting where the speaker and the writer need cooperation to ensure success. The tradition of public speaking in the English language owes much to the poetic tradition, which was originally an oral tradition. As one observer noted, "the language of the speech should also be poetic —replete with alliteration, metaphor, and other figures of speech. Such adornments, far from being superfluous, enhance meaning and emphasize relationships among ideas." As difficult to define as to achieve, cadence and balance impart movement and harmonious effect to any speech. Essentially a matter of ordering groups of words (and ideas) into rhythmic patterns, cadence and balance can be attained by such classical rhetorical devices as the ones described below. Do not be put off by the classic Greek names of some of these rhetorical devices; in practice we use them naturally in conversation and writing every day. The grouping of words into patterns of three can lead to a memorable effect, provided the device is not overused. Some notable examples from classic oratory include " Veni, vidi, vici "; "Never ... was so much owed by so many to so few"; "The kingdom, the power, and the glory ..."; "I have not sought, I do not seek, I repudiate the support of ..."; "one third of a nation ill-clad, ill-nourished, ill-housed...." The linkage of similar words or ideas in a balanced construction that repeatedly uses the same grammatical form to convey parallel or coordinated ideas: "Bigotry has no head and cannot think; no heart and cannot feel;" "Charity beareth all things, believeth all things, hopeth all things, endureth all things." The repetition of initial sounds in a series of words to give emphasis. For instance, "We need to return to that old-fashioned notion of competition—where substance, not subsidies, determines the winner," or, "... the nattering nabobs of negativism...." This is the repetition of the same word or words at the beginning of successive clauses or sentences. Churchill's famous defiance of Hitler, "We shall fight on the beaches, we shall fight on the landing grounds ...," which has been previously cited, is one of the most famous examples. A common form of parallel structure comparing and contrasting dissimilar elements. For instance, "... give me liberty, or give me death."; "Ask not what your country can do for you—ask what you can do for your country."; "To some generations much is given; from others, much is demanded ..."; "A great empire and little minds go ill together."; "It was the best of times, it was the worst of times. It was the age of wisdom, it was the age of folly."; "If Puritanism was not the godfather to Capitalism, then it was godson." This technique involves more than alternating longer sentences with short ones. The writer may employ either periodic sentences, that is, those in which the main clause comes at the end, or loose sentences, in which the main clause is presented at or near the beginning, to be followed by other main or subordinate clauses. Sentence variation also includes the use of such devices as those described below. "Is peace a rash system?" "Is life so dear or peace so sweet as to be purchased at the price of chains and slavery?" The speaker leads the audience to the conclusion he hopes they will draw by asking a question that makes his point, and that he intends to answer himself, either immediately, with a flourish, or at greater length during his remarks, through patient exposition. "Dear money. Lower credit. Less enterprise in business and manufacture. A reduced home demand. Therefore, reduced output to meet it." The speaker dramatizes the situation by reducing it to a stark declaration, which he renders more striking by pausing to let the facts sink in after each sentence fragment. "With what dignity and courage they perished in that day." This classic rhetorical practice, once more widely used, seeks to embellish the general flow of words, much like an ornament or a musical flourish. It also helps give a particular sentence special emphasis by causing it to stand out from others by its unusual form. With this device, the speaker comes to a complete stop in his remarks, using the ensuing moment of silence to concentrate the listeners' attention on his next phrase. "My obligation as President is historic; it is clear; yes, it is inescapable." Even periodic sentences, if used with care, repeating the "suspended" subject or verb before modifying phrases or clauses can contribute to the effect: "Thus did he prove to be a leader who—victorious in battle, magnanimous in victory, skilled in the arts of peace—was able, in the face of his most determined foes ..." Repeating key words and using simple connective conjunctions ( and , for , because , but ) can make many complex sentences more easily intelligible to the ear by breaking them up into "bite size" segments. For instance, "Be a craftsmen in speech that thou mayest be strong, for the strength of one is the tongue, and speech is mightier than all fighting." No speech will sound fresh and vivid if it is not animated by imaginative imagery, by metaphor in its many forms: "the hatred of entrenched greed"; "America will always stand for liberty"; "Democracy is the healthful lifeblood which circulates through the veins and arteries of society ..."; "Whether in chains or in laurels, liberty knows nothing but victories." Extended metaphors or analogies, comparing similarities in different things, should be used with care so that the principal subject will not be lost in the image. Two or more metaphors in a single sentence or thought can be safely ventured only by the most experienced writers—"To take arms against a sea of troubles"—without incurring ridicule (as in the famous—and perhaps apocryphal—example attributed to the newspaper Pravda , the onetime propaganda organ of the Soviet Communist Party: "The fascist octopus has sung its swan-song"). Above all, in the spoken word there must be an element of identity and rapport with the listener, whether the speaker uses a "natural" conversational tone or a more oratorical style. Effective speechwriting for Congress is not a branch of "creative writing." Its "rules" are meant to foster clarity of expression, whatever the occasion and purpose of any given speech. Mere clarity is not enough for persuasive rhetoric, however. Indeed, there are times when clarity, brevity, and the like are not appropriate. The issues, because of their import and complexity, may preclude such treatment; similarly, the gravity or delicate political nature of the occasion may call for some measure of deliberate ambiguity. The best speechwriter will take into account the context of the speech and the speaker's personality, the image that is projected—that is, the speaker whom the audience sees and hears. The section on speech analysis in this report attempts a closer look at Lincoln's great Farewell Address at Springfield, illustrating many of the principles considered in this report. What Jefferson Bates called "audience analysis" is probably the single most important factor to be considered in writing every speech: know your listeners, and you will have a much better chance of connecting with them. Bates and others list a number of criteria useful in audience analysis, including, among others: age; gender; culture; education; profession ; size of the audience; and affiliation. Age is obviously an important factor; high school students, young parents, and senior citizens have different levels of life experience, different interests reflecting the challenges they face at their particular stages of life, and, to some extent, they even speak different languages. Although gender differences in societal roles are less pronounced than a generation ago, some believe that certain persistent disparities of viewpoint between many men and women on some topics persist. With respect to "culture," William Wiethoff, in Writing the Speech , states that it "has escaped a standard or preferred definition. Speechwriters, however, may envision culture as the race, customs, and religion shared by members of an audience." The factors of education, profession, and income level can be a pitfall for the unwary speechwriter. Never confuse education with intelligence, or professional status and worldly success with moral superiority or virtue, or modest means and educational attainment with the opposite. The writer must be sensitive to these varying frames of reference found in an audience. Draft remarks should be familiar, sympathetic, and topical, without being condescending. They must, as always, be phrased in a way that is natural for the Member; it is painfully obvious to an audience if a Member is not comfortable in his role or with his words. The size of an audience is another important factor in preparing a speech. A large audience and a formal occasion usually call for greater formality in language and delivery, lengthier remarks, and greater reliance on some of the classical rhetorical practices cited in this report. By comparison, many Members will require only talking points for a town meeting, and will almost certainly speak extemporaneously in still more intimate gatherings. In the age of cable and satellite television, and Webcasts, the Member is often asked to address what may appear to be a very small group of listeners physically present at the broadcast venue; at the same time, however, many others, perhaps thousands, may be viewing from other locations, or from their homes. It is the writer's task to craft remarks that simultaneously take into consideration the people physically present in the studio or location, and those who may be watching from home or other locations. Speechwriters must also condition their words to the degree of political affiliation, or lack thereof, in the intended audience. A gathering of the party faithful is usually ready for some "red meat." An audience consisting of a non-partisan citizen's group, such as the League of Women Voters, is almost certainly not. The writer must also always remember that, while the Member is affiliated with one political party, and comes from a particular part of the state or district, he or she represents all the people, and gives due attention and respect to the legitimate views and aspirations of all constituents. Another of the speechwriter's tasks is to assess the occasion at which the Member has been asked to speak and tailor the remarks accordingly. In contemporary society, the delivery of remarks by public figures is an expected element in almost every secular public ceremony, and at many religious services. The speechwriter must ensure that the occasion and the speech agree with one another, in both tone and content. For instance, Veterans' Day and Memorial Day are among the most solemn public holidays in the calendar. For these two events, the speechwriter should focus on themes of commemoration, service, and sacrifice. The atmosphere should appropriately be both somber, and hopeful: "their sacrifice led to a better, more secure life for those who followed them." High school and college commencements are of a different genre altogether. The occasion may demand inspirational remarks, but as one observer noted, "I've heard speakers ... deliver a tedious, solemn policy address at graduation ceremonies in which the graduates and families just want to hit the exits and have a good time." Conversely, a formal address to a learned society will differ dramatically from friendly remarks at a neighborhood picnic, town meeting, or retirement home. Simply put, the writer should exercise common sense in preparing remarks appropriate in tone and content to both the audience and the occasion. Another useful consideration for congressional staff is to plan the delivery of substantive remarks on substantive occasions. If the Member is scheduled to announce a major policy statement or initiative, it should be delivered in commensurate surroundings, and on occasions when media coverage will be adequate. Timing is also a serious factor; speeches delivered at mid-morning, at lunchtime, or early afternoon at the latest, are far more likely to be covered that same day by local TV news. The purpose of a speech and the occasion at which it will be delivered are closely related. Most frequently, the latter will govern the former. William E. Wiethoff suggests a "purpose" template for speechwriters in Writing the Speech . In it he establishes three categories of purpose: information , persuasion , and entertainment . These speeches seek to convey facts or information to the audience. The speaker first identifies the information that is about to be presented, seeking to link the new facts with others the listeners may already be aware of. Next, the speaker elaborates on the details of the information just conveyed, while avoiding a level of complexity and detail that would confuse the audience. Finally, the speaker draws together the facts and ideas related earlier, ideally recapitulating the main points in order to fix them in the listener's memory. The persuasive speech is a two-edged sword: it can seek to instill in the listeners either the acceptance of, or at least a more favorable opinion toward, a particular condition, fact, or concept. This variant is described as advocacy . Conversely, a speech may also attempt to change an audience's impressions, opinions, or most ambitiously, their convictions. Wiethoff calls this dissent , and asserts that it is more difficult than advocacy, since the speaker faces the burden of proving to the listeners that what they have heretofore accepted should be modified or rejected. In both cases, the writer must marshal the arguments that will convince the audience. Wiethoff's third category of speech purpose is entertainment. A great percentage, perhaps a majority, of Member speeches will fall into this category. The choice of title for this group may be misleading, however. These are not necessarily frivolous occasions, and they are not unimportant to the life and people of a town or village, students at a school, or members of a club who constitute the audience for such remarks. Speeches in this category serve the vital function of reinforcing the common ties and experiences that bind communities together and help reinforce the vitality of civic life in America. As Wiethoff notes: These speeches are delivered during ceremonies or rituals that are significant in themselves. They do not need clarification in order to be understood. They do not need proof of their importance. Instead, on these occasions people share an expectation of what will happen, and they are dissatisfied if the events do not take place as expected. "Entertainment" speeches may be solemn in nature, such as a Memorial Day address, or celebratory, such as remarks at the opening of a new school, library, or child-care facility. They remind citizens of their joint identity as members of a community; these events, seemingly everyday, or even trite, are actually vital expressions of civic life. The Member's role as a community leader and spokesperson on these occasions should not be underestimated; it is a great honor for him or her to deliver remarks at these community rites, and a congressional speechwriter should devote talent and originality to them. Obviously, the three purpose categories cited here are not necessarily mutually exclusive; in order to convince an audience, a speaker often needs to combine persuasion with information. Similarly, while some types of remarks are intended purely for entertainment, such as a celebrity roast, the careful speechwriter will always seek to entertain audiences in order to capture and retain their attention. How long should a Member speak? The answer to this fundamental question of speechwriting, like so many others, depends on a wide range of factors. Audience analysis and occasion have been previously noted, but the habits and attitudes of the speaker must also be taken into consideration. The natural inclinations of the Member must be examined. Is the Member a person of few words, or is he or she a good talker? Does the Member stick to the text, or lay it aside to share anecdotes, personal reminiscences, or even humor, with the audience? These and other related questions can be answered only through experience on the part of the congressional speechwriter. Learning the Member's style and preferences will result in a better product that communicates more effectively. Time of day should be considered by the writer. In the morning, people are relatively fresh, and are generally better prepared physically to listen attentively. By late afternoon, or after a luncheon, however, the audience may need to be stimulated, either by coffee or by lively remarks. Finally, lengthy after-dinner remarks should almost never be inflicted, especially on a paying audience. The potential auditors are full, tired, and ready to go home. It's best to give them their wish as quickly as possible. Finally comes the classic question: how many words should the speechwriter prepare? Once again, the factors of audience, occasion, Member preference, and time of day should be considered. The question of length of time, however, must be dealt with at some point. A number of classic speech authorities suggest that in most cases 20 minutes should be the upward limit. Conventional wisdom often holds that most listeners tune out, perceptibly or not, after that period. Ritual or pro forma speeches, such as occasional remarks at schools, churches, or public functions where the Member is a guest, but not the main attraction, benefit from brevity, perhaps being limited to five to 10 minutes. Although substantive public policy speeches may merit greater length, in modern America, only presidential inaugural and State of the Union messages seem to exceed the 20-minute limit regularly, with the latter often weighing in at over an hour. The question of pace is also important; is the Member a fast talker? Different speakers exhibit considerable variety in pace, ranging from 115 to 175 words a minute. Once again, the speechwriter will factor these personal differences into his work. As a benchmark, however, an often-cited rule-of-thumb is that the average 20-minute speech contains about 2,600 words, or, about 130 per minute. Most word processing programs will provide a total document word count as part of their spell check feature. Having a fixed time stimulates careful preparation. Both a time limit and notes or text help guard against logorrhea , or excessive verbiage. Time limits also encourage speakers not to be overly comprehensive, saying everything there is to be said on the speech topic. This is a temptation difficult to resist, but a speech is, by nature, a precis or digest. Excessive complexity or verbiage are capable of transforming an effective speech into something ponderous and exhausting. Jefferson's sharp judgment of 1824 applies today with equal force: "Amplification is the vice of modern oratory.... Speeches measured by the hour die with the hour." Theme, audience, time, place, occasion and purpose—once these are settled, the speechwriter's next concern is to gather ideas, facts, examples, illustrations, quotations, and humor, in short, whatever is needed to give substance, character, and interest to the speech. There is no shortcut for researching a speech, although a number of resources can speed the process. Congressional speechwriters often consult the Congressional Research Service first when preparing a draft statement or an address for a Member. CRS offers a range of speechwriting resources for the use of congressional staff, many of which are available from the CRS Home Page, at http://www.crs.gov . To find this report and other speechwriting resources, go to the CRS Home Page and click on the tab on the right, "Reference Desk" http://www.crs.gov/ reference/ general/ reference.shtml . On the left side of the page you will find a link to "Speechwriting & Holidays/Commemorative Events" http://www.crs.gov/ reference/ general/ speechwriting.shtml . This page provides links to commemorative speech materials, many of them focusing on major holidays, such as the Fourth of July and Labor Day, and month-long celebrations like Black History Month and Native American Heritage Month. Information is provided on the history of and related facts about the holiday or celebration. The speechwriting page also accesses sources providing practical tips for writing a speech, quotations, the full text of selected speeches and United States historical documents and writing guides. Other sources of information on public policy, reference resources, appropriations information, legal resources and many external links conveniently organized by topic are also available on the CRS Home Page. From the "Reference Desk," you can access "Basic Resources for Daily Work in Congressional Offices": government directories, encyclopedias, statistical sources, dictionaries, grammar guides, maps, and other online reference links. There is also a "Legislative Reference Source" page with links to facts about Congress including information on membership, committees, rules and schedules. Providing timely, accurate, and unbiased information and analysis on current policy questions is the most important function of the Congressional Research Service. The congressional speechwriter can access the CRS Home Page to garner analysis on current policy issues. The page links to the Current Legislative Issues, such as the Economy, Homeland Security, Internet/Telecom, and Iraq. These are further divided into subcategories, with links to the full text of CRS reports, containing comprehensive and multi-disciplinary analysis and information. They are available exclusively to congressional staff from the CRS Home Page and provide a ready resource to the congressional speechwriter. In addition to the Current Legislative Issues on the CRS Home page, on the left side of the page is a link to "Featured Products." The first Featured Product link is entitled "Floor Agenda: CRS Products." For a speechwriter who wishes to write about recent bills scheduled for floor action, this is an invaluable resource. This link accesses CRS reports about legislation that is scheduled for floor action that week. The link to the "Appropriations Status Table" accesses the latest status of and links to appropriation bills, as well as committee and CRS reports. Congressional staff who wish to discuss any policy-related issue with the appropriate CRS analyst can call the Inquiry Section at [phone number scrubbed], to place a request or to ask for a briefing by an analyst. Alternatively, to find out how to contact a CRS expert from the Home Page, click on the "Contact Expert" tab. A request for analysis or research assistance may also be faxed to the Inquiry Section at [phone number scrubbed] or may be placed from the CRS Home Page by clicking on the "Place a Request" tab. The CRS Hotline at [phone number scrubbed] is available for immediate ready reference requests, such as questions about presidential quotes on the virtues of the Constitution or perhaps variations in the Consumer Price Index for the past five years. In addition, the LaFollette Congressional Reading Room (LM-204, James Madison Memorial Building, the Library of Congress), Rayburn Research Center (B-335, Rayburn House of Representatives Office Building), and Senate Research Center (SR-B07, Russell Senate Office Building) provide a full range of in-person assistance, including many standard reference sources and CRS products. They are staffed full-time by information professionals available to assist you. Legislative information is also available from commercial publications such as CQ Weekly , the annual Congressional Quarterly Almanac , and the same publisher's eight-volume history of major legislation and national issues since 1945, Congress and the Nation. A journal of similar content but with greater emphasis on executive branch activities is National Journal , which appears weekly. There are sites on the Web that may be helpful to the speechwriter. American Rhetoric http://www.americanrhetoric.com/ index.htm This is an Index to an expanding database of over 5000 full text, audio and video versions of public speeches, debates and interviews. This site has a useful set of communication links and is updated every two weeks. Speechwriter.com http://wwwthespeechwriter.com This website contains many links to research sites, statistics, encyclopedias, business links, current events, anecdotes, quotes, speeches, toasts and biographies. The Advanced Public Speaking Institute http://wwwpublic-speaking.org/ public-speaking-articles.htm This website has 43 articles on the use of humor in a speech. Additional helpful resources may include books on speechwriting. Writing Great Speeches: Professional Techniques You Can Use ( Essence of Public Speaking Series ), by Alan M. Pearlman, has endorsements from two public speaking groups, the National Speakers Association and Toastmasters International. You may also wish to consult a work by Richard Dowis, The Lost Art of the Great Speech: How to Write One—How to Deliver It . The author, a former journalist and public relations executive, discusses the content, the memorability, rule of three, and other speechwriting methods. Finally, Choosing Powerful Words: Eloquence that Works ( Essence of Public Speaking Series ), was written by Ronald H. Carpenter, a professor of English and communications. These books may be requested from the Loan Division of the Library of Congress, telephone 707-5441. There are other basic materials with which every speechwriter should be familiar. These include a good standard dictionary (spell check is not foolproof, and has a rather limited vocabulary). The preferable dictionary is prescriptive as well as descriptive, that is, it prescribes or recommends usage in addition to providing descriptions or definitions. A thesaurus, such as Roget ' s , published in numerous editions since 1852, or J.I. Rodale's Synonym Finder , various editions since 1961, is useful in finding the right word and generally superior to the thesaurus feature offered with most word processing programs. For quotations, consult the standard Bartlett ' s Familiar Quotations in any one of its many editions, or Respectfully Quoted , a quotation dictionary compiled by the Congressional Research Service. Annual almanacs, such as the Information Please Almanac and the World Almanac , are often essential for quick reference. Literary and religious sources include the works of Shakespeare in any readable edition and the English Bible, especially the King James or Authorized Version. Aside from its obvious spiritual aspects, the King James Bible is important for both its literary quality and its tremendous influence on spoken and written English. Access to some standard encyclopedia, such as Americana , World Book or Britannica, is also helpful for fact checking and general information. Chase ' s Calendar of Events is a useful annual guide to special observances throughout the nation. A wealth of facts, statistics, and data useful in speech preparation can be found in the annual U.S. Government publication Statistical Abstract of the United States , published annually. For sample speeches on many topics of contemporary interest, the speechwriter may wish to consult Vital Speeches of the Day , published twice monthly, available through EBSCO Host and other Internet sources. It provides examples of speeches delivered by recognized public figures on topical questions and major issues and events of the day, and is annually indexed by author and topic. All these sources are available in the La Follette Congressional Reading Room, and most are also available in House and Senate office building reference centers. Daily newspapers are a familiar, if neglected, resource for speeches; a dedicated speechwriter will read or skim several each day, noting and saving background items that may prove to be useful later. Both national and hometown papers should be included. Other useful sources include weekly news magazines and more specialized journals that cover public policy issues. Here, again, the advent of the Internet provides new sources of information valuable to the congressional speechwriter: home district newspaper web sites may be regularly scanned for local news on issues and events of interest to the Member. These are usually posted online the day they are published, and almost always well in advance of postal delivery of the printed product. Certain general principles may be useful to guide the congressional speechwriter in choice of content and style: Quotations and humorous anecdotes or remarks are like spices, and should be used with discrimination, mindful of good taste and effectiveness. Speeches overloaded with quotations and anecdotes can sink from their own weight. Pseudo-quotations should be avoided. Never use a quotation that cannot be verified in an authoritative source. Unless a writer is gifted with lightness of touch, self-deprecating or gentle humor is usually more effective than satire or ridicule. Jokes aimed at people's personal lives or at religious and ethnic groups are invariably offensive, regardless of the speaker's motives. Avoid them. Statistics should be used with care and moderation. Like the points in an outline, they are better alluded to in context than cited in tedious detail. A speech filled with statistics becomes a statistical abstract, not a speech. When selecting material, the responsible speechwriter will take great care to quote accurately and give full credit for whatever is borrowed outright. Plagiarism is often illegal and always unethical . On the other hand, it is entirely proper to adapt existing materials to one's own purpose in preparing a new speech for any occasion. As Thomas Jefferson wrote in response to accusations that he had plagiarized parts of the Declaration of Independence from other works, "I did not consider it as any part of my charge to invent new ideas altogether and to offer no sentiment which had ever been expressed before." Straining after originality, which has been defined by an anonymous wit as "imitation not yet detected," can ruin the best of speeches. Finally, the seasoned speechwriter soon learns to recycle the best parts of previous efforts, to save time and effort, and also to preserve a particularly fine turn of phrase. The task of actually writing the speech, once the preliminaries are completed, will be greatly facilitated in most cases by the use of an outline. The novice speechwriter may be tempted to dispense with this device, on the grounds that it adds a time consuming extra step to a process that is often constrained by tight deadlines. On the other hand, it forces the writer to plan and organize his thoughts, to determine in advance what he intends to say, and to begin at the beginning. A speech outline generally is not nearly as detailed as an outline for an academic work, such as a journal article, or even a research paper. The outline serves as a skeleton, a framework to carry the flesh and blood of the fully developed speech. At the same time, this skeleton should eventually be invisible, clothed in delivery with ideas and emotions, and as simple as possible; beware of explicitly enumerating too many points or topics. Outlines may be written in topics, or key sentences, or in complete thoughts, so long as there is an orderly sequence. The frugal writer will retain speech outlines, since they can easily be reworked for future efforts. In whole or in parts, these can be placed in folders in a word processing program, or written out into a looseleaf notebook binder or even on index cards. From any of these media, the outlines can be quickly cut, rearranged, or added to as future occasions may require. President Ronald Reagan, for example, was legendary for his expert use and reuse of note cards that included facts and themes he sought to emphasize in various speeches. Throughout the speech, the writer ought to be constantly asking: "What is it I am trying to say?" and, after it is written: "Have I, in fact, said it clearly, succinctly, and well?" Every speech seeks in some way to move an audience, to win support, to motivate, to convince, perhaps to inspire, or simply to entertain. Adhere to the central theme or idea while addressing it in different ways, much in the manner that good sentences are constructed for a paragraph. The arrangement of ideas and themes should follow a logical progression. Each fact establishes a certain point, which leads to the speaker's next point, and so forth, ultimately climaxing with the thematic conclusion. While it is more dramatic to gain an audience's attention by opening a speech with a grand conclusion, be sure that the initial dramatic assertion is followed up by the essential process of weaving the argument the Member seeks to make. Do not try to say too much, particularly when the speech is intended as the vehicle for a major announcement or initiative. The most memorable presidential inaugural addresses have been those that set a single theme, or coherent group of related themes. Stick to no more than three major points, rather than attempting to say a little something about everything. Anything more risks running afoul of Churchill's famous comment concerning a bland dessert: "This pudding has no theme." Nearly every speech will have a basic three-part structure of introduction, body, and conclusion. An arresting introduction should lead into an emphatic statement of the main theme or themes. The argument that follows seeks to elaborate and develop the theme convincingly and effectively—that is, without too much detail. The central theme is restated in the closing peroration. One helpful approach for overcoming the feeling of word fright (what can I say and how?) is to write the speech in reverse: begin with the conclusion, which should summarize the central message, while abridging and restating whatever goes before. If the introduction sets the tone and establishes initial appeal or rapport, the closing communicates the final effect and is more likely to be remembered. Working backward is one way of imparting unity, coherence, and emphasis to the speech as a whole. There are many techniques available for the actual writing of a speech. Almost all speeches delivered by, or on behalf of, Members of Congress, even those for ceremonial or pro forma occasions, will have a certain political character because of the Member's representative function, and also because of the way in which his or her office is perceived. In the rhetorical context, political means persuasive, including the expression of personal interest and concern, assuring and reassuring, conveying the Member's identity with each audience, and so creating a community of interest and trust. Three kinds of persuasive techniques are usually distinguished: the appeal to reasonableness: "Surely Democrats and Republicans alike can agree that there is no excuse today for hunger in the world's richest nation...." the appeal to emotion: "Can we, as a nation, close our eyes to the spectacle of millions of children going to bed hungry every night...?" the ethical appeal (that is, to the character of the audience): "our historic traditions of decency and generosity demand that we face squarely the question of hunger in America...." All three approaches may be used in any given speech. One popular option for developing a speech is the "attention-problem-solution" method, especially for longer speeches of a non-partisan character. Useful for many different occasions, this method begins by stimulating the interest of the audience, usually with attention-grabbing examples of a problem that needs to be recognized and confronted. The speaker then moves to define the "problem" situation, and concludes with the proposed "best" solution, presented so as to win listener support. Another option, the "this-or-nothing" method, advocates a policy mainly by presenting and refuting proposed alternatives as inadequate or worse. It lends itself well to partisan occasions or to stirring those already convinced. In every case the speaker seeks to reinforce and strengthen his principal ideas as they are unfolded in the speech. Prior audience analysis and subject preparation will often help the speech "write itself." No speaker should ever apologize for his or her presence, or for the content of the speech. If it truly deserves apologies, it is better left unsaid. Further, a prudent speaker, rightly wary of the impulse to speak "off-the-cuff," will make certain that "extemporaneous" or "impromptu" remarks are not unprepared. For most speakers it is also better not to memorize a speech (unless one has a gift for it), since memory is fallible and elusive at best. The congressional speechwriter should not shrink from commonly accepted contemporary usage: the all-day speeches and obscure classical allusions of Daniel Webster and Henry Clay make wonderful reading, but they are history. The development of public address systems, radio, and, finally, the "cool" medium of television, and the perhaps even more intimate medium of the webcast have combined with other social changes to turn down the volume, both in decibels and emotions, of public speaking in the United States, for better or worse eliminating its more histrionic qualities. The accepted style of contemporary oratory is generally low key, casual without being offensively familiar, and delivered directly to the audience in a conversational tone and volume. It puts the audience at ease and helps promote psychological bonding between listeners and speaker. The speaker is perceived as a neighbor or friend, as well as an elected official. This is, of course, what every Senator and Representative strives to be. Perhaps the first, and certainly one of the most effective, practitioners of this art was President Franklin Delano Roosevelt, in his radio "fireside chats." His calm, reassuring voice and homey language revolutionized the bond of communication between the American people and their Presidents. It could be said that FDR spoke "with," rather than "to," the people, a standard to which Members can honestly aspire today. Once again, certain exceptions are allowed, but these are generally reserved largely to the President, or for only the most formal occasions. Use natural words and phrases in a speech; let the sentences flow conversationally. It is helpful for some writers, time permitting, to prepare a first draft in longhand, shaping the sentences slowly, speaking aloud the phrases they intend to use. The first person is perfectly acceptable in modern public discourse, and when combined with other personal pronouns—remember to avoid "I" strain—it can help connect listener to speaker and create a sense of community within the audience. While the first person singular is sometimes deprecated, it is its excessive use that should be avoided. Conversely, speakers should avoid referring to themselves in the first person plural (we) or the third person singular (he or she). The former has been reserved to monarchs, and is considered archaic in modern speech. The latter too often conveys a sense of excessive self importance to listeners. For instance, a Member should think twice before referring to himself or herself in the third person singular: "Dave (or Mary) Smith thinks the problem of hunger is the greatest challenge facing America today." Writers should generally use simple, declarative sentences, preferably in active voice, when making important statements of fact, assertion, or opinion. Use of the passive voice should not be dismissed out of hand, however; it is sometimes the more desirable form, and can lend grace and variety to the speaker's flow of words that stimulates the listener. It is excessive use that should be avoided. Similarly, exclusive use of the active voice can impart a choppy, juvenile cadence to even a content-rich speech. Just as there are points to emphasize in every speech, serving as clear transitions or aural signposts for paragraphs ("secondly," "nevertheless," "finally," "accordingly," "as a result," "in spite of," "as I have said," etc.), so there are things to avoid, and they are more numerous. While they are discussed in full in many reference works, they include: jargon and trendy neologisms: "impact" used as a verb, "stakeholders," "incentivize," "outside the box," et al .; redundancy resulting from excess verbiage, not deliberate restatement; mannerisms that may distract the listener, and trite phrases or cliches, with the exception previously mentioned, monotony of style or pace, and, in general, language inappropriate to the audience and occasion. Punctuation is crucial to an effective speech; it helps to clarify the delivery of the spoken word. Good punctuation in English, apart from a few basic elements, is less a matter of inflexible rules than of purpose and style, particularly where speeches are concerned. Historically there have been two broad traditions of punctuation: syntactical—that is, guided by syntax or grammatical construction; and elocutionary—deriving from the rhythm and pace of actual speech. One writer has further distinguished three methods of punctuating: by structure or logic to indicate the sense of what is being said; by the rhythm of word order and intended meaning—a subtle use best avoided by novice speech writers; and by respiration—that is, by the physical ease of natural speech, which assumes that what is read is really spoken. This last method, essentially the same as the elocutionary style, is the most widely used and certainly the most appropriate for speeches. In short, punctuate according to the ear and not the eye. This also means punctuating for the lungs: give the Member time to breathe! A long and convoluted sentence (something to be avoided in general) can leave the Member literally gasping for breath as he or she concludes it. A useful practice for congressional speechwriters is to declaim aloud (speak aloud, not in a conversational tone, but as if one were speaking to an audience) any lengthy sentence intended for the Member. If the writer finds it taxing on the lungs, then so will the Member; in such cases, it is advisable either to fashion shorter sentences, or to repunctuate the original, using such obvious "time out" devices as the colon and semi-colon, both of which are described in the next paragraph. Commas and dashes are useful to the speaker and listeners alike as guideposts to what lies ahead in a speech. They also provide pauses where the speaker can let the import of the previous sentence sink in, or simply catch his or her breath. Opinion is divided on colons and semicolons; some consider them as serving the same functions as commas and dashes, while others suggest that they are more emphatic, demanding a full stop in the flow of remarks, rather than a short pause. They are also sometimes criticized as leading to long compound sentences that are difficult for audiences to process, and that are better replaced by shorter declarative ones. In the final analysis, the Member's personal preferences and style should be the congressional speechwriter's guide. Correct grammar and syntax in the context of speechwriting and delivery mean using a level of English usage that is appropriate to the occasion. While it is highly desirable, the formal grammar of the written language is not an end in itself; it exists to further the clarity of expression. Far more important than the grammarian's rules is the communication of personality by which a speech, as opposed to a lecture, is clothed with emotion and enthusiasm, so that the speaker is perceived to be sincere and trustworthy, neither "talking over people's heads" nor "talking down" to them. While this may belong more to the presentation or delivery, the writer should strive for it in speech preparation as well. Effective delivery can transform a weak speech and make it sound very good. Poor delivery can ruin the best-prepared speeches, and sometimes does. Although delivery is not the concern of the speechwriter as such, it must be always in mind as a speech is actually written. The speaker's pace, his or her style, mannerisms, tendencies (such as departing from a text), peculiarities, or special difficulties (words to avoid)—these are elements with which the writer should be well acquainted before preparing any speech. Knowing how a Member speaks is essential in preparing a draft that is both useful and realistic. Ideally, a speech draft ought to be reviewed three times—by the writer, by the prospective speaker, and by a disinterested third party. Of these three, priority should ordinarily be given to the speaker. The revised product is likely to be more effective. With speeches, as with food, however, too many cooks are undesirable. Moreover, time seldom permits this much critical evaluation and rewriting. It may even be easier to provide for some appraisal of the speech's impact and audience reaction after delivery. For example, it is said that Senator Robert F. Kennedy's speech writers would follow his delivery of a speech word by word, noting those phrases or ideas that were well received, or others that created problems. An effective political speech is defined not by rules of rhetoric, but by the character of response it evokes. The speaker, then, is always concerned to measure that response and to elicit "positive feedback." This means a network of contacts that can report on the opinions and reactions of the audience, and evaluate the interest generated and evident a week or more after the event. It requires an awareness of media coverage and subsequent treatment from constituents, the sponsoring organization, and others. In short, it means adding a political relevance to the familiar phrase, "keeping in touch." Although there are substantial distinctions between legislative and non-legislative speeches, the basic principles of preparation and presentation are identical for both. Good writing is nurtured by wide reading, which in turn fosters a sense of style, enriched vocabulary, accuracy in grammar, and a feeling for English syntax. The best speechwriters will, through regular daily reading, bring an ever more abundant background to their work. Everything is grist for the speechwriter's mill. Moreover, nothing is surer in speechwriting than that "practice makes perfect." The more one writes, the easier the task becomes, and the smoother and more conversational the flow of the Member's remarks. As with so many aspects of speechwriting and delivery, the physical form of a speech is a matter of personal preference. Some speakers prefer to work from a completely polished text, one that may include carefully tailored "spontaneous" anecdotes and jokes at appropriate places, and may even incorporate hints on speech delivery or effective body language in the text. Others prefer to speak from notes derived from such a text, proceed from a series of "talking points," or simply extemporize. Whichever method is used, preparatory notes or an outline are recommended, with the cautionary warning that dependence on a manuscript can deaden the delivery, just as the excessive use of notes or cards can stimulate verbosity. President-elect Lincoln's farewell speech at Springfield, Illinois on February 11, 1861 is arguably the shortest great speech ever delivered from the back of a train. Its railway car setting recalls to mind the now-vanished connection between political events and the railroad, including the whistle-stop campaigns of most presidential candidates from William Jennings Bryan to Dwight Eisenhower. What Jacques Barzun called Lincoln's "workaday style [would become] the American style par excellence," undermining the monopoly exercised by purveyors of "literary plush." The Springfield speech illustrates with extraordinary brevity—it is only a 15 line paragraph—the Lincolnian qualities of precision, vernacular ease, rhythmic virtuosity, and elegance. The sense of right order and emphasis throughout culminates in the closing sentence—"one of the greatest cadences in English speech." The effect is achieved by the simple yet artful devices of parallelism, the balancing of similar and antithetical words phrases, and ideas, evoking rich Biblical overtones among his hearers. Lincoln's style is rooted in the "speaking intonations" and "humanly simple vernacular" of everyday speech, heightened by form and rhythm, the distinctively American tradition seen at its best in such writers as Emerson and Frost. Although some hold that today there is no place for rhetorical eloquence, arguing that "bluntness and clarity" and simplistic thoughts are the norm, others assert that the craft of speechmaking, the impact of skilled political rhetoric is as significant as ever in our history. Lincoln's mastery of that craft remains a formidable example. My Friends: No one, not in my situation, can appreciate my feeling of sadness at this parting. To this place, and the kindness of these people, I owe everything. Here I have lived a quarter of a century, and have passed from a young to an old man. Here my children have been born, and one is buried. I now leave, not knowing when or whether ever I may return, with a task before me greater than that which rested upon Washington. Without the assistance of that Divine Being who ever attended him, I cannot succeed. With that assistance, I cannot fail. Trusting in Him who can go with me, and remain with you, and be everywhere for good, let us confidently hope that all will yet be well. To His care commending you, as I hope in your prayers you will commend me, I bid you an affectionate farewell. The rise and, indeed, the virtual triumph in American political speaking of "the popular conversational idiom," with its emphasis on simplicity, brevity, and terseness, has tended to encourage "simplistic language together with slogans or catch words ...," influenced perhaps by the techniques of mass media advertising and particularly television. "Repetition and retention of a few simple ideas are stressed more than a complex concept." In consequence, some have noted a growing trend toward what some have characterized as a numbing mediocrity: "Since the 1920s more political speakers have addressed larger audiences on a wider range of topics than at any time in history. Yet so marked is the decline in the quality of style that the majority of speeches are pedestrian, prosaic, and impotent." This last may be an excessively pessimistic evaluation of the state of contemporary political speech. Few, moreover, would advocate a return to the florid style of public speaking that prevailed as recently as the 1920s. The remedy, in part, may be the cultivation of style. "Time should be devoted," writes L. Patrick Devlin, "to using impressive language," which he defines as "the most vivid, clear, concise, and meaningful style." It will be most effective if it bears the personal stamp of the speaker. "The process of persuasion is ... more a matter of communicating values than logical information." In essence, good speechwriting requires that the speaker assume a role: to some extent, he or she must be able to impart confidence and to sense the character of an audience. We need not agree with Talleyrand's cynical observation that "speech was given to man to disguise his thoughts" to recognize that effective persuasion calls for the ability to win the hearts and minds of listeners. To seem natural is not easy; as George Fluharty and Harold Ross wrote in Public Speaking : The speaker is estimating his audience and his audience is estimating him. His ethics, his integrity, understanding, and humanity are strong forces for good and also strong components of his "ethos" or personal effect upon not only his present but also his future audiences. The speaker should therefore make sure that the actual situation permits him to use a given persuasive device. Once again, the words of Abraham Lincoln, himself no mean practitioner of the public speaker's art, may serve to summarize the speechwriter's ultimate goal: When the conduct of men is designed to be influenced, persuasion, kind, unassuming persuasion, should ever be adopted. It is an old and true maxim that "a drop of honey catches more flies than a gallon of gall." So with men. If you would win a man to your cause, first convince him that you are his sincere friend. Therein is a drop of honey that catches his heart, which, say what he will, is the great high-road to his reason, and which, when once gained, you will find but little trouble convincing his judgment of the justice of your cause, if indeed that cause really is a good one.
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The frequent delivery of public remarks by Senators and Representatives is an important element of their roles as community leaders, spokespersons, and freely elected legislators. Congressional staff are often called on to help prepare draft remarks for such purposes. Writing for the spoken word is a special discipline; it requires that congressional speechwriters' products be written primarily, although not exclusively, to be heard, not read. Speeches are better cast in simple, direct, and often short sentences that can be easily understood by listeners. Rhetorical devices such as repetition, variation, cadence, and balance are available to, and should be used by, the speechwriter. It is important for speechwriters to analyze audiences according to factors such as age; gender; culture; profession; size of audience; political affiliation, if any; and the occasion for, and purpose of, the speech. Most effective speeches do not exceed 20 minutes in length. After researching a topic, speechwriters should prepare an outline from which the speech will be developed. They should strive to maintain a clear theme throughout the speech. Most speeches will have a three-part structure consisting of an introduction, a body, and a conclusion. The accepted style of contemporary American public address is natural, direct, low key, casual, and conversational. This puts listeners at ease and promotes a sense of community between audience and speaker. Punctuation should reflect the sound structure of the speech, reinforcing the rhythm and pace of actual speech. Clarity of expression is as important a consideration in speech grammar as rigid adherence to rules for written language. Effective delivery can greatly improve a speech. Congressional speechwriters should make every effort to become familiar with the speaking style of the Member for whom they are writing, and adjust their drafts accordingly. A wide range of speechwriting resources are available for congressional staff from the Congressional Research Service and other sources.
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Earmark disclosure rules in both the House and Senate were implemented with the stated intention of bringing more transparency to congressionally directed spending. The administrative responsibilities associated with these new rules vary by chamber. This report outlines the major administrative responsibilities of Senators and committees of the Senate associated with the chamber's earmark disclosure rules. Senate Rule XLIV prohibits a vote on a motion to proceed to consider a measure or a vote on adoption of a conference report, unless the chair of the committee or the majority leader (or designee) certifies that a complete list of earmarks and the name of each Senator requesting each earmark is available on a publicly accessible congressional website in a searchable form at least 48 hours before the vote. If a Senator proposes a floor amendment containing an additional earmark, those items must be printed in the Congressional Record as soon as "practicable." Rule XLIV, paragraph 5, explicitly defines congressionally directed spending item, limited tax benefit, and limited tariff benefit as follows: Congressionally directed spending item - a provision or report language included primarily at the request of a Senator providing, authorizing or recommending a specific amount of discretionary budget authority, credit authority, or other spending authority for a contract, loan, loan guarantee, grant, loan authority, or other expenditure with or to an entity, or targeted to a specific State, locality or congressional district, other than through a statutory or administrative formula driven or competitive award process. Limited tax benefit - any revenue provision that (A) provides a federal tax deduction, credit, exclusion, or preference to a particular beneficiary or limited group of beneficiaries under the Internal Revenue Code of 1986, and (B) contains eligibility criteria that are not uniform in application with respect to potential beneficiaries of such provision. Limited tariff benefit - a provision modifying the Harmonized Tariff Schedule of the United States in a manner that benefits 10 or fewer entities. If the earmark certification requirements have not been met, a point of order may lie against consideration of the measure or vote on the conference report. A point of order would not apply to floor amendments. Senate earmark disclosure rules apply to any congressional earmark included in either the text of the bill or the committee report accompanying the bill, as well as the conference report and joint explanatory statement. The disclosure requirements apply to items in authorizing legislation, appropriations legislation, and tax measures. Furthermore, they apply not only to measures reported by committees but also to unreported measures, amendments, House bills, and conference reports. Under Senate Rule XLIV, paragraph 6, a Senator requesting that a congressional earmark be included in a measure is required to provide a written statement to the chair and ranking minority member of the committee of jurisdiction that includes the Senator's name; the name and address of the intended earmark recipient (if there is no specific recipient, the location of the intended activity should be included); in the case of a limited tax or tariff benefit, identification of the individual or entities reasonably anticipated to benefit to the extent known to the Senator; the purpose of the earmark; and a certification that neither the Senator nor the Senator's immediate family has a financial interest in such an earmark. It is important to note that, when submitting earmark requests, individual committees and subcommittees often have their own additional administrative requirements beyond those required by Senate rules (e.g., prioritizing requests or submitting request forms electronically). The Senate Appropriations Committee, for example, has stated that it will require Members requesting earmarks to post information regarding their earmark requests on their personal website. This information must be posted at the time of the request and must include the purpose of the earmark and why it is a valuable use of taxpayer funds. The committees may also establish relevant policy requirements (e.g., requiring matching funds for earmark requests) or restrictions (e.g., not considering earmark requests for certain appropriations accounts or disallowing multi-year funding requests). In addition, committees and subcommittees often have deadlines, especially for earmark requests in appropriations legislation. For this reason, it is important to check with individual committees and subcommittees to learn of any supplemental earmark request requirements or restrictions. The committee of jurisdiction is responsible for identifying earmarks in the legislative text and any accompanying reports. Therefore, when it is not clear whether a senatorial request constitutes an earmark, the committee of jurisdiction may be able to provide guidance. When submitting an earmark request, it may be relevant whether the Senator wants the earmark to be included in the text of the bill or the committee report accompanying the bill. Committees may make an administrative distinction between these two categories in terms of the submission of earmark requests, and there may be policy implications of an earmark's placement in either the bill text or the committee report. For example, under Executive Order 13457, issued in January 2008, executive agencies are directed not to commit, obligate, or expend funds that were the result of an earmark included in non-statutory language, such as a committee report. If, during consideration of a measure, a Senator proposes an amendment that contains an additional earmark, the Senator shall ensure that a list of earmarks (and the name of any other Senator who submitted a request for each earmark included) is printed in the Congressional Record as soon as "practicable." Under the Senate rule, earmark disclosure responsibilities of Senate committees and conference committees fall into three major categories: (1) determining if a spending provision is an earmark; (2) compiling earmark requests for presentation, and (3) certifying that requirements under Rule XLIV have been met. Committees of jurisdiction may use their discretion to decide what constitutes an earmark. Definitions in Senate rules, as well as past earmark designations during the 110 th Congress, may provide guidance in determining if a certain provision constitutes an earmark. Senate Rule XLIV states that before consideration is in order on a measure or conference report, a list of included earmarks and their sponsors must be identified through lists, charts, or some means and made available on a publicly accessible congressional website for at least 48 hours. The Senate Appropriations Committee has stated that it will make earmark disclosure tables publicly available the same day that a subcommittee reports the bill. In the case of measures, the list of earmarks (and Senate sponsors) on the congressional website must be "searchable." Lists associated with conference reports should also be in a searchable format but only to the extent it is technically feasible. Senate rules state that a committee report containing a list of earmarks (and their sponsors) that is available online satisfies the disclosure requirement. The rule also requires the applicable committee to make the certifications of no financial interest available online. The rule does not specify how long after consideration any of these required materials must be maintained. The rule states that consideration of a measure or conference report is not in order until the applicable committee chair or the majority leader (or designee) "certifies" that the requirements stated above have been met. While the rule does not state what constitutes certification, it has been the practice of the committee chair to make a statement on the Senate floor or submit a written statement to be printed in the Congressional Record confirming compliance with Rule XLIV's disclosure requirements. An example of a certification letter is provided below.
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Earmark disclosure rules in both the House and the Senate establish certain administrative responsibilities that vary by chamber. Under Senate rules, a Senator requesting that an earmark be included in legislation is responsible for providing specific written information, such as the purpose and recipient of the earmark, to the committee of jurisdiction. Further, Senate committees are responsible for compiling and presenting such information in accord with Senate rules. In the Senate, disclosure rules apply to any congressional earmark, limited tax benefit, or limited tariff benefit included in either the text of a bill or any report accompanying the measure, including a conference report and joint explanatory statement. The disclosure requirements apply to earmarks in appropriations legislation, authorizing legislation, and tax measures. Furthermore, they apply not only to measures reported by committees but also to measures not reported by committees, floor amendments, and conference reports. This report will be updated as needed.
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Ports handle more than 35% (by value) of the Nation's imports and exports, and the role of water transport in the national economy is growing as trade policies increase the quantity of goods transported. A recent assessment of the U.S. marine transportation system by the Department of Transportation predicts that the total tonnage of U.S. domestic and international marine trade will more than double by 2020. Ocean carriers are deploying larger ships with deeper drafts to handle the robust growth in maritime trade. The Harbor Maintenance Tax (HMT) was instituted by the Water Resources Development Act of 1986 (WRDA 1986, P.L. 99-662 ) to pay for routine maintenance and operations costs of harbors. The funds are deposited in the Harbor Maintenance Trust Fund (HMTF). Numerous legal challenges to the HMT raise questions about its future and possible legislative changes. Harbor maintenance dredging requirements are expected to increase in the near-term due to current channel deepening projects at many ports. This report reviews recent developments in harbor maintenance legislation and the current status of harbor maintenance funding. Recent trends in container shipping and their impact on port dredging requirements are discussed. The report also describes alternative funding proposals that have been considered. The last section examines the impact these and other funding alternatives may have on the geography of U.S. maritime commerce. The decision on how best to finance harbor dredging requires balancing national economic efficiency concerns with local port economic development concerns. Two points of clarification are helpful in a discussion about the HMT. The first is the distinction between harbor maintenance and harbor-deepening projects. These projects are approved under different procedures and are funded from separate appropriations accounts. Harbor maintenance refers to the routine dredging of harbor channels to their existing depth. Funds in the HMTF are used to pay the federal portion of routine dredging which Congress makes available through Energy and Water Development Appropriations. Harbor-deepening (or widening) projects are new projects that increase the authorized depth/width of harbor channels. Congress authorizes new channel depths through the biennial Water Resources Development Act. Funds for the federal share of harbor-deepening projects are provided from U.S. Treasury general funds. The U.S. Army Corps of Engineers has the responsibility for both the maintenance and deepening of federal waterway channels. Funding for dredging harbor berths, the waterside area along the wharf where a vessel is docked, is the responsibility of state or local port authorities. A second useful point of clarification is the distinction between "shipper" and "carrier". In everyday usage, the term "shipper" can refer to both the cargo owner and the transporter of goods. In the transportation industry, the term "shipper" is used to identify the owner of the cargo in motion, e.g. the party that pays the freight bill. The term "carrier" is defined as the party providing the transportation service. In a maritime context, the carrier would be the shipowner or operator. Under the current HMT scheme, the shipper is liable for payment of the tax resultant from cargo vessel movements. For passenger vessels, the carrier is liable for the tax. Prior to 1986, U.S. Treasury general funds were used to pay the federal share for operation and maintenance (O&M) of harbors and for the deepening of channels. In 1986, Congress enacted cost-share requirements for harbor deepening and maintenance (as shown in Table 1 below). The HMT was devised to provide stable federal funding for this purpose. The tax was originally applied on an ad valorem basis on commercial cargo for any use of federally-maintained ports (e.g., the loading of exports and unloading of imports, domestic as well as international cargo). In 1986, the HMT was established at 0.04% of the cargo value. This revenue was intended to pay for 40% of O&M costs incurred by the Army Corps of Engineers and 100% of O&M costs of the St. Lawrence Seaway. Section 11214 of the Omnibus Budget Reconciliation Act of 1990 ( P.L. 101-508 ) increased the HMT from 0.04% to 0.125% in order to recover 100% of the Corps' port O&M expenditures. In March 1998, the U.S. Supreme Court struck down the application of the HMT with respect to exports, finding that it violated Article I, Section 9, Clause 5 of the Constitution which states that, "No tax or duty shall be laid on articles exported from any state." Exports generated about a third of the fund's revenues. Other court decisions (including decisions by the U.S. Court of International Trade (CIT), the U.S. Court of Appeals, and the U.S. Supreme Court) have established that HMT is constitutional as applied to domestic shipments and the embarkation of cruise line passengers. Cases regarding the constitutionality of the HMT on imports remain in litigation. The federal government is statutorily required to continue collecting the HMT from non-export cargo and passenger categories. The European Union sees the application of the HMT to imports as a discriminatory import tariff that violates U.S. obligations under the World Trade Organization (WTO). Approximately 80% of HMT collections in FY 1999 were derived from imports, with the remaining revenue coming from collections on domestic cargo (11%), foreign trade zone cargo (8%), and cruise ship passengers (1%). In February 1998, the European Union requested WTO consultations on the issue. A first round of consultations took place in March 1998. Second round negotiations, which included Japan, Norway, and Canada, took place in June 1998. The European Union indicated that if satisfactory legislation was not passed by January 1, 2000, it would ask for a dispute resolution panel. As of December 2003, however, the European Union has not requested a panel. The revenues collected from the HMT are deposited into the HMTF. Much uncertainty about the future of the HMTF exists because of the various legal challenges. The HMTF balance was $1.85 billion at the end of FY2002, as shown in Table 2 . Currently, revenue deposited into the HMTF exceeds transfers out of the fund. The HMTF balance increased in FY 1999 as a result of the Energy and Water Development Appropriations Act of FY 1999 ( P.L. 105-245 ), which did not require the recovery of Corps of Engineers O&M expenditures from the fund for that year. The current HMTF balance, in conjunction with the revenue stream from the remaining HMT collections and interest payments, are considered sufficient to recover expenditures for the foreseeable future. However, the results of the aforementioned legal and trade challenges could reduce or halt incoming revenue. Should that occur, the fund could quickly be depleted at which point policymakers would have to decide whether the federal government would continue to fund harbor maintenance and if affirmative, would have to develop a mechanism to do so. There are a number of significant channel deepening (or widening) projects nearing completion, under way, or in the planning stage. An obvious concern is the effect these deepening projects will have on future harbor maintenance costs. The DOT expects maintenance costs will likely increase, at least in the near term: Overall, however, the Nation's future dredging requirements can be expected to grow above recent highs following the completion of current and future deepening projects and the ongoing maintenance requirements associated with these deeper channels.... Upon completion of justified deepening work, an initial increase in maintenance dredging requirements can be expected until the hydrodynamics of the deeper channels begin to stabilize to the new dimensions. The long-term impacts of deeper channels on annual maintenance dredging is somewhat more uncertain, with dredging needs highly specific to each project location and subject to a complex set of variables involving the natural coastal and river processes that affect sediment movement. In addition to the total amount of material dredged, total expenditures may increase due to an increase in the per unit cost of dredged material. The port industry cites U.S. Army Corps of Engineers' figures which show that over the last 30 years, the total cost of dredging has increased while the volume of material dredged has actually decreased. A review of the Corps O&M budget on dredging for fiscal years 1990 to 1999 shows a steady increase in total expenditures from $370 million in 1990 to $684 million in 1999. The yearly amount of material dredged for maintenance over this same period fluctuates around an average of 236 million cubic yards. Complicating the dredging process is the fact that ports are often located in or near environmentally sensitive areas such as wetlands, estuaries, and fisheries. A growing concern is a shortage of disposal sites and a lack of disposal options. The volume of sediments classified as contaminated has increased but this may be due to new testing requirements. In the early 1980s, deep draft colliers (coal ships) fueled debate over U.S. port dredging needs. Today, however, ever-larger containerships are the primary driving force behind current dredging activity. Although oil tankers are among the largest vessels in the world fleet, their size peaked in the 1970s and 1980s. A supertanker often transfers its cargo at sea rather than in port. Typically, a supertanker stays at sea for extended periods, loading at offshore platforms or single-point moorings and discharging at designated "lightering" zones offshore where a supertanker transfers part of its cargo to a smaller shuttle tanker. The shuttle tanker delivers the crude oil to the refinery on shore. Dry bulk vessels (ships that carry grain, soybean, ore, or coal) have also grown in size since World War II but at present there does not appear to be a trend towards larger vessels in this category. In the container ship category, however, "the 1990s ushered in a wave of vessel size increases that seems to have no limit." As the volume of containerized cargo increases, the liner industry is replacing smaller vessels with drafts of 38-40 feet with larger ships requiring drafts of 45-50+ feet. The larger ships can carry 2,000 to 3,000 additional containers saving the carrier an estimated $25 per container on voyage costs. The economic advantage of these mega-ships derives from the principle of economies of scale as ship costs do not increase as fast as capacity. Ship size in the past was restricted by the dimensions of the Panama Canal. The development of a double-stack train (DST) network that began in the early 1980s allowed shipping lines to move containers efficiently across the continent by rail, reducing the need to move traffic through the Canal. By forming alliances or merging, carriers are better able to absorb the risk of mega-ship investment. In addition to getting bigger, container ships are expected to be more prevalent in the near future. Today, 55% of general cargo in international marine trade is being moved in containers. By 2010, it is expected that containerized market share will increase to 90%. Differences in service patterns between container and liquid or dry bulk carriers also account for the greater need of container ships for deeper access channels. Bulk tankers are usually chartered per voyage and therefore have more flexibility in waiting for tidal action to ease their passage in port. Container ships, however, operate in a more time-sensitive environment, calling various ports on a rigid and advertized schedule. Tidal restrictions would severely disrupt their service performance. In its decision the U.S. Supreme Court stated that a user fee based on the value of service provided to a marine carrier would not violate the Constitution. In August 1998, the Clinton Administration proposed a new revenue generating system using a Harbor Services User Fee (106 th Congress, H.R. 1947 ). The payment of the Harbor Services User Fee (HSUF) would be placed on the carrier, rather than the shipper (who pays the current HMT). The HSUF was based on a vessel's capacity, as measured by vessel capacity units, which are a volumetric measurement of ship size based on net tonnage or gross tonnage as appropriate, and its frequency of port use per voyage. Revenues from the fee would be deposited into the Harbor Services Fund, which would fund both routine maintenance and harbor-deepening projects. The proposal was aimed at satisfying the Supreme Court ruling by establishing a close link between the revenue collection and the service provided, while being consistent with trade obligations. Industry observers have noted that shifting the tax burden from shippers to shipowners concentrates the tax burden. With the HMT, a large number of shippers pay a relatively small fee, but with a HSUF, because there are many more shippers than there are shipowners, a few (shipowners) would pay a relatively large fee. This reality has political implications. Ports and carriers opposed having the federal contribution for deepening projects taken from an industry-supported fund, rather than from general revenue. Another criticism raised of the Clinton Administration's proposal was that a user fee would place U.S. ports at a competitive disadvantage to foreign ports and that bulk commodities, such as grain and coal, would be disproportionately affected. The European Union has indicated that it considered the Clinton Administration's proposed fee to be an unfair trade practice. The 106 th Congress did not pursue the Clinton Administration's proposal nor other proposals, such as a return to funding maintenance and dredging from general revenues ( H.R. 1260 ). Supporters of H.R. 1260 claimed that general revenues were the only option because no user-fee system could equitably raise revenues from the users of navigation facilities. Citing GAO figures, they also maintain that waterborne trade is already heavily taxed by 11 federal agencies collecting124 fees. U.S. Customs collects over $20 billion annually in assessments on the commercial maritime industry, most of which are import duties. The revenues that U.S. Customs generates are deposited directly into the general fund of the U.S. Treasury. Some have proposed designating a portion of these revenues to fund harbor maintenance. Opponents of this plan assert that since most Customs duties are collected from importers, exporters would not be contributing their share for harbor maintenance. In its decision the Supreme Court stated, "This does not mean that exporters are exempt from any and all user fees designed to defray the cost of harbor maintenance. It does mean, however, that such a fee must fairly match the exporters' use of port services and facilities." There are a number of policy questions that are intertwined with the question of how to finance harbor maintenance in a manner that is both constitutional and not in violation of trade agreements. The fundamental question is who should pay for dredging: port users or taxpayers? If it is decided that port users should pay, which users in particular: shippers or carriers? Whether the federal government or local port authorities should administer the fee and whether a nationally uniform fee or a port-specific fee is more equitable and efficient are also key questions. In addition to these issues, policymakers may revisit the cost sharing arrangement between federal and non-federal sources. Answering these questions involves a trade-off between maximizing the overall efficiency of the U.S. maritime transportation system and the economic development of specific coastal cities. While economic analysis provides a framework for evaluating financing options, the answer to each of these questions is inherently a political choice. As one study on dredging explains, "The conflict over funding is a conflict of values and goals, a conflict about who pays and who benefits. Those conflicts can only be resolved in the political process with political compromises." One option is to maintain the status quo—that is, to continue funding harbor dredging through a cargo-value-based tax. Some observers view the present system as at least one step more efficient than funding from general revenues. If port users are required to pay at least part of the cost of dredging, they argue, it promotes a more efficient use of resources because the users are not likely to pay more in fees than they hope to save in shipping costs. Also, if port users are required to pay for dredging, they are likely to require that the government spend their resources on the most worthwhile projects. Conversely, they argue, if general taxpayer revenue is used to pay the full cost of dredging, funds will more likely be wasted on unjustified or marginally useful projects. Others contend that the present funding system is broken and must be overhauled because the original intent of Congress was to have both exporters and importers paying the tax. They argue that it is unfair that importers are essentially paying for the dredging needs of exporters. Some also contend that the legal and trade challenges to the HMT make it an unstable funding source. Some economists believe a user fee system could be re-structured in such a way as to promote better use of the nation's marine transportation system. Advocates of a port-specific, carrier-based fee argue that, from an economic efficiency point of view, the user fee model would be superior to other funding models. They argue that (1) the shipowners rather than the shippers should pay the fee and (2) the fee be port-specific rather than nationally uniform. This funding scheme would, they claim, optimize transportation efficiency because it would allow market forces to allocate cargo to the most efficient ports. The rationale for their argument is as follows. They argue that the present HMT funding scheme inflates the supply of larger ships. Although larger ships save money on the ocean leg, they increase costs at port because, among other things, they require deeper channels and berths. However, shipowners do not fully calculate these costs in their decision to build larger ships because dredging costs are borne by others, namely port authorities, shippers, and taxpayers. To the extent that dredging costs are external to a shipowner's cost-benefit analysis, their decisions regarding fleet investment will be biased in favor of larger ships. On the other hand, if these costs were internalized by the shipowners through payment of a dredging fee based on ship size, ship investment decisions would more accurately reflect the true cost of bigger ships. Supporters of a carrier-based fee ask why U.S. taxpayers should finance deeper channels only to help (mostly foreign) container carriers realize marginal cost efficiencies on the ocean leg of their voyages. They also argue that the present scheme, which creates a national pool of funds for channel dredging, results in naturally deep harbors subsidizing shallower ports. Naturally deep harbors, they argue, should be allowed to reflect their lower dredging costs in the rate structure they offer ocean carriers. Carriers would be attracted to those ports that require the least amount of dredging because the user fees at those ports would be less. The present system, they say, levels the playing field among ports with different dredging requirements. It draws traffic away from more efficient ports to less efficient ports, thereby raising the Nation's overall cost of moving goods through the marine transportation system. In general, East Coast and Gulf Coast ports are shallower and require more dredging than West Coast ports which tend to have naturally deeper channels. In addition, since exporters currently are not paying the HMT, ports with traffic profiles heavily skewed toward imports contribute more to the fund than do ports that primarily rely on export cargo. Cross-subsidies among ports would be eliminated if funds generated at a particular port were reserved solely for that port's local dredging needs rather than becoming part of a system-wide fund. Some observers defend cross-subsidies among ports asserting that the HMT facilitates the development of a maritime network that is national in scope. They note that the Highway Trust Fund also redistributes gas tax monies from heavily populated states to sparsely populated states. This redistribution is justified on the grounds that populated states share an interest with rural states in developing and maintaining an interstate highway system that provides national inter-connectivity. Other observers argue that while the trust fund mechanism may be suitable for developing a national highway system it is not suitable for seaport development. A Transportation Research Board report presents the following view: Arguments for cross-subsidies based on scale economies, whatever their validity for highways, do not apply to ports. U.S. seaports do not constitute a network that is analogous to the highway system, since the value of a port does not depend on the existence of other ports in the same way that the value of a road increases if its connectivity to other roads increases. Therefore the highway program cannot be used as a model for justifying the use of revenues generated at high-volume ports to subsidize maintenance and improvements at low-volume ports. Supporters of a carrier-based, port-specific user fee believe there is sufficient competition among ports to allow for a market solution to the problem. Since ports compete with one another on their population base, intermodal connections, and labor costs, these observers ask why ports should not compete on the costs of dredging their harbors as well. The intermodal facility of containerized cargo and the development of a double-stack train network in much of the country has generated competition not only between nearby rival ports, but even ports on opposite coasts. The term "discretionary cargo" refers to freight that can be routed economically through more than one port, typically cargo originating or destined for the interior of the country or the far coast. Port rationalization by the liner carriers, which consolidates cargo at fewer ports, has also intensified competition between ports. Based on the competitive climate ports face today, some believe the market provides enough incentive for ports to invest in dredging without federal involvement. Advocates of a port-specific, carrier-based fee argue that this replacement fee is the most appropriate scheme for ensuring adequate harbor depths while at the same time preventing excess dredging. While the replacement fee described above may be an economic prescription for financing port dredging, it does raise distributional issues. Harbor communities generally view their ports as engines of economic development for the city and surrounding region. While containerization has reduced the number of jobs onsite, ports still generate jobs offsite with the many businesses that serve the ports, such as freight forwarders, custom house brokers, warehouses, trucking firms, etc. In addition, there are the importers and exporters that choose to locate near a port to save on shipping costs. However, a port-specific funding system is likely to favor large ports over small ports. With more ship traffic, large ports would not have to charge as much per ship or shipment to recover dredging costs as smaller ports. Some small ports might either have to close or service only small ships. Economic development is a significant public policy goal with respect to ports and, in fact, was a rationale for the creation of port authorities in the late 1800s and early 1900s. At that time, marine terminals were largely owned and controlled by private railroads. As railroads merged, each railroad acquired additional port terminals as nodes in their track network. Rather than develop infrastructure at each port, railroads found it advantageous to consolidate their investment at only selected ports. Not unexpectedly, port communities with neglected harbor facilities were dissatisfied with railroad control over local port development. Therefore, they created a central public authority to ensure that port development would be more in line with the public interest. The railroads' strategy of concentrating cargo flow through fewer ports is not unlike the strategy container carriers have adopted today. As carriers deploy larger ships to achieve economies of scale on the high seas, these ships are calling fewer ports because there are dis-economies of scale while the ship is in port. Some industry observers note the emergence of a "hub and spoke" system consisting of load center ports where the largest ships call and a system of feeder ports serviced either by smaller coastal ships or, more likely in the United States, by railroads. If the maritime industry is moving towards a market-oriented selection process of large ports and feeder ports, a port-specific funding scheme is likely to compliment or even accelerate this trend while a system wide fee is likely to impede it, to the extent that it levels the playing field among ports. The issue of harbor maintenance funding, therefore, appears to involve a trade-off between a national interest in economic efficiency and the local interests of some harbor communities not to be relegated to feeder port status. As can be gleaned from the above discussion, much of the debate regarding harbor maintenance funding revolves around the issue of how it would affect the geography of U.S. maritime commerce. In addition to inter-port competition among U.S. ports, however, there is also the issue of competition with ports in Canada, Mexico, or in the Carribean. With regard to the present funding mechanism, the HMT, U.S. ports near the Canadian and Mexican borders claim that it diverts cargo to nearby ports across the border. WRDA 1986, which established the HMT, required the DOT to submit an annual report quantifying the amount of U.S. cargo transhipped through Canada. The report shows that since the late 1980s, when the report was first published, 4% to 6% of U.S. liner trade has been transhipped through Canadian ports on a yearly basis. The report also notes that Canadian cargo is transhipped through U.S. ports. However, cargo diversion may be attributable to other factors that outweigh any influence of the HMT. Regions in northern New England may determine that routing cargo through Montreal, which is closer than New York or Boston, is the most economic choice. Carriers (and exporters) may prefer to route European bound cargo from particular U.S. origins through Halifax because it offers a later sailing date (and cargo cut-off time) than New York or Boston. In addition to these considerations, rail rates, trucking costs, or port throughput rates may be cheaper via Canada for particular U.S. cities or towns. Some observers argue that while diversion of cargo through ports of an adjacent country may be lost business for a particular U.S. port, the Nation as a whole, and U.S. shippers in particular, may benefit from routing cargo in this manner. If importers and exporters in the upper Midwest, for instance, can move cargo more economically to and from Europe through the ports of Montreal or Halifax, one could argue that they have benefitted from importing the transportation services of Canada. As with a cargo-value-based tax, policymakers might consider what effect a carrier-based fee would have on cargo flow through domestic ports. As a ports expert has asserted, a fee based on ship capacity may have a very different effect on cargo flow than a tax based on cargo value. A fee that is based on vessel size might induce carriers to avoid the tax by diverting their largest ships to a nearby foreign port, such as Vancouver, Halifax, or Freeport, in the Bahamas. By transhipping U.S. bound cargo from large ships to smaller, feeder vessels at these foreign ports, carriers could save a substantial amount in harbor user fees. Transhipment at these foreign ports would not necessarily mean less cargo for U.S. ports. The same amount of cargo might arrive but on smaller, coastal feeder ships. Paradoxically, if the fee reduced the size of ships calling at U.S. ports, there would be less need for deeper channels. Carriers contend that a carrier-based fee could be roughly equivalent to a container ship's daily operating cost and would thus significantly influence their port rotation decisions. However, there are additional cost considerations that may limit transshipments. The cost of load and discharge handling at an additional port is significant. Transhipment could also increase transit time due to missed connections or increase the risk of cargo damage due to additional handling. Ports with a large local population base, such as New York, would presumably still attract vessel calls with or without a user fee. No matter which party a dredging fee is levied upon (carriers or shippers), and regardless of how it is administered (at the port level or federal level), the ultimate payers of the fee or tax are import consumers and export producers. However, how the tax is levied and administered does make a difference politically. With regard to shipper groups, one can say that shippers of high-value, low volume commodities are likely to prefer a tax based on cargo tonnage rather than cargo value. Conversely, high-volume, low-value shippers are likely to prefer a tax based on cargo value rather than cargo tonnage. It is also worth noting that shifting the user fee from shippers to shipowners would concentrate the tax because there are many more shippers and shipments than there are shipowners and vessel port calls. Concentrating the tax may influence the decision making process because, as some observers maintain, a small group that has more to lose may have more incentive to organize, and make themselves felt politically, than a larger, more diverse group that has less at stake individually. According to some, this political dynamic partly explains the failure of the HSUF proposed during the Clinton Administration. With regard to ports, one could expect that low-volume ports with high-cost dredging requirements would prefer a system-wide, uniform fee while high-volume ports with low-cost dredging needs would prefer a port-specific fee. Those who view ports as a public good, generating nationwide benefits, believe port maintenance and improvement should be financed through general revenues. Ports argue that they are a vital component of the nation's economy. To the extent that deeper ship channels lower transportation costs, they argue, they reduce the cost of commodities, making imported inputs less expensive and making exports more price competitive. The maritime industry also does not like the fact that the HMT is running a surplus—that more money is collected by the tax than is used to pay for dredging. Some economists argue that, while federal aid may be justified in the early stage of an industry's development, shipping is now a mature industry and therefore should be self-supporting. They argue that returning financing of harbor dredging to general revenues amounts to a corporate subsidy and leads to overcapacity in port facilities. The strong demand for channel deepening has been characterized by critics as "a race to the bottom." They argue that overcapacity puts downward pressure on port revenues leading to unhealthy port facilities requiring more public assistance. Some analysts contend that not every port needs to become a super-port. It is less likely that U.S. taxpayers will squander money on unnecessary dredging, they argue, if greater market discipline is brought to the process of examining investment risk in port infrastructure. Some believe that the cost-share requirements of WRDA 1986 are out of date due to the growing prevalence of larger containerships. They believe the federal government should increase its investment in harbor dredging by eliminating the 45-foot threshold, essentially revising the three-tier cost share formula to a two-tier formula. In other words, the non-federal cost-share would decrease from 60% to 35% for deepening projects and from 50% to 0% for maintenance projects with harbor depths between 45 feet and 53 feet. The Water Resources Development Act of 2003 ( H.R. 2557 , sec. 2003), which passed the House, would authorize this change in cost share arrangements. In 1986, when the cost-sharing formula was established, vessels requiring more than 45-foot draft were considered highly specialized ships. While container ships were increasing in size during the 1980s as well, it was believed that the dimensions of the Panama Canal would limit the draft requirements of most of the container fleet to under 40 feet. The emergence of double-stack container trains in the mid-1980s made transcontinental transport by rail more competitive as compared with the all-water route through the Panama Canal. The size restrictions of the Panama Canal, therefore, became less of a limiting factor and carriers began deploying "post-Panamax" ships—ships too big to fit through the Panama Canal. Opponents of reducing the local cost share argue that it is only at the "first in" or "last out" port of call that container ships are likely to be fully loaded. When container ships call at ports in between the first and last ports of call, they are usually not fully loaded and therefore do not require their full draft. They caution that lowering the local cost share requirement will level the competitive field between ports, impeding the market's natural selection process of allocating cargo to the most efficient ports. Coastal shipping interests also seek to return financing of harbor dredging to general funds. They believe more containerized cargo could be taken off congested highways, such as I-95 along the eastern seaboard, and moved by barges or fast-speed ferries along the coast. They believe a fee system, whether paid by carriers or shippers, is an impediment to coastal shipping because it raises the price of coastal shipping relative to truck and rail alternatives. Others disagree, noting that trucks contribute to the cost of their infrastructure by paying fuel and other taxes into the Highway Trust Fund and railroads pay for their infrastructure primarily by themselves. Some believe charging port users for harbor infrastructure promotes equity among competing modes and reduces price distortions in modal choice.
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The Harbor Maintenance Tax (HMT) was instituted by the Water Resources Development Act (WRDA) of 1986 (P.L. 99-662) to pay for the routine maintenance and operations costs of harbors. Numerous legal challenges to the HMT raise questions about its future and the issue of possible legislative changes. In March 1998, the Supreme Court struck down the application of the HMT with respect to exports, finding that it violated the Constitution's ban on export taxes. Cases regarding the constitutionality of the HMT on imports remain in litigation. The European Union sees the application of the HMT to imports as a discriminatory import tariff that violates the General Agreement on Tariffs and Trade (GATT). The current Harbor Maintenance Trust Fund balance, in conjunction with the revenue stream from the remaining HMT collections and interest payments, are considered sufficient to cover expenditures for the foreseeable future. However, the results of the legal and trade challenges could reduce or halt incoming revenue. Harbor maintenance dredging requirements are expected to increase in the near-term over recent levels due to current deepening projects at many ports. Larger containerships appear to be the primary driving force behind current dredging activity. Issues for the 108th Congress include how to finance harbor maintenance in a manner that is both constitutional and not in violation of trade agreements, and how to finance the federal portion of harbor-deepening projects. Key policy questions include: Should the federal government return to using the general fund to finance harbor maintenance? Should a new user fee be established to pay for harbor maintenance? The larger issue that may need to be resolved before a funding solution can be found is: what should the role of the federal government be in port maintenance and dredging? The Water Resources Development Act of 2003 (H.R. 2557), which passed the House, would increase the role of the federal government by increasing its share of the cost in harbor deepening and maintenance projects. This report will be updated as warranted.
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According to the National Bureau of Economic Research (NBER), the U.S. economy was in a recession for 18 months from December 2007 to June 2009. It was the longest and deepest recession of the post-World War II era. This report provides information on the patterns found across past recessions since World War II to gauge whether and how this recession might be different. There is no simple, rule-of-thumb measure to determine when recessions begin or end. Recessions are officially declared by the National Bureau of Economic Research (NBER), a non-profit research organization. The NBER defines a recession as a "significant decline in economic activity spread across the economy, lasting more than a few months" based on a number of economic indicators, with an emphasis on trends in employment and income. It is unlikely that all of those indicators will begin declining or rising simultaneously. Thus, when comparing historical episodes, some of the symptoms associated with a recession may occur before or after the recession has officially begun or ended. In the recent episode, gross domestic product (GDP) began to fall (in the fourth quarter of 2007) before employment (in January 2008), and both deteriorated significantly in the third quarter of 2008. The economy began to grow again in the third quarter of 2009, but employment continued to fall through December 2009. Recessions are not uncommon—2008 marked the 11 t h since World War II. In recent years, recessions have been less frequent—from 1982 to 2001, there were only two recessions—but the length between the recent one and the prior one, 73 months, was comparable to the frequency of recessions from 1945 to 1981. As can be seen from Table 1 , the recent recession was 18 months long, making it the longest of the post-war period. It was almost twice as long as the median length of post-war recessions (9.5 months). Recessions end because of monetary and fiscal stimulus—both were employed in the recent episode —and because markets automatically adjust. Recessions affect economic well-being by their length and depth. When considering depth, the recent recession can be separated into two distinct phases. During the first phase, which lasted for the first two quarters of 2008, the recession was not deep as measured by the change in GDP or unemployment. It deepened in the third quarter of 2008, however, and remained deep through the first quarter of 2009. After a slight further decline in the second quarter, the economy returned to expansion in the third quarter of 2009. The fall in GDP during the recent recession, a cumulative 4.1%, was the deepest of the post-war period. By contrast, output fell by 1.4% in the 1990-1991 recession and 0.3% in the 2001 recession. The decline in output after the second quarter of 2008 was even larger than over the entire recession. Most of the decline occurred from the third quarter of 2008 to the first quarter of 2009. The 1981 recession was the last recession to feature consecutive quarters of steep declines in GDP. The 1973 and 1981 recessions were also unusually long and deep, in terms of lost output. During the recession beginning in 1973, GDP fell by a cumulative 3%. During the recession beginning in 1981, GDP fell by a cumulative 2.9%, and this recession came on the heels of a 2.2% decline in GDP in a separate recession one year earlier. Economists often attribute the unusual length and depth of the 1973 and 1981 recessions in part to the Federal Reserve's decision to keep interest rates high. The rate targeted by the Fed, the federal funds rate, peaked at 12.9% in July 1974 and 19% in July 1981. (After adjusting for inflation, these rates were not nearly as high as they appear because inflation was so much higher at the time.) The Fed had raised rates that high in order to reduce inflation, which, as measured in the GDP accounts, peaked at an annualized rate of 12.8% in the third quarter of 1974 and 11.1% in the fourth quarter of 1980. For that reason, some economists have described these recessions as "made in Washington"—had the Fed not raised rates so high, they argue, the recessions would presumably have been shorter and milder (although inflationary problems might have worsened). This dynamic has not been important in the recent recession, as the federal funds rate's recent peak was 5.25% and was reduced before the recession had begun, eventually falling to almost zero. Rising inflation was initially a concern in the current episode, but has never come close to the rates of the 1970s and 1980s—it peaked at 4.2% in the first quarter of 2007. Rising energy and commodity prices were temporarily pushing inflation up in the first half of 2008. Since then, declines in those prices temporarily led to deflation (falling prices) at the end of 2008, with very low inflation since. As the economy gradually recovers, views are divided on the outlook for inflation. Some commentators point to a federal funds rate of zero and the unprecedented scale of the Fed's intervention in financial markets as policies that will ultimately push inflation higher. Through direct lending and asset purchases, the Fed's outstanding support to the financial sector has, at times, exceeded $1 trillion, compared with less than $1 billion before the financial crisis began. In normal times, such interest rate and lending policies would be expected to be highly inflationary. But as the recession drove down aggregate demand, it put downward pressure on inflation. Other commentators fear that the recession was severe enough that deflation is a greater threat than inflation. They argue that the Fed's intervention in financial markets was necessary to avoid a "liquidity trap," where lower interest rates no longer stimulate interest-sensitive spending. Although the Fed has brought the federal funds rate down to near zero, because it was only 5.25% when the Fed began reducing rates, the Fed's scope for easing monetary policy through traditional methods was somewhat limited. By contrast, the federal funds rate, although high, was reduced (peak to trough) by 6.8 percentage points in the 1973 recession and by 10.5 percentage points in the 1981 recession. Table 2 shows the rise in unemployment in all 11 post-war recessions. Unsurprisingly, the recessions with the deepest declines in output also featured the largest increases in unemployment. From the expansion peak to post-recession high, the 1973 recession saw an increase in the unemployment rate of 4.2 percentage points, and the 1981 recession saw an increase of 3.6 percentage points (or 4.8 percentage points compared with the expansion that ended in 1980). Unemployment peaked at 10.1% in October 2009, a 5.1 percentage point increase compared with the previous expansion peak. The 1981-1982 recession was the only other recession in the post-war period in which unemployment topped 10%. Most of the increase in unemployment in the recent recession occurred after the first six months of the recession, underlining the initial mildness of the recession. The rise in the unemployment rate during this recession was comparable to the recessions since 1960 for the first 10 months following the recession's onset. Beginning in the 11 th month, however, it followed a pattern similar but even more severe than the two "deep and long" recessions of 1973 and 1980. (Unemployment leveled off after about a year in the other four recessions since 1960.) The recent recession eventually featured the largest increase in unemployment in the post-war period. Unemployment rose for 22 months, the longest period of rising unemployment since World War II. The 1973 and 1981 recessions were the only other two in the post-war period where unemployment continued to rise after about a year; in the 1973 recession, it rose for 19 months. The previous two recessions, in 1991 and 2001, were mild and brief as measured by the decline in GDP, and had some of the smallest increases in unemployment in the post-war period. This is not the whole story, however, because, in both cases, unemployment continued to rise for over a year after the recession had ended. (In every other post-war recession, with the exception of the one beginning in November 1970, unemployment began falling within six months of the recession's end.) These two episodes have therefore been called "jobless recoveries." If the rise in unemployment in the jobless recovery were included, the episode beginning in 1991 would have featured an above average rise in unemployment; but the episode beginning in 2001 would still remain below average. It is unclear whether the economy has changed in some fundamental way that makes jobless recoveries more likely from now on, or if it was simply a coincidence that the previous two recessions ended in this way. Job growth following the recent recession was more typical in that employment began rising in January 2010, seven months after the recession officially ended. Less typically, subsequent employment growth has been weak. The recent recession has also featured the largest decrease in consumption and private fixed investment spending of any post-war recession. There are a few commonalities found across all previous post-war recessions. First, in all cases, consumption spending did not weaken as much as GDP, as shown in Table 1 . In fact, in five out of 11 recessions, consumption continued to grow while GDP fell. To the extent that households can adjust their saving and borrowing levels, they are thought to generally prefer to "smooth" consumption over time, avoiding sudden increases and decreases. In the recent recession, consumption declined relatively rapidly in the third and fourth quarters of 2008, with small positive and negative changes in the other quarters. Consistent with the historical pattern, consumption has fallen by proportionately less than output cumulatively. Second, in all recessions, fixed investment spending fell more sharply than GDP. This evidence casts doubt on a popular explanation that recessions are caused by declines in consumption. It suggests to some that the primary driver of the business cycle is cyclical changes in investment demand. Investment demand is separated into two categories—business investment (in plant and equipment) and residential investment (home building). Cyclical changes in business investment could be driven by changes in business conditions, confidence, or credit conditions. Residential investment is driven by changes in housing demand and credit conditions. Changes in credit conditions are heavily influenced by monetary policy. Both business investment and residential investment fell in each of the post-war recessions. In eight out of 10 recessions, there was a larger percentage decline in residential investment than in business investment. The percentage decline in residential investment was much larger in the recent recession—beginning in the second quarter of 2006, residential investment fell by more than an annualized rate of 10% for thirteen straight quarters, while business investment fell by more than 10% in only two quarters. Further, in nine out of 10 past recessions, the decline in residential investment preceded the decline in GDP growth. This pattern held in the recent recession as well. Many economists have argued that the housing crash was a root cause of the recent recession. The fact that the decline in residential investment preceded the decline in GDP is not necessarily evidence that housing crashes have also caused other post-war recessions. It may be that recessions are caused by a tightening in credit conditions, and residential investment is the sector that is first and most affected by tighter credit conditions. For example, the deep decline in residential investment in the early 1980s is usually attributed to the Fed's decision to push the federal funds rate as high as 19%. While residential investment has fallen in all other post-war recessions, national house prices had not (since the major data series were first collected), until now. In the recent recession, national house prices fell 15% peak to trough, and residential investment fell by more than half from peak to trough. Unlike many other post-war recessions, housing may be a cause, rather than a symptom, of the recent recession. Another commonality between the recent recession and past recessions is the behavior of oil prices. The recessions of 1973 and the early 1980s are remembered for their oil shocks, and this pattern is not uncommon. In a well-known article, economist James Hamilton identified disruptions to oil supply before all but one of the post-war recessions—a pattern that has continued in every recession since his article was published, including the latest. Crude oil prices rose from $51 per barrel in January 2007 to a peak of $129 per barrel in July 2008. The average price in 2009 was about half the 2008 peak price, which should eventually offset much of the contractionary effects of the previous price increase on GDP. Evidence against attributing the economic downturn to rising oil prices would be the fact that oil prices rose significantly in the previous expansion without any noticeable effect on GDP growth. For example, prices rose from $37 per barrel in December 2004 to $69 per barrel in July 2006. As a result of the current global nature of the financial turmoil, the recent recession was widespread throughout the world. In 2009, world GDP growth was -0.6% overall and -3.2% in developed economies, contracting in all of the G-7 economies. A widespread recession is not historically unusual. For example, between 1980 and 1982, all of the G-7 countries except France and Japan experienced a contraction in GDP for at least one year (and growth was close to zero in France in 1981). Likewise, between 1991 and 1993, all of the G-7 countries except Japan experienced a contraction in GDP for at least one year (and growth was close to zero in Japan in 1992 and 1993). The global nature of the recession could potentially prolong and deepen it because there would be less demand abroad for a country's exports. In a study of historical recessions in industrial countries, the International Monetary Fund (IMF) found that recessions that were highly synchronized internationally lasted an average of four months longer and GDP fell an average of 1% more than in other recessions. A primary reason that the recent recession was longer and deeper than normal is the severity of the financial downturn that began in August 2007 and worsened dramatically in September 2008. As noted above, the recession was initially mild, and the decline in GDP accelerated markedly after the financial downturn worsened. Although a diminished investor appetite for risk and a stock market decline before or during a recession is common, the recent recession has featured a breakdown in activity in certain financial markets, such as the markets for asset-backed securities, commercial paper, and interbank lending, and the failure (or government rescue to avoid failure) of several large, established financial firms. Since then, financial conditions have improved but have not completely returned to normal. Beginning in the fourth quarter of 2008, disruptions in financial markets resulted in significant declines in business investment. Given the lag between changes in financial conditions and economic activity, it is less surprising that the recession was so much longer than average. In a study of historical recessions in industrial countries, the IMF found that recessions associated with financial crises lasted an average of seven months longer, although the decline in GDP was not statistically significant from other recessions. Some commentators have suggested that the financial crisis of the recent recession makes the Great Depression a more relevant comparison than the other post-war recessions. While the current financial downturn has been the most severe in the post-war period by many measures, there are many differences between the recent situation and the Great Depression. Although the stock market crash of 1929 played a role in setting the economic downturn in motion, there is a consensus among economists that policy errors caused the downturn to become the Great Depression. Among the most important errors were the Fed's failure to counteract the contraction in the money supply, which caused overall prices to fall a cumulative 25%, and bank runs, which caused thousands of banks to fail. (The money supply fell primarily in order to maintain the gold standard, and the economic growth rate was high after the United States abandoned the gold standard.) By contrast, policymakers have responded aggressively and unconventionally to attempt to contain the current crisis. The Fed has reduced short-term interest rates to nearly zero. Direct Fed assistance outstanding to the financial system has exceeded $1 trillion, and Congress authorized Treasury to provide an additional $700 billion to the financial system through the Troubled Assets Relief Program. Widespread bank runs have not occurred since the introduction of deposit insurance in the 1930s, and similar runs on money market mutual funds in 2008 were circumvented when Treasury temporarily guaranteed their principal. The Federal Deposit Insurance Corporation (FDIC) also temporarily guaranteed certain bank debt to ensure that banks would not lose access to borrowing markets. During the Great Depression, policymakers were also reluctant to stimulate the economy through fiscal expansion (a larger structural budget deficit). By contrast, the budget deficit increased as a share of GDP from 1.2% in 2007 to 10% in 2009. There was also a belief among some policymakers at the time that recessions were healthy processes that purged the economy of inefficiently allocated resources—a view that fell out of favor as the Depression worsened, and was eventually replaced by the view that prudent policy changes could avoid the needless waste of resources laid idle by recessions. The Great Depression included two recessions, with the first lasting 3½ years and the second, beginning four years later, lasting another year. As deep as the recent recession was, it was mild compared with the first contraction of the Great Depression, as shown in Table 3 . The changes in GDP, prices, and unemployment in the recent recession were much closer to those experienced in other post-war recessions than the Great Depression.
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According to the National Bureau of Economic Research (NBER), the U.S. economy was in a recession for 18 months from December 2007 to June 2009. It was the longest and deepest recession of the post-World War II era. The recession can be separated into two distinct phases. During the first phase, which lasted for the first half of 2008, the recession was not deep as measured by the decline in gross domestic product (GDP) or the rise in unemployment. It then deepened from the third quarter of 2008 to the first quarter of 2009. The economy continued to contract slightly in the second quarter of 2009, before returning to expansion in the third quarter. The recent recession features the largest decline in output, consumption, and investment, and the largest increase in unemployment, of any post-war recession. Previously, the longest and deepest of the post-war recessions were those beginning in 1973 and 1981. Both of those recessions took place in a context of high inflation that made the Federal Reserve (Fed) hesitant to aggressively reduce interest rates to stimulate economic activity. The Fed has not shown a similar reluctance in the recent recession, bringing short-term rates down to almost zero. Although inflation exceeded the Fed's "comfort zone" in 2007 and 2008, it was not nearly as high as it was in the 1970s or 1980s recessions. The economy briefly experienced deflation (falling prices) at the end of 2008, and inflation has generally remained very low since. Deflation may be a bigger threat to the economy in the near term, although some economists are fearful that the Fed's actions will cause inflationary problems once the economy returns to full employment. Both the 1973 and 1981 recessions also featured large spikes in oil prices near the beginning of the recession—as did the recent one. Disruptions to oil markets and recessions have gone hand in hand throughout the post-war period. The previous two recessions (beginning in 1991 and 2001) were unusually mild and brief, but subsequently featured long "jobless recoveries" where growth was sluggish and unemployment continued to rise. The recent recession did not feature a jobless recovery longer than the norm, but employment growth has been weak in 2010. A decline in residential investment (house building) during a recession is not unusual, and it is not uncommon for residential investment to decline more sharply than business investment and to begin declining before the recession. The recent contraction in residential investment was unusually severe, however, as indicated by the atypical decline in national house prices. One unique characteristic of the recent recession was the severe disruption to financial markets. Financial conditions began to deteriorate in August 2007, but became more severe in September 2008. While financial downturns commonly accompany economic downturns, financial markets have continued to function smoothly in previous recessions. This difference has led some commentators to instead compare the recent recession to the Great Depression. While the onset of both crises bear some similarities, the effects on the broader economy have little in common. In the first contraction of the Great Depression, lasting from 1929 to 1933, GDP fell by almost 27%, prices fell by more than 25%, and unemployment rose from 3.2% to 25.2%. The changes in GDP, prices, and unemployment in the recent recession were much closer to those experienced in other post-war recessions than the Great Depression. Most economists blame the severity of the Great Depression on policy errors—notably, the decision to allow the money supply to contract and thousands of banks to fail. By contrast, in the recent recession policymakers have aggressively intervened to stimulate the economy and provide direct assistance to the financial sector.
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The U.S.-Singapore Free Trade Agreement ( P.L. 108-78 ) went into effect on January 1, 2004. This report provides an overview of the major trade and economic developments following the FTA over the five years ending in January 2010. It also includes selected information on key provisions of the agreement. As the United States and Singapore adjust to the provisions of the FTA, it becomes increasingly difficult to separate out the effects of the FTA from that which has occurred because of other economic forces. The effects of the global financial crisis and recession of 2008-2009 have had a major downward effect on trade flows, but some general conclusions still can be drawn. The U.S.-Singapore FTA has taken on new importance in trade policy because the United States is engaged in negotiations to join the Trans-Pacific Partnership (TPP). The TPP negotiations are the first major market-opening initiative of the Obama Administration. On December 14, 2009, United States Trade Representative Ron Kirk notified Congress of the intent to enter into the TPP negotiations. The objective is to shape a high-standard, broad-based regional free trade agreement with Australia, Brunei Darussalam, Chile, New Zealand, Peru, Singapore, and Vietnam. The first round of negotiations began March 15, 2010, in Sydney, Australia. Singapore, Chile, Brunei, and New Zealand are the original members of the pact. The United States, Australia, Peru, and Vietnam are seeking to join. The United States already has FTAs with Singapore, Chile, Australia, and Peru. The TPP could become the basis for a Free Trade Area of the Asia-Pacific over the long term. The U.S.-Singapore FTA essentially eliminated tariffs on all goods traded between the two countries. It also included market access measures and other provisions related to trade in services, investment, rules of origin, intellectual property rights, government procurement, licensing of professionals, telecommunications, worker rights, the environment, capital controls, and dispute settlement. The FTA has provided greater access for U.S. companies, has been instrumental in increasing bilateral trade, and has provided reassurance to Singaporeans of U.S. interest in the country at a time when many in the region perceived that the United States had been focused on the Middle East and "neglecting" Asia. The FTA seems to have benefitted overall bilateral relations. The FTA has provided certain advantages to American businesses, but since Singapore has FTAs with many other nations, those advantages often are extended to other nations as well. As a city-state, Singapore operates as an entrepot and shipping center and basically has free trade with almost all countries. It imposes import restrictions on only a handful of goods. Under the FTA, Singapore made concessions that dealt mainly with providing greater access for American service providers (particularly financial services) and with strengthening the business environment in areas such as the protection of intellectual property rights and access to government procurement. In 2009, the United States ran a $6.6 billion surplus in its balance of merchandise trade with Singapore, up from $1.4 billion in 2003, but down from the $12.0 billion in 2008. U.S. exports of goods to Singapore surged from $16.6 billion in 2003 to a peak of $27.9 billion in 2008 before declining to $22.3 billion in 2009. Major U.S. exports to Singapore include machinery, electrical machinery, aircraft, optical and medical instruments, plastic, and mineral fuel oil. U.S. trade with Singapore has increased faster than anticipated before the FTA. Even with this rapid increase in U.S. exports to Singapore, however, the U.S. share of Singapore's imports has declined from 16% in 2003 to 12% in 2009. The main reason for this is that Singapore's overall trade is booming. Still, Singapore imports more from the United States ($28.5 billion) than from China ($26.0 billion). Malaysia is Singapore's top source of imports, while the United States is second, and China is third. Imports from China, however, have been rising rapidly, and China has passed Japan as a source of imports. The U.S. balance of trade in services with Singapore declined from a surplus of $4.0 billion in 2001 to $1.2 billion in 2005 but rose to $4.2 billion in 2008. While U.S. receipts of royalties and license fees ($3.2 billion) and exports of other private services ($4.2 billion) have increased, so have U.S. payments for other private services ($2.1 billion) and for travel and transportation ($1.3 billion). A significant increase has been in income from U.S. direct investments in Singapore. U.S. access to the Singaporean market for multinational corporations seems to have been enhanced considerably under the FTA. U.S. income from assets in Singapore rose from $6.7 billion in 2003 to $21.1 billion by 2008. As an example of U.S. service providers in Singapore under the FTA, Citibank has been able to expand its operations there (it has 50% of the credit card market), offer innovative products (such as biometric identification for bill paying), and partner with the subway system to issue credit cards that double as subway fare cards and to locate branches and ATM terminals in and around subway stations. On the U.S. import side (Singapore's exports), a noteworthy development is that U.S. imports of pharmaceuticals from Singapore have risen dramatically from $0.09 billion in 2003 to $3.0 billion in 2007 before declining to $2.0 billion in 2008. In 2008, Singapore was the seventh largest supplier of pharmaceuticals to the United States. The FTA did not lower the U.S. tariff rate for pharmaceuticals, since such products already enter the United States duty free. What appears to have occurred has been the development of Singapore as a regional center for multinational pharmaceutical companies. This apparently was partly triggered by provisions in the FTA that required Singapore to strengthen its intellectual property protection. The Singaporean government also has provided incentives for multinational biomedical companies to locate research and production in the country. Most of the major pharmaceutical companies of the world have established subsidiaries in Singapore and are exporting part of their production. Singapore has relatively high labor standards. It ratified the International Labor Organization's Minimum Age Convention in 2005. This brought the number of ILO Conventions the country has ratified to more than 20, including Core Conventions that cover child labor, forced labor, collective bargaining, and equal remuneration. As a city state with 3.4 million people and an area roughly the size of the Washington, DC, area inside the Beltway, Singapore's environmental challenges relate primarily to industrial pollution (strictly regulated), urbanization, and preservation of natural areas. The country touts itself as a garden city. It recycles all waste water, appears clean, and uses variable tolls to alleviate traffic congestion. The United States has not formally raised environmental or labor issues with Singapore under the FTA. For details on the content of the FTA, see CRS Report RL31789, The U.S.-Singapore Free Trade Agreement , by [author name scrubbed]. Since the U.S.-Singapore FTA came into effect in January 2004, U.S. trade with Singapore has boomed. As shown in Figure 1 , U.S. exports of merchandise to Singapore rose by 68% from $16.6 billion in 2003 to a peak of $27.9 billion in 2008 before the global financial crisis depressed world trade in 2009. In 2009, U.S. exports to Singapore were at $22.3 billion. U.S. imports from Singapore increased by a lesser 22% to go from $15.1 billion in 2003 to a peak of $18.4 billion in 2007 before declining to $15.7 billion in 2009 or approximately the same level as prior to the FTA. The U.S. trade surplus with Singapore rose from $1.4 billion in 2003 to a peak of $12.0 billion in 2008 before declining to $6.6 billion in 2009. Major U.S. exports to Singapore include machinery, electrical machinery, aircraft/spacecraft, mineral fuel and oil, optical and medical instruments, plastic, and organic chemicals. As shown in Figure 2 , U.S. exports of each of these products have risen since the U.S.-Singapore FTA took effect in January 2004, although they declined in 2009 because of the global financial crisis. The highly developed nature of the city-state's economy can be seen in the major U.S. exports there. They consist primarily of industrial and scientific machinery and materials. The rising surplus in merchandise trade with Singapore, however, masks other underlying trends that do not bode as well for the United States. Although Singapore's share of U.S. exports to the world has remained at about 2.3% to 2.1%, Singapore's imports from the United States have been declining relative to those from many other countries of the world. As shown in Table 1 , in 2001, the United States accounted for 16.4% of Singapore's imports. By 2009, that share had fallen to 12%, despite the rapid growth in U.S. exports there. Still, Singapore imports more from the United States ($28.5 billion) than from China ($26.0 billion). Malaysia is Singapore's top source of imports, while the United States is second, and China is third. Imports from China, however, have been rising rapidly, and China has passed Japan as a source of imports. The surplus in the U.S. balance of merchandise trade with Singapore runs contrary to a commonly held perception that free trade agreements lead to larger U.S. deficits in trade. The perception seems to be generated mostly by U.S. trade with its immediate neighbors, Canada and Mexico. As shown in Figure 3 , in 2009, the United States ran trade surpluses with Australia, Singapore, Chile, the Dominican Republic, Morocco, and seven other FTA countries, while it ran deficits with Mexico, Canada, Israel, Costa Rica, and Nicaragua. During the FTA talks with Singapore, negotiations were intense over that country's import restrictions on a few products. Even though Singapore is largely a free-trade nation, it has restrictions on imports of specific controlled items (including chewing gum) and has import duties on beer, stout, and a local beverage called samsu . Under the FTA, Singapore allowed imports from the United States of chewing gum with "therapeutic value" (excluding nicotine gum) to be sold in pharmacies. The country also dropped all duties on beer, stout, and samsu from the United States. Under the FTA, U.S. exports of beer (made from malt, Harmonized System code 2203) rose from $0.352 million in 2003 to $0.648 million in 2005 but was at $0.505 million in 2009. As a share of Singapore's total imports of beer, however, in 2009, the United States accounted for about 0.5% of the total and ranked 18 th among all sources of beer imports. The top six sources were Malaysia, Mexico, Belgium, the Netherlands, Thailand, and South Korea. Among these countries, only Thailand and South Korea have free trade agreements with Singapore. With respect to chewing gum, the data on Singaporean imports do not show appreciable imports from the United States. In 2009, out of a total of $850,309 in chewing gum imports (HS 170410), none came from the United States. $627,016 in chewing gum came from Indonesia and $112,907 that came from South Korea. As for imports from the United States in previous years, in 2005, Singapore imported $1,298 and 2006, $246 worth of American chewing gum. U.S. business interests point out that the greatest potential effect of the U.S.-Singapore FTA is likely to be increased access by U.S. companies to Singapore's market in services. Services are provided in two ways: in cross-border transactions and from subsidiaries in the trading partner's economy. Services such as insurance, shipping, provision of intellectual property, and travel often are sold across borders and are counted as exports and imports. Other services, such as accounting, legal services, and banking often are provided directly to the consumer through overseas subsidiaries of U.S. companies. These transactions usually do not appear as exports or imports, although the repatriation of profits from such activity is counted as an income flow. The United States has traditionally run a surplus in its balance of services trade with Singapore. This is shown in Figure 4 . Under the FTA, this balance declined from $4.0 billion in 2001 to $2.6 billion in 2006 but has risen to $4.2 billion in 2009. Among the four components of trade in services, the United States ran surpluses in two and deficits in two. In royalties and license fees, the U.S. surplus increased from $2.5 billion in 2001 to $3.1 billion in 2008. Some of this rise in fees for intellectual property likely can be attributed to strengthened intellectual property protection in Singapore resulting from the FTA. In other private services, the U.S. surplus has fluctuated with a fall from $1.9 billion in 2001 to $0.7 billion in 2006 but a rise to $2.2 billion in 2008. In military and government transactions, the trade balance varies from year to year. It was -$0.04 billion in 2001, -$0.2 billion in 2006, and -$0.6 billion in 2008. In travel and transportation, the balance trends toward an increasingly large U.S. deficit. Most of this is in transportation, particularly shipping, as well as in passenger fares and travel. This negative balance grew from -$0.3 billion in 2001 to -$1.0 billion in 2006 but diminished to -$0.4 billion as the global financial crisis curtailed shipping and tourism. Increased market access in services under an FTA, therefore, may or may not result in an improvement in the U.S. bilateral trade balance in services. It depends on what kind of service is being traded and the relative comparative advantage of each country. U.S. service providers, moreover, may find it more advantageous under the increased access and strengthened intellectual property regime engendered by an FTA to locate a subsidiary in the FTA partner country. This may reduce U.S. exports of private services but also may increase royalties and payments from use of intellectual property and earnings from operations in the host country. In the Singapore case, U.S. income from assets owned in Singapore increased from $3.9 billion in 2001 to $6.7 billion in 2003, and after the FTA jumped to $14.3 billion in 2006 and $21.1 billion in 2008. In 2008, Singaporean investors earned $6.3 billion on their assets in the United States for a $14.8 billion surplus for the United States. This is more than triple the U.S. surplus in trade in services. In financial services, Singapore made several key concessions under the FTA. In 2007, the government lifted the ban on new licenses for full-service and wholesale American banks. Licensed full-service banks from the United States (two as of 2007) are now able to offer all their services at an unlimited number of locations. Under the first two years of the FTA, U.S.-licensed full-service banks were able to operate at up to 30 customer service locations (branches or off-premise ATMs). Non-U.S. full-service foreign banks have been allowed to operate at a combined 25 locations. Locally incorporated subsidiaries of U.S. banks are able to apply for access to the local automated teller machine (ATM) network on commercial terms, and branches of U.S. banks were to obtain access to the ATM network by 2008. Citibank, in particular, has been expanding its presence in Singapore. From four branches in 2004, it now has eleven full-service branches and more planned. It was the first in Singapore to introduce a biometric payment system that allows payments without credit cards based on fingerprint identification. It also has joined with the Singapore MRT subway system to provide credit cards that double as subway tickets and to locate ATMs and branches in and around subway stations. Citibank has a 50% share of the Singapore credit card market. As of mid-2006, Citibank along with the other major foreign banks had created their own ATM network rather than join that of the local banks. American banks are allowed under the FTA to enter the domestic ATM network if financial considerations warrant such a move. In general, foreigners in Singapore cannot practice Singapore law (without local credentials), employ Singapore lawyers to practice Singapore law, or litigate in local courts. Since June 2004, however, U.S. and other foreign lawyers have been allowed to represent parties in arbitration in Singapore without the need for a Singapore attorney to be present. U.S. law firms can provide legal services with respect to Singapore law only through a joint venture or formal alliance with a Singapore law firm. Under the FTA, Singapore has recognized law degrees from Harvard University, Columbia University, New York University, and the University of Michigan for the purpose of admission to practice law in Singapore. Also, since October 2006, graduates of these universities who are ranked among the top 70% of their graduating class may be admitted to the Singapore bar. The FTA contains state-of-the-art provisions on electronic commerce, including national treatment and most-favored-nation obligations for products delivered electronically, affirmation that services disciplines cover all services delivered electronically, and permanent duty-free status of products delivered electronically. The FTA provided the impetus for the Singapore government to amend its laws to create one of the strongest IPR regimes in Asia. In July 2004, amendments to the Trademarks Act, the Patents Act, the Layout Designs of Integrated Circuits Act, Registered Designs Act, a new Plant Varieties Protection Act, and a new Manufacture of Optical Discs Act came into effect. This was followed in 2005 by an amended Copyright Act and Broadcasting Act. Singapore also has implemented or ratified various international conventions or treaties dealing with IPRs. Singaporean officials have indicated that the provisions in the FTA that strengthened IPR protection in Singapore have attracted foreign business investments. Recently, Microsoft, Pfizer, ISIS Pharmaceuticals, Motorola, Genentech, and Lucas Films have made new investments in operations in Singapore. In January 2010, the World Intellectual Property Organization (WIPO) of the United Nation established an office in Singapore to handle some of WIPO's dispute resolution activities. The Singapore office is to administer and facilitate hearings in cases conducted under WIPO arbitration rules and to provide training and advice on procedures such as arbitration, mediation and expert determination. The Singapore Office of WIPO aims to cater to regional needs and to make WIPO's experience and expertise in intellectual property alternative dispute resolution more accessible in the Asia-Pacific Region. The U.S.-Singapore FTA provides for national and most-favored nation treatment for foreign investors. Investors have the right to make financial transfers freely and without delay. The FTA also provides for disciplines on performance requirements, for international law standards in the case of expropriation, and for access to binding international arbitration. In 2006, Singapore was the third largest destination for U.S. foreign direct investment in the Asia Pacific. U.S. direct investment (cumulative position) in Singapore was $40.8 billion in 2001, $51.1 billion in 2003, $81.9 billion in 2006, and $106.5 billion in 2008. By comparison, in 2008, it was $88.5 billion in Australia, $79.2 billion in Japan, $51.5 billion in Hong Kong, and $45.7 billion in China. According to the U.S. Department of Commerce, in 2004 and 2005, one of the strongest increases in the value added of overseas affiliates of U.S. multinational corporations was in manufacturing operations in Singapore. The attractiveness of the country as a "manufacturing base for the Asia-Pacific region was heightened by the enactment of the United States-Singapore Free Trade Agreement, which facilitates the shipment of inputs to production from the United States." In 2005, U.S. affiliates in Singapore accounted for 15% of Singapore's GDP, up from 13.2% in 2004 and second only to the share in GDP of U.S. affiliates in Ireland (18.5%). In 2005, U.S. non-bank affiliates in Singapore employed 123,600 persons, held assets of $150.7 billion, had sales of $162.7 billion, and generated net income of $18.7 billion. This net income in Singapore exceed that by U.S. non-bank affiliates in Japan ($15.0 billion), Australia ($13.0 billion), or China ($7.9 billion) for the same year. Just as U.S. exports to Singapore have increased since the U.S.-Singapore FTA came into effect in 2004, so also have U.S. imports from Singapore. After the FTA, Imports rose by 22% from $15.1 billion in 2003 to $18.4 billion in 2007 (not adjusted for inflation) but as the global financial crisis curtailed international trade, imports from Singapore declined to $15.7 billion in 2008 and $15.7 in 2009. Since the FTA, therefore, U.S. exports have increased considerably more than U.S. imports. By sector, the growth rates for imports vary considerably. Figure 5 shows the average annual growth rates for the four years prior to and for the five years after the FTA was implemented for the top 40 products (by 2-digit Harmonized System code) imported from Singapore. In 2009, the value of these products ranged from a low of $3.9 million for nickel to $4,639.6 million for machinery. Imports from Singapore are concentrated in the top six categories each with amounts exceeding $1 billion. Together these six accounted for 91% of the total imports from Singapore in 2009. One of the concerns expressed during consideration of the FTA was that it would increase significantly imports of textiles and apparel from Singapore. This has not occurred. In 2009, there were no imports of knitted or crocheted fabrics. Since 2003, imports of woven apparel fell by 39% per year from $38 million to $3 million in 2009, and imports of knit apparel likewise fell by 22% per year from $233 million to $68 million. The most significant gains have been in U.S. imports of pharmaceuticals from Singapore. Imports of such products jumped from $0.09 billion in 2003 to $3.0 billion in 2007, although they declined to $2.0 billion in 2009. Singapore is the ninth largest supplier of pharmaceuticals to the United States, behind Belgium, Israel, and Switzerland, but ahead of Italy, Japan, and India. The vast majority (95%) of these imports ($1.9 billion) were cardiovascular medicaments (HS 3004909120). The increase in imports of pharmaceuticals from Singapore cannot be attributed to a reduction in U.S. tariffs under the FTA. Pharmaceuticals already enter the United States duty free. Rather what appears to have occurred is the development of Singapore as a regional center for multinational pharmaceutical companies—both for manufacturing and for research and development. Two major factors have contributed to this. The first is the strengthening of intellectual property protection and new or revised laws in Singapore. The second is the development of a biomedical industrial park (Tuas Medical Park) for pharmaceutical companies to locate production and other facilities plus a research complex called Biopolis that houses biomedical research institutes, councils, and related organizations. Multinational companies have come to dominate the manufacture of pharmaceuticals in Singapore. These include Merck Sharp and Dohme, Aventis, GlaxoSmithKline, Pfizer, Schering-Plough, Wyeth, and Eli Lilly. Singapore is increasingly becoming a base for both regional and global pharmaceutical production for a growing number of multinational companies. The government goal is to have at least ten multinational pharmaceutical manufacturing facilities operational in Singapore by 2010. Much of the production is for export, particularly to North America and Europe. Exports from other Asian countries also flow into Singapore for re-export. The country exports more pharmaceuticals than any other "Asian Tiger" economy (Hong Kong, Taiwan, and South Korea). Before the FTA, a sizable proportion of Singapore's pharmaceutical exports were transshipments from other countries. While such re-exports continue to increase, exports of domestic production now dominate. Figure 6 shows Singapore's global exports of pharmaceuticals and the rapid increase in domestic exports relative to re-exports. From 2002 to 2006, the re-export share of all pharmaceutical exports dropped from 60% to 11%. In the modern globalized economy, much trade is intra-industry. The old economic model of trade in which each country specializes in certain products and exchanges them for others in which it has a comparative disadvantage only remotely resembles trade between industrialized economies populated by multinational enterprises. In many cases, the United States both imports and exports products in the same sector. Some of this trade may occur within a manufacturer's supply chain that may straddle several countries. For example, an electronic product may be designed and marketed in the United States, but final assembly may be in Singapore using components from the United States as well as from other economies in the region. The U.S. balance of trade in goods with Singapore is shown in Figure 7 by two-digit Harmonized System codes. The balance of trade by sectors also indicates how trade with Singapore may be affecting sectoral employment in the United States. The first observation is that the U.S. aerospace products, mineral fuel and oil, and electrical machinery producers are doing well in Singapore. The U.S. trade surplus in each exceeds $2.3 billion. The largest U.S. sectoral deficits in trade are in organic chemicals (-$2.7 billion) and pharmaceutical products (-$1.9 billion). Most other sectors are experiencing either small surpluses or small deficits in bilateral trade—less than $1 billion. (The sectors not shown in Figure 7 had balances with an absolute value of less than $60 million.) In the U.S.-Singapore FTA, labor obligations are part of the core text of the trade agreement. Both parties were to reaffirm their obligations as members of the International Labor Organization, and they are to strive to ensure that their domestic laws provide for labor standards consistent with internationally recognized labor principles. The agreement also contains language that it is inappropriate to weaken or reduce domestic labor protections to encourage trade or investment. The agreement further requires parties to effectively enforce their own domestic labor laws. This obligation is to be enforceable through the agreement's dispute settlement procedures. Singapore has ratified 24 ILO Conventions (20 in force), including five Core Conventions that cover child labor (ratified in 2001); forced labor; collective bargaining, and equal remuneration (ratified in 2002). The country ratified the Minimum Age Convention in November 2005 after the FTA went into effect. Unless otherwise indicated, the other conventions were ratified in 1965. (The United States has ratified 14 ILO Conventions [12 in force] including 2 [Forced Labor and Child Labor] of the five Core Conventions.) In 2009 Singapore's national labor force was made up of approximately 2.99 million workers of which about 500,000 were unionized and represented by 68 unions. Almost all of the unions (which represent virtually all of the union members) were affiliated with the National Trade Union Congress (NTUC), an umbrella organization with a close relationship with the government. In a 2009 study of the U.S.-Singapore FTA, the Government Accountability Office concluded the following: Singapore generally had strong protections for workers going into the FTA and has since improved them. As a high-income economy, Singapore provides good working conditions and a broad range of social benefits for most of its workers, and U.S. officials involved in the negotiations said changes in Singapore's labor laws were not needed to conclude the FTA. The International Trade Union Confederation (ITUC) reports that there are some restrictions on unions in Singapore's labor laws, but many of the restrictions are not applied in practice. U.S. FTA negotiators were initially concerned by Singapore's lack of a minimum wage law, but these concerns were allayed by an understanding of Singapore's unique system for determining wage increases through the annual recommendations of a National Wages Council that is composed of government, trade union, and employer representatives. U.S. embassy officials said Singapore has made changes in its laws to improve worker protections since the FTA took force. The embassy officials stated that, for example, a workplace safety and health act was enacted to provide safety protections to a broader range of workers. State's 2008 human rights report indicates that Singapore's Ministry of Manpower effectively enforced its laws and regulations on working conditions, safety and health standards, and child labor. (p. 37) No U.S. activity or assistance on labor has been provided since the FTA went into effect, according to ILAB (U.S. Bureau of International Labor Affairs) officials. Singapore has high labor standards and relatively few labor problems, as indicated in the FTA labor rights report. U.S. officials told us that because Singapore's labor laws and enforcement systems were good, they did not see a need for extensive cooperation and, furthermore, Singapore had not requested it.... Despite the provisions in the labor cooperation annex and the expectations of negotiators in both countries, neither U.S. nor Singapore government officials were aware of any technical cooperation activities concerning labor since the FTA was implemented. However, Singaporean officials told us they were cooperating on labor issues with other trade partners, such as the Trans-Pacific Strategic Economic Partnership that also includes Chile, New Zealand, and Brunei Darussalam. (p. 44) In the U.S.-Singapore FTA, both parties agreed to ensure that their domestic environmental laws provide for high levels of environmental protection and that they are to strive to continue to improve such laws. They are not to weaken or reduce domestic environmental protections to encourage trade or investment. The agreement also requires that parties effectively enforce their own domestic environmental laws. This obligation is to be enforceable through the agreement's dispute settlement procedures. Since Singapore is an island (3.4 million population) the size of the Washington, DC, area inside the Beltway, it has virtually no natural resources. Its environmental issues are characteristic of a highly urbanized city. It has no problems associated with mining, forestry, or large-scale agriculture. Singapore touts itself as the "garden city of the East." It is relatively clean, ordered, and well-planned. Waste water is purified and recycled. The restricted space available in the country raises issues pertaining to industrial pollution (tightly regulated), urbanization, and the protection of the few natural areas still existing. Vehicular traffic is alleviated by charging special tolls to travel into the inner city during rush hours and by levying taxes and other fees on new or used cars. The closer economic links established under the FTA appear to have assisted in areas such as cargo security. In December 2007, Singapore announced that it was to conduct a six-month trial project under the Secure Freight Initiative. Under this initiative, 100% of U.S.-bound shipping containers are to be scanned for nuclear or radiological materials before being loaded on ships. Singapore is to be one of seven ports participating in the trial. The Ports Command in Singapore already had been cooperating with the United States in various security initiatives. It now scans about 15% of the 24 million cargo containers that pass through its ports, and it is able to scan an incoming container truck in less than one minute. In March 2003, Singapore was the first country to sign on to the U.S.-sponsored Cargo Security Initiative. The U.S.-Singapore FTA also generated non-economic effects. At a time when many in Southeast Asia perceive that the United States is distracted by events in the Middle East and not paying enough attention to Asia, the FTA provided some degree of reassurance of U.S. interest in the region. It also created a bandwagon effect as Malaysia, Thailand, and South Korea soon followed with negotiations of their own for an FTA with the United States. Singapore has supported the U.S.-backed proposal to create a Free Trade Area of the Asia Pacific under the Asia Pacific Economic Cooperation forum. It also has aggressively been concluding other FTAs that eventually could form the basis for this proposed free trade area. In addition, the closer economic ties under the U.S.-Singapore FTA contributed to more diplomatic and military cooperation with Singapore. In July 2005, the United States and Singapore signed a Strategic Framework Agreement that extended bilateral cooperation to defense and security. Located in the midst of several secular Muslim nations, Singapore has been active in cooperating with the United States in political and security cooperation in the global counterterrorism campaign. Singapore has been at the forefront of cooperating with neighboring countries and the United States to enhance maritime security in nearby waters, especially in the Strait of Malacca where terrorist threats and piracy have been problems. Singapore also has cooperated extensively to ensure the security of cargo bound for the United States. Singapore also continues to welcome port visits by the U.S. Navy and allows U.S. aircraft carriers to use the special pier at its naval base built especially to accommodate such large ships. In 2007, when Buddhist-led demonstrations erupted in Burma, Singapore held the Chair of ASEAN, the Association of Southeast Asian Nations, of which Burma/Myanmar is a member. Despite the tradition of non-interference in domestic affairs of the member states, Singapore supported investigation of the protests in Burma by the Special U.N. Envoy to Myanmar Ibrahim Gambari. Singapore also continued its bilateral and multilateral intelligence and law enforcement cooperation to investigate terrorist groups with a focus on Jemaah Islamiya, a group that had plotted to carry out attacks in Singapore in the past.
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The U.S.-Singapore Free Trade Agreement (FTA) (P.L. 108-78) went into effect on January 1, 2004. This report provides an overview of the major trade and economic effects of the FTA over the three years ending in 2006. It also includes detailed information on key provisions of the agreement and legislative action. The U.S.-Singapore FTA has taken on new importance in trade policy because the United States is engaged in negotiations to join the Trans-Pacific Partnership (TPP). The TPP negotiations are the first major market-opening initiative of the Obama Administration. On December 14, 2009, United States Trade Representative Ron Kirk notified Congress of the intent to enter into the TPP negotiations. The objective is to shape a high-standard, broad-based regional free trade agreement with Australia, Brunei Darussalam, Chile, New Zealand, Peru, Singapore, and Vietnam. The first round of negotiations began March 15, 2010, in Sydney, Australia. The U.S.-Singapore FTA has provided greater access for U.S. companies, has been instrumental in increasing bilateral trade, and has provided reassurance to Singaporeans of U.S. interest in the country. As a city-state, Singapore operates as an entrepot with essentially free trade. Under the FTA, concessions dealt mainly with providing greater access for American service providers and with strengthening the business environment in areas such as the protection of intellectual property rights and access to government procurement. In 2009, the United States ran a $6.6 billion surplus in its balance of merchandise trade with Singapore, up from $1.4 billion in 2003, but down from the $12.0 billion in 2008. U.S. exports of goods to Singapore surged from $16.6 billion in 2003 to a peak of $27.9 billion in 2008 before declining to $22.3 billion in 2009. Even with this rapid increase in U.S. exports to Singapore, the U.S. share of Singapore's imports has declined from 16% in 2003 to 12% in 2009. The main reason for this is that Singapore's overall trade is booming. Still, Singapore imports more from the United States ($28.5 billion) than from China ($26.0 billion).The U.S. balance of trade in services with Singapore declined from a surplus of $4.0 billion in 2001 to $1.2 billion 2005 but has risen to $4.2 billion in 2008. A significant increase has been in income from U.S. direct investments in Singapore. U.S. access to the Singaporean market for multinational corporations seems to have been enhanced considerably under the FTA. U.S. income from assets in Singapore rose from $6.7 billion in 2003 to $21.1 billion by 2008. On the U.S. import side (Singapore's exports), a noteworthy development is that U.S. imports of pharmaceuticals from Singapore have risen from $0.09 billion in 2003 to $3.0 billion in 2007 before declining to $2.0 billion in 2008. Singapore has developed as a regional center for multinational pharmaceutical companies. This apparently was partly triggered by provisions in the FTA that required Singapore to strengthen its intellectual property protection. Negotiations for the U.S.-Singapore Free Trade Agreement were launched under the Clinton Administration in December 2000. The FTA became the fifth such agreement the United States has signed and the first with an Asian country. This report will be updated as circumstances warrant.
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Pakistan is a key front-line ally in the U.S.-led anti-terrorism coalition, and the BushAdministration has expressed satisfaction with ongoing Pakistan-U.S. cooperation in this area. (1) Top U.S. government officialsregularly praise Pakistan and its leadership for their "fine efforts" in joint counterterrorismoperations, most recently with the capture of suspected Al Qaeda leader Khalid Mohammed in thePakistani city of Rawalpindi on March 1, 2003. Yet the bilateral relationship has come undersignificant strain in recent months due to signs of growing U.S. frustration with the continuedexistence of Islamic militants both along the Afghan-Pakistani border and infiltrating intoIndian-held Kashmir; doubts about the commitment of Pakistan's intelligence service to Islamabad'sstated anti-terrorism policies; widespread anti-American sentiment in Pakistan; reports of allegedPakistani nuclear proliferation activities; continued perceived anti-democratic practices in Islamabad;new U.S. immigration regulations; and continued antagonistic relations between Islamabad and NewDelhi. One senior observer reports that U.S. frustration with Islamabad grew alarmingly high in thelatter months of 2002. (2) At the same time, suspicion of and resentment toward the United States is reported to be spreadingrapidly throughout Pakistani society. (3) A sense of the difficulties faced in pursuing U.S. policies inPakistan's conservative Muslim western regions can be found in the March 2003 assertion by thespokesman for Pakistan's largest Islamist party that captured alleged Al Qaeda leader KhalidMohammed is a "hero of Islam" and that there is "no reason to believe that Al Qaeda really exists." Many Pakistanis reportedly believe that September 2001 terrorist attacks on the United States werea ploy by Israel designed to cause anti-Muslim backlash. (4) For several years, analysts have discussed the potential dangers toPakistan and its people's civil liberties represented by increased Islamization there. (5) There are newer concerns thatU.S. military action in Iraq may fuel Islamic radicalism in Pakistan; March 2003 witnessedanti-U.S./anti-war marches in Karachi, Lahore, and other cities organized by Islamist political partiesand involving as many as 250,000 demonstrators at a time. (6) After the September 2001 terrorist attacks on the United States, a previously poor bilateralrelationship with Pakistan was quickly improved. On September 22, 2001, President Bush lifted allremaining nuclear proliferation-related sanctions on Pakistan (and India). The Congress then passed,and the President signed into law, S. 1465 ( P.L. 107-57 ) in October 2001. With thislaw, Congress exempted Pakistan from all sanctions related to democracy and debt-arrearage forFY2002, and granted the President authority to waive such sanctions through FY2003. PresidentialDetermination 2003-16 exercised this authority for FY2003 on March 14, 2003. Members of the 107th Congress introduced several Pakistan-related bills that were not votedupon, including one that would authorize the President to reduce or suspend duties on Pakistanitextiles ( S. 1675 ); one that would repeal the President's authority to waive economicsanctions and end assistance to Pakistan as a country whose elected head of government was deposedby military coup ( H.R. 5150 ); and one that would require Presidential certification ofPakistan's successful efforts to halt cross-border terrorism into India, that the country's nationalelections are conducted freely and fairly, and that waivers on aid restrictions would facilitate bothU.S. anti-terror efforts and the transition to democratic rule in Pakistan ( H.R. 5267 ). During the final months of 2002, in response to reports alleging Pakistani assistance to NorthKorea's covert nuclear weapons program, a Member of Congress urged reinstatement ofproliferation-related aid restrictions pursuant to P.L. 106-79 , Title IX. A similar call was taken upin another Member's February 2003 request that the Bush Administration take "immediate steps" toban all military sales to Pakistan and reimpose proliferation-related sanctions under §669 of theForeign Assistance Act of 1961 (the Symington Amendment). However, in March 2003, the BushAdministration announced that it had "carefully reviewed the facts relating to the possible transferof nuclear technology from Pakistan to North Korea and decided that they do not warrant theimposition of sanctions under applicable U.S. laws." (7) Members of the 108th Congress may confront more proliferation- and democracy-related aidissues with regard to Pakistan, as questions about Islamabad's possible nuclear technology transfersand about levels of democratic governance in Pakistan continue to surface. (8) Pakistan's enthusiastic desireto purchase U.S.-made weapons is likely to be an area of continuing congressional interest. Trade-related legislation may again arise, especially in the area of textile duties. (9) U.S. assistance to Pakistanrose steeply after September 2001, from about $10 million in FY2001 to more than $1 billion inFY2002. P.L. 108-7 includes authorization for Pakistan to use $188 million in FY2003 EconomicSupport Funds to cancel approximately $1 billion in concessional debt to the U.S. government. TheBush Administration is requesting bilateral assistance to Pakistan in the amounts of $305 million forFY2003 and $395 million for FY2004. (10) Prior to the September 2001 terror attacks on the United States, and especially afterIslamabad's 1998 nuclear tests and 1999 military coup, U.S. relations with Pakistan had becomemarked by discord and distance. After the attacks, and under intense diplomatic pressure, PakistaniPresident Gen. Pervez Musharraf made a swift decision to end his government's support for theTaliban regime in Afghanistan and join the U.S.-led anti-terrorism coalition. The United States andPakistan now share pressing interests in the region. These chiefly are related to ending Islamicmilitancy that continues to wreak terror and destruction in South Asia and elsewhere, and that posesa threat to the continued existence of moderate government in a nuclear-armed Pakistan. The policy reversal by Musharraf took place without the full support of the country's Islamiccitizens or its military and intelligence organizations. Islamabad subsequently has asked the UnitedStates for military equipment, aid, and other forms of security cooperation to both assist in theanti-terror campaign and in an effort to maintain balance with India's conventional forces. WithinPakistan, however, a negative political reaction is fueling anti-government and anti-Americansentiment that may jeopardize longer-term U.S. interests in the region. A further complication is that the massive U.S. bombardment of Afghanistan's Tora Boraregion in late-2001 and Operation Anaconda in Afghanistan's eastern Shah-i-Kot mountains inMarch 2002 apparently prompted two waves of up to 5,000 Al Qaeda fighters fleeing intoPakistan. (11) Pressreports indicate that Pakistan has been allowing the United States to conduct low-level military ormilitary support operations in Pakistan's western border regions since April 2002. (12) U.S. efforts to pursuecounterterror operations in Pakistan are complicated by alleged assistance given to the Taliban, AlQaeda, and indigenous Pakistani terrorist groups by elements of Pakistan's powerful Inter-ServicesIntelligence agency (ISI). (13) Anti-terrorism operations may meet further obstacles if recentlybolstered Pakistani Islamist political parties succeed in exerting their anti-American influences onthe country's foreign policy orientation. The United States continues to make large aid donations to Pakistan and to support thatcountry's interests in negotiations with international financial institutions. President Bush andSecretary of State Powell commonly refer to the Islamabad regime as a "crucial ally." Yet there areconcerns that 2002 national elections in Pakistan were not sufficiently free and open by Westernstandards and that the military-dominated government in Islamabad intends to remain in powerthrough manipulation of constitutional and democratic processes. This possibility has led someMembers of Congress to seek the renewal of aid restrictions until such time that a more robustdemocratic process is sustained and a civilian-led government is effectively in place. (14) At the same time, the very democratic process encouraged by the United States may bringto power Islamist political groups that do not share some key U.S. interests and concerns. There isalso possibly growing anti-American sentiment in Pakistan, and the potential "re-Talibanization" ofthat country's western provinces bordering Afghanistan could lead to a reduction of Pakistan-U.S.cooperation in counterterrorism efforts, thereby harming U.S. interests in the region. (15) Some Islamist membersof Pakistan's national assembly have warned U.S. forces to stay out of areas near the border withAfghanistan, and the provincial government of one such region recently dropped the criminal chargesthat had been brought against hundreds of Pakistani citizens for taking part in anti-U.S.demonstrations last year. (16) It was reported that, following Pakistan's October 2002 elections and the ascension of anIslamist coalition there, U.S. officials presented to the Islamabad government three policy priorities:1) a preference that the Islamists not be included in the ruling national coalition; 2) that provincialgovernments being run by Islamist politicians not be allowed to interfere with ongoing anti-terroroperations involving U.S. personnel; and 3) that the basic understanding between the United Statesand Pakistan -- agreed to between Secretary of State Powell and President Musharraf on September14, 2001, and guaranteeing full Pakistani cooperation with the U.S.-led anti-terror campaign -- "mustcontinue unhindered." (17) This report reviews the current status of Pakistan-U.S. anti-terrorism cooperation in the areasof law enforcement, intelligence, and military operations. U.S. arms transfers to and securitycooperation with Pakistan are also discussed. A following section addresses the major domesticrepercussions of Pakistan-U.S. counterterrorism efforts, the ways in which such efforts are perceivedby newly-empowered Pakistan Islamists and their followers, and the possible effects these dynamicsmay have on future Pakistan-U.S. cooperation in this realm. The final section assesses the overallstatus of Pakistan-U.S. anti-terrorism cooperation and key points of U.S. concern. Pakistan historically has demonstrated inconsistency in its efforts to reign in Islamic militantsoperating inside its borders. The United States has long been aware of the existence of outlawedgroups both in Pakistan-held Kashmir and within Pakistani cities. The government of neighboringIndia continues to call Pakistan the "epicenter of global terrorism." In July 2000 testimony beforethe House International Relations Committee, a senior U.S. counterterrorism official calledPakistan's record on combating terrorism "mixed," noting that "Pakistan has tolerated terrorists livingand moving freely within its territory" and is believed to have provided "material support for someof these militants, including the Harakat ul-Mujahidin, a group that [the United States] hasdesignated as an FTO [Foreign Terrorist Organization]." The official pointed to the role played byIslamic religious schools, or madrassas, some of which "inculcate extremism and a violentanti-Americanism in their students." (18) Pakistan's tolerance of and support for hardline Islamists in both the country and the regionhas been rooted in ethnic Pashtun ties that cross the Afghani-Pakistani border and in formerPresident Gen. Zia ul-Haq's moves to strengthen Islamists during the 1980s. President Musharraf'ssweeping policy shift away from Islamic extremism began with the severing of all official ties tothe Taliban in September 2001 and culminated in a landmark January 2002 speech in which hevowed to end Pakistan's use as a base for terrorism of any kind, criticized religious extremism andintolerance in the country, and banned numerous militant groups, including Lashkar-e-Taiba andJaish-e-Muhammad (both blamed for terrorist violence in Kashmir and India). (19) The Islamabadgovernment also instituted sweeping police reforms, upgraded its immigration control system, andbegan work on new anti-terrorist finance laws. In the wake of the speech, about 3,300 extremistswere arrested and detained, though at least one-third of these have since been released, including thefounders of both Lashkar-e-Taiba and Jaish-e-Muhammad. (20) American military successes in Afghanistan in the final months of 2001 apparently ended theexistence of Al Qaeda as a coherent entity in that country. Yet the first half of 2002 saw increasingindications that the group -- along with its Taliban cohorts -- was making progress in regrouping,first in the tribal western regions of Pakistan and later in major urban centers. By late-2002,intelligence analysts believed that Al Qaeda had established a new base of operations in thesprawling city of Karachi, Pakistan's most populous. In early-2003, President Musharraf shifted hisprevious stance and opined that Osama bin Laden himself may be in Pakistan. (21) In response, U.S. law enforcement agencies, led by the F.B.I., began in early 2002 to provideactive assistance to Pakistan in its effort to hunt terrorists and their allies. The number of U.S.counterterrorism agents in Pakistan has been reported at between "several dozen" and "the lowhundreds." (22) WhileU.S. officials claim that the involvement of American agents in field operations and raids has beenquite limited, senior Pakistani officials have indicated that F.B.I. agents participated in numerousraids, where they "carry guns" and "help us break down doors." (23) Yet a spokesman for thePakistan Foreign Office stated in April 2002 that there exist "no independent F.B.I. offices inPakistan," and Pakistan's interior minister repeatedly has claimed that F.B.I. operatives are notinvolved in hunting Al Qaeda supporters in Pakistan. (24) Director of Central Intelligence Tenet is reported to have made at least one trip to Pakistanafter September 2001, and the Islamabad government is said to be cooperating with the C.I.A. in theongoing hunt for Osama bin Laden, Mullah Omar, and other top-level Islamic militantfugitives. (25) There havebeen some concerns raised that U.S. counterterrorism agents, by working in tandem with Pakistanisecurity organizations that have been accused of human rights abuses including extralegaldeportation and torture, may share responsibility for any such abuses that may be occurring. (26) December 2002 pressreports suggest that "stress and duress" techniques used by the C.I.A. to interrogate suspected AlQaeda and Taliban members may be abusing human rights. New York-based Human Rights Watchhas written a letter to President Bush calling for an investigation into what the rights group allegesmay be the use of torture by U.S. officials. (27) The February 2002 kidnaping and subsequent murder of Wall Street Journal reporter DanielPearl is believed to have spurred an intensified U.S. focus on law enforcement in Pakistan and effortsto assist local security forces in tracking and capturing Islamic militants in that country's urbancenters. Al Qaeda is believed by U.S. officials to have assisted Pakistani militants in carrying outtwo deadly car bombings in the spring of 2002: a May attack that killed 14, including 11 Frenchmilitary technicians, and a June explosion that killed 12 Pakistani nationals outside the Americanconsulate in Karachi. Al Qaeda links also are suspected in numerous other violent anti-Western andanti-Christian attacks in Pakistan. (28) On May 8, 2002, senior U.S. government officials from several executive-branch agencieshosted the first meeting of the U.S.-Pakistan Joint Working Group on Counterterrorism and LawEnforcement. Pakistan's Minister of Interior, Moin Haider, led the Pakistani delegation. The twogovernments discussed a broad range of bilateral law enforcement issues, including counternarcotics,counterterrorism, extradition, money laundering, trafficking in persons, demand reduction and drugabuse control, alternative development and poppy eradication, police and legal system reform, andissues related to the repatriation of Pakistani nationals detained in the United States in connectionwith immigration proceedings. (29) The two governments agreed to strengthen their cooperation ineach of these areas, and ensuing trips to Pakistan by Deputy Secretary of State Armitage andCoordinator for Counterterrorism Taylor marked a continuation of this process. Officials from theU.S. Departments of State and Justice met with Pakistani counterparts in Islamabad in September2002, and another full meeting of the U.S.-Pakistan Joint Working Group on Counterterrorism andLaw Enforcement is slated to take place in Washington in April 2003. (30) In November 2002, then-U.S. Treasury Secretary O'Neill met with top officials in Islamabadto discuss Pakistan's ongoing efforts to halt terrorist financing. He stated that Pakistan was "leadingthe world" in the fight to eradicate money-laundering, but some officials are more pessimistic. (31) Islamabad has taken actionagainst at least 185 of the 247 U.S.-designated entities operating on Pakistani territory, and has takenits own initiative to detain operatives and designate active groups suspected of financing terroristactivities. Yet Pakistan's legal and regulatory structures remain insufficient for a fully effectiveanti-terrorism financing regime, especially with an inability to monitor the activities of foreigncharities, and the newly seated Assembly has yet to enact a proposed money laundering bill. U.S.officials continue to encourage stricter oversight and regulation, and the United States has agreedto provide technical assistance and training to Pakistani customs and finance officials as part of thiseffort. (32) Supplemental FY2002 U.S. aid to Pakistan included $73 million in International Narcoticsand Law Enforcement (INCLE) Emergency Response Funds that continue to be used in FY2003 forborder security and related law enforcement efforts. (33) The United States reportedly has supplied numerous instrumentsto bolster Pakistani security forces, including five used transport helicopters, 750 short- andlong-range radios, and 434 vehicles (trucks, tractors, SUVs, and motorcycles) to increase mobility. During her December 2002 visit to Islamabad, Assistant Secretary of State for South Asia Roccaannounced the provision to Pakistan of some 8,000 pieces of sophisticated communication andsurveillance equipment worth more than $4 million. The equipment is to be used in efforts to trackdown suspected terrorists and those involved in drug trafficking. Also, the United States isundertaking to train Pakistani police investigators and is helping to establish a national fingerprintdatabase modeled on that of the F.B.I. In March 2003, the United States disbursed to Pakistan $10million for the Criminal Information Database, along with nearly $20 million more for road-buildingprojects in the Federally Administered Tribal Areas. The roads are expected to improve access forlaw enforcement and security personnel, as well as bolster the region's economy. (34) In what may become the most ambitious integrated national identification system everinstalled, the United States reportedly is supplying to Pakistan the Personnel Identification SecureComparison Evaluation System (PISCES). This computer software is said to make real-timecomparisons of photographs and other personal details with the F.B.I. database in order to track themovements of Islamic militants. The ultimate aim is to monitor travelers entering or leavingPakistan at all 18 major transit points. The system is reported to be in place at Karachi, Islamabad,and Lahore airports, and is expected to soon be operational at airports in Quetta and Peshawar, aswell. (35) It is through the provision of intelligence that American agents are reported to be makingtheir greatest contributions to such operations as those noted below. (36) The interception andtracing of satellite telephone transmissions has been a key tool in joint U.S.-Pakistani efforts tocapture fugitive Taliban and Al Qaeda forces in Pakistan. American agents also closely monitoremail and other Internet traffic for signs of terrorist communications. The F.B.I. is reported to havetrained and equipped a number of former Pakistani army officers and others in what is known as the"Spider Group," an informal intelligence-gathering unit that is especially focused on monitoring theactivities of Pakistani Islamist groups. (37) U.S. government efforts to assist Pakistan with counterterrorism and law enforcement haveproduced many positive results. U.S. law enforcement personnel are reported to have played vitaland direct, if low-profile roles in each of the following operations: (38) In March 2002, Abu Zubaydah, believed to be Al Qaeda's field commander,was shot and captured while trying to flee a raid in the Pakistani city of Faisalabad. He is said tohave provided abundant intelligence to American authorities. Also that month, an F.B.I. agent wasasked by the Pakistan government to provide sworn testimony to help in the prosecution of DanielPearl's kidnappers. Finally, in the eastern cities of Faisalabad and Lahore, a major raid netted 26suspected Al Qaeda and Taliban fugitives. In June, 8 suspected members of banned extremist organizations were capturedin Lahore. In July, 10 "Arab mujahideen" -- alleged escapees from Kohat -- were arrestedin Hyderabad. In August, an office used by Harakat-ul-Mujahideen, a group linked to AlQaeda, was raided, resulting in the arrest of 12 suspected militants and the seizure of explosives andother incriminating evidence. In September, Ramzi bin al-Shibh, said to be a key figure in the planning ofthe September 2001 terror attacks on the United States, and Sharib Ahmad, the most-wanted militantin Pakistan and alleged organizer of the June 2002 car bomb attack on the U.S. consulate in Karachi,were both apprehended. Later in the month, two Algerian nationals believed to be Al Qaedamembers were arrested in Karachi, bringing to 10 the number of Algerians apprehended over atwo-day period. In October, a raid on a refugee camp near Peshawar netted four suspected AlQaeda operatives. Days later, a pre-dawn raid on another refugee camp led to the capture of fivesuspected militants wanted in connection with a spate of terror attacks on Pakistani Christians, aswell as Khan Mohammad, said to be security chief for renegade Afghani warlord GulbuddinHekmatyar. Later in the month, FBI agents interrogated a physician who admitted to treating Osamabin Laden and collaborating with Al Qaeda in Afghanistan. In December, two tribesmen from Pakistan's South Waziristan Agency werehanded over to U.S. agents for interrogation for their alleged involvement in an attack on a U.S.military camp in Afghanistan. Later in the month, a joint raid by Pakistani police and F.B.I. agentsnetted 9 suspected Al Qaeda operatives, including two naturalized Americancitizens. In January 2003, Pakistani police and F.B.I. agents arrested three suspected AlQaeda operatives after a gunfight on the outskirts of Karachi. Computers, grenades, and $30,000in U.S. currency were recovered. Among the nine suspects arrested in December was a Pakistanidoctor, Ahmed Khawaja, who is named in January, and then charged along with his brother inFebruary, as having provided material assistance to numerous Al Qaedafigures. On March 1, Khalid Mohammed, alleged mastermind of the September 2001terrorist attacks and close associate of bin Laden, was arrested along with two cohorts in a pre-dawnraid in Rawalpindi. The efforts of U.S. communications specialists reportedly were key to locatingthe suspects. Seized at the scene were computer and communications equipment that are said toprovide a "trove" of valuable data on Al Qaeda's methods of operations, support networks, andfinances. One week after, 10 Al Qaeda suspects were arrested in Peshawar, including one believedto have had recent contact with Osama bin Laden. Later in March, police arrested alleged Al Qaedafinancier and communications operative Yassir al-Jaziri in Lahore. This arrest appears to haveprovided leads resulting in the arrest of 6 more suspected Al Qaeda militants near Lahore and twoin Peshawar on March 17. The arrest of Khalid Mohammed in early March spurred heightened speculation that Osamabin Laden's capture was imminent. The White House called Mohammed's capture a "joint operation"between Pakistani and U.S. authorities and President Bush expressed his "deep appreciation andgratitude to President Musharraf and to the government of Pakistan" for their "fine efforts" incombating terrorism. (39) In the wake of the announced capture, rumors abounded that the ISI had known of Mohammed'swhereabouts for weeks or even months before and that they may have staged the videotaped seizurethat was shown to reporters. (40) In mid-March, Pakistan's intelligence agency claimed to havecaptured 442 foreign nationals suspected of terrorist activities and to have remanded 346 of theseto U.S. custody (at least 36 have been transferred to other countries and more than 50 releasedwithout charge) since September 2001. (41) Pakistan has served as a vital basing and transit point for Operation Enduring Freedom, theU.S.-led anti-terror mission in Afghanistan. According to the U.S. Department of Defense, Pakistanis providing basing and overflight permission for all United States and coalition forces engaged inAfghanistan. The airbase near Jacobabad has been vital to U.S. military operations in the region, andthe airport of Dalbandin, near the Afghan border, is a key forward operational base. More than57,000 U.S. military sorties have originated on Pakistani territory. U.S. military personnel reportedlyhave installed extensive radar facilities at three Pakistani airfields, allowing for coverage of the entirePakistani airspace. Pakistan also deployed more than 115,000 regular and paramilitary troops alongthe tribal belt bordering Afghanistan and Iran in support of U.S.-led efforts to capture Taliban andAl Qaeda fugitives (many of the regular army troops were redeployed to the Pakistan-India borderduring a 10-month period of heightened tensions between Islamabad and New Delhi from December2001-October 2002). Some 45,000 Pakistani troops were reported to be actively supportingOperation Enduring Freedom as of October 2002. (42) Reports indicate that U.S. special operations soldiers and C.I.A. paramilitary agentsparticipate in operations on Pakistani territory at the company-level (small teams of Americanspecialists accompany much larger Pakistani units). (43) These reports are not confirmed by either Washington orIslamabad, as both governments make no official statements about such joint operations. Thepresence and activities of U.S. military personnel in Pakistan is a subject of great sensitivity in bothcapitals. Officially, there is only a handful of U.S. troops operating on Pakistani territory. In orderto blend in with Pakistani military units, American special forces personnel are said to all be ofmedium-height, Pashto-speaking, and wearing Pakistani Army uniforms. (44) A July 2002 press report stated that more than 3,500 Al Qaeda operatives crossed intoPakistan while fleeing U.S. military operations in neighboring Afghanistan. There is continuingconcern that these militants intend to establish a permanent presence in Pakistani cities. (45) In August, a U.S. militaryassessment estimated the presence of up to 1,000 Al Qaeda fighters in Pakistan, spurring the topofficer of the U.S. Central Command, Gen. Tommy Franks, and Secretary of Defense Rumsfeld tosuggest that the successful continuation of his Afghanistan mission would require expanding U.S.military operations into "neighboring countries." (46) His statement was met with adamant Pakistani assertions thatany U.S. troop presence on their territory is "out of the question" given the professed sufficiency ofongoing Pakistani security operations. (47) U.S. military operations in Afghanistan extremely close to thePakistan border and employing thousands of troops have been ongoing. (48) In this mountainousregion, the location of the international border is not always clear, but there remain no confirmedopen-source reports of large-scale American troop movements or aerial sorties in Pakistaniterritory. (49) Pakistani government officials have issued contradictory statements on the issue of AlQaeda's presence in their country, but many have flatly denied that Al Qaeda forces have enteredPakistan in any but the smallest numbers. In September 2002, a senior Pakistani security officialclaimed that his forces had "broken the back" of Al Qaeda in the country, (50) but more recentpronouncements have been less assured: after acknowledging that Al Qaeda members are in hidingthroughout the country, the chief of Karachi's police investigation department stated in December2002 that Al Qaeda is "down, but not out" in Pakistan. It is estimated that up to 5,000 Al Qaeda andTaliban fighters are still on the loose in the North West Frontier Province (NWFP) alone. (51) Press reports in early 2003 suggested that Al Qaeda and Taliban forces have regrouped onPakistani territory near the Afghani border in preparation for spring offensive operations againstU.S.-led coalition units in Afghanistan. (52) More recently, however, the chairman of the Senate IntelligenceCommittee claimed that the March arrest of Khalid Mohammed likely would preclude any plannedAl Qaeda offensive, and a U.S. military spokesman was quoted as saying he does not expect a springoffensive by Al Qaeda because he does not think there is "that much spring in them." (53) Almost immediately upon joining the U.S.-led anti-terrorism coalition in September 2001,the Pakistani government sought compensation for its support, primarily through economic aid, debtforgiveness, and renewed access to sophisticated U.S. weaponry. The transfer to Pakistan of U.S.military equipment was ended in 1990 when then-President Bush could no longer certify thatPakistan was not pursuing a nuclear weapons program. U.S. economic sanctions triggered byPakistan's May 1998 nuclear tests and October 1999 military coup were waived by President GeorgeW. Bush and new legislation in October 2001, (54) spurring Islamabad to present Washington with a "wish list" thatwas reported to have included a variety of missiles, artillery and rocket launching systems, unmannedaerial vehicles, and the release of previously purchased F-16 jets. An unnamed Pakistani defenseministry source was quoted as saying, "We want the kind of relationship the United States has withEgypt in terms of weapons sales." (55) In the lead-up to his January 2003 visit to the United States,Pakistani Foreign Minister Kasuri urged the United States to "take steps to reduce the conventionalweapons disparity" between Pakistan and India as a means of halting a nuclear arms race in SouthAsia. (56) There have been numerous foreign press reports, along with Pakistani and Indian governmentofficials' claims, that Islamabad has secured deals for the purchase of major U.S. weapons platforms,including F-16s fighter jets, P-3 maritime surveillance aircraft, and Harpoon anti-ship missiles. Yet,as of late March 2003, the Bush Administration has notified Congress of only two pending transfers: the first, dated July 16, 2002, involves seven used C-130E transport aircraft (one being for spareparts); the second, dated July 26, 2002, is for six Aerostats -- sophisticated, balloon-mountedsurveillance radars. These mark the first noteworthy arms sales to Pakistan in more than a decadeand reportedly are intended to support Islamabad's ability both to move troops quickly and to detectinfiltration (thus aiding in counterterror operations). Pakistan lately has emphasized a perceived need to bolster its air forces, if not throughacquisition of new F-16s then at least through the receipt of spare parts and weaponry for its existingfleet of 1970s-era F-16A fighters (many of which are grounded for want of maintenance andmunitions). (57) Whilemost of Pakistan's arsenal is of Chinese origin, major U.S.-made weapons systems include P-3 Orionand C-130 Hercules aircraft, Harpoon and Stinger missiles, and 155mm howitzers. PastU.S.-imposed sanctions have caused many of these systems to become inoperable. (58) The long-moribund Pakistan-U.S. Defense Cooperation Group (DCG) -- created to overseea bilateral defense relationship that has existed since the 1950s -- met in Pakistan in late September2002. This was the first such meeting since 1997. The two-day session included discussions amongworking groups on military cooperation, security assistance, and anti-terrorism. A joint statementissued by the DCG reports that the meetings "served the purpose of providing a forum to exchangeviews on security matters and, in Pakistan's case, share with the United States its views of its securityenvironment." (59) October 2002 saw the first joint U.S.-Pakistan military exercises in nearly five years, withapproximately 120 soldiers from each country coming together in Pakistan for "Inspired Gambit III." U.S. Central Commander Gen. Tommy Franks witnessed the event. As with recent joint U.S.-Indianmilitary exercises, an emphasis was placed upon increasing interoperability in weapon systems andtactics. (60) NumerousPakistani press reports in early 2003 claimed that further joint exercises were being planned, butthese reports are not confirmed by the U.S. government. U.S. assistance to Pakistan undersecurity-related programs includes $396.5 million distributed in FY2002, $56.5 million allocated forFY2003, and $120 million requested for FY2004. (61) As a current rotating member of the UN Security Council (UNSC), the Pakistani governmentfaced a dilemma in addressing early-2003 discussions related to Iraq. Islamabad's external role asa key U.S. ally and member of the U.S.-led counterterrorism effort came up against powerfuldomestic opposition to Pakistan's participation in or condoning of a war against another Muslimcountry. So great were the countervailing pressures that most analysts foresaw a Pakistani abstentionon a potential UNSC Res. 1442, but the vote never came. Upon the initiation of U.S.-led militaryoperations against Iraq in March 2003, Islamabad called the war "unjustified" and vowed to opposeit in all fora, while nearly all Pakistani opposition parties -- religious and secular, alike -- wereharshly critical of U.S. policy. (62) November 2002 saw the formation of a fragile, pro-Musharraf ruling coalition in Islamabad,and President Musharraf ostensibly has turned day-to-day governance of the country over to civilianpoliticians. (63) Thecomposition and actual level of influence exerted by the National Assembly and Prime MinisterZafarullah Jamali may have significant impact on future Pakistan-U.S. security relations in generaland on U.S. counterterrorism efforts in South and Southwest Asia in particular. Thus far, the newcivilian government in Islamabad has stated that it will "fulfill all its commitments to theinternational community in the fight against terrorism" and that "the policies initiated by PresidentPervez Musharraf will be continued." (64) A rough estimate indicates that regional anti-terrorism effortshave caused the Pakistani economy losses in excess of $10 billion since October 2001. (65) President Musharraf's cooperation with U.S.-led anti-terrorism efforts is widely recognizedas placing him in a precarious circumstance between external pressures to uphold pledges toeliminate Al Qaeda, Taliban, and Kashmiri separatist militants operating from Pakistani soil on theone hand, and internal pressures to maintain foreign policy independence, support for Kashmirifreedom, and even Islamic cohesion on the other. A February 2003 report indicates that Musharrafsurvived at least 6 assassination attempts during 2002, and notes that the risk of a coup staged by"senior-ranking" Pakistani military officials who disapprove of his relationship with the West cannotbe ruled out. (66) Thelatter development could place Pakistan's nuclear arsenal of up to 75 warheads in the hands ofIslamic extremists. In March 2003, large-scale street demonstrations organized by Islamist parties,combined with persistent calls by opposition political figures that Musharraf drop his "illegal"package of constitutional amendments and resign his post as Army Chief, are said by many to bemaking the Pakistani government "extremely uncomfortable." (67) The escalation of U.S. military involvement in anti-terrorism operations in western Pakistanapparently has brought some positive results and probably keeps Al Qaeda and Taliban remnantsoff-balance, but a negative political reaction within Pakistan is fueling anti-government andanti-American sentiments that may jeopardize longer-term U.S. interests in the region. An apparentbreakdown of the long-standing autonomy of Pakistan's tribal zone along the border withAfghanistan, combined with an unprecedented U.S. military presence in the country, is reported tobe causing increased anger and resentment among the ethnic Pashtun majority there. Likewise, thepresence of American law enforcement agents in Pakistani cities is seen to be having similar effectsamong middle- and upper-class urban Pakistanis. The Islamabad government has attempted to assuage this negative political response. Pakistani ballistic missile tests in early October 2002 were viewed as both a pre-election messageof continued hawkishness vis-a-vis Kashmir and India, and a demonstration of foreign policyindependence from the United States, given Washington's expressed displeasure at any signs of armsrace dynamics in the region. The presence in Pakistan of U.S. law enforcement and militarypersonnel, and the arrest and extradition of several Pakistani nationals, have spurred frequentexpressions of sovereignty concerns, especially by leaders of the Muttahida Majlis-e-Amal (MMA),a coalition of six leading Islamist parties. In late-2002 and early-2003: the president of the Peshawar Bar Association described Pakistan as havingbecome "a U.S. colony;" senior legal figures in Baluchistan have complained that F.B.I. operations inthat region are "clear violations of the Pakistani constitution;" MMA Secretary-General Maulana Rehman made a declaration of "jihad againstAmerica that has stationed its forces in Pakistan to do away with oursovereignty;" top MMA chief Liaquat Baloch demanded that all Americans living in Pakistanshould be fingerprinted and tested for AIDS; the MMA vice president stated that police forces in the NWFP and Baluchistanhad been instructed to comply only with the orders of their provincial governments and not withthose given by any U.S. agencies; and reports that F.B.I. agents had raided several mosques and madrassas in thePakistani capital elicited complaints and warnings from Islamic clerics that such raids would leadto a "direct clash." (68) The Pakistani government also has been critical of the newly-instituted U.S. policy offingerprinting and photographing all Pakistani men who enter the United States, considering thepolicy unwarranted and "discriminatory" against the citizens of a U.S. ally. Islamabad formallyrequested that the United States remove Pakistan from the list of 20 nations subject to suchimmigration restrictions, with Pakistani Foreign Minister Kasuri warning that his country's presenceon the new U.S. registration list could destabilize the Islamabad government and bolster the causeof radicals in Pakistan. Secretary of State Powell responded by assuring Kasuri that the UnitedStates is "very sensitive" to Pakistani concerns on this issue and emphasizing that the registrationprogram "is not something directed at Pakistan or directed at Muslims or directed at Pakistanis inAmerica" (69) The issuereflects a growing perception in Pakistan that the United States maintains a double-standard offriendly relations with the Islamabad government and "adversarial" relations with the Pakistanipeople. Negative repercussions also were manifest in Pakistan's October 2002 national elections. Thepolls resulted in unexpectedly strong showings for candidates of the United Action Forum (knownas MMA in its Urdu-language acronym), a coalition of six Islamic parties that ran on what largelywas an anti-American platform and that won 68 seats -- about 20% of the total -- in the nationalassembly. The MMA also controls the provincial assembly in the North West Frontier Province andleads the coalition running that in Baluchistan (the two Pashtun-majority regions which borderAfghanistan). This circumstance has led to concerns that a major shift in Pakistan's foreign policymay be in the offing, most especially with renewed indications of the "Talibanization" of westernborder regions. Yet anti-Americanism as expressed through support for Islamic parties is not limitedto the rural western regions; religious candidates won parliamentary seats in Islamabad, Lahore, andKarachi, and resentment of perceived U.S. support for what are called President Musharraf'santi-democratic practices and military dictatorship has arisen even among Pakistan's moniedelite. (70) Leading Islamist politicians in Pakistan reportedly have made numerous provocativecomments since coming to power. One senior MMA leader stated that "Taliban and Al Qaedamembers are our brothers." MMA parliamentary leader Qazi Hussain Ahmed has threatened that,if Musharraf supported any U.S. military action against Iraq, "the MMA will make the governmentunmanageable." During prayers on the floor of the Pakistani Parliament for a Pakistani nationalrecently executed in Virginia for two murders outside the CIA headquarters in 1993, a senior MMAmember stated that, "America is the biggest terrorist state." In the first days of January 2003, thechief of Jamat al-Daawa -- one of 6 MMA coalition parties -- asserted his belief that "all anti-Muslimforces including the United States are trying to paralyze the Muslims economically, socially, andpolitically all over the world." MMA leader Maulana Mahmood stated later in the month thatPakistan's opposition groups will "break America into pieces like Russia" and "erase America fromthe world." (71) Anti-American sentiment is notably more virulent in Pakistan's Urdu-language press, wherereferences to an alleged Christian-Jewish assault on Islam and the "traitorous" status of Pakistan'sWestern-allied leadership are more explicit. (72) Along with Islamist expressions of anger at the United States and the Musharraf-Jamaligovernment's current alliance with it, there are plentiful signs of efforts underway to "re-Talibanize"Pashtun-majority areas near the Afghani-Pakistani border. In 2003, MMA lawmakers in the NWFPhave pledged to accelerate the process of Islamization in the region, and have made requests that thefederal government grant them the authority to impose harsh penalties under Sharia , such asamputating the hands of thieves and stoning adulterers, as well as severely limiting women'sfreedoms. The seizure and burning of books and videotapes deemed "pornographic" has becomecommon; numerous carnivals and theaters have been shut down. Even a leading Muslim separatistgroup in India's Jammu and Kashmir state has criticized Pakistan for the "Talibanization" of IndianKashmir by sending jihadis across the Line of Control. (73) Although the MMA did enjoy a strong showing in October 2002 elections, Pakistanigovernment officials repeatedly have stated that Islamabad's foreign policy will remain unchanged. Moreover, Pakistan does have a small, but politically active middle-class, as well as a notable campof moderate political figures who seek to establish a firm middle ground between the perceived polesof secular military dictatorship and the institution of Islamic rule. These figures often root their ideasin the writings of Mohammed Ali Jinnah, Pakistan's founding father and proponent of a moderateand democratic Islamic republic. To date, such moderate views usually have been outweighed bymilitarist influences and/or the perception of widespread corruption among Pakistan's civilianpoliticians, which have fostered political polarization. In March 2003, a top U.S. diplomat stated that U.S.-Pakistan relations are both "significantlybroadened" and "solid." She called Pakistan-U.S. anti-terrorism cooperation "excellent" and "100percent solid," and noted that "Pakistan has apprehended close to 500 suspected Al Qaeda operativesand affiliates." (74) However, while the U.S. State Department and White House continue to be almost wholly positivein their pronouncements relevant to Pakistani cooperation, the first months of 2003 have seenincreasing expressions of U.S. doubts and concerns, emanating especially from top military andcongressional leaders. Specific issues most commonly raised regard the continuation of Islamistmilitant infiltration into Indian Kashmir, the continued presence in Pakistan of wanted terrorists andillegal terrorist groups, and the extent to which Pakistan's government and its intelligence apparatusare committed to Islamabad's stated anti-terrorism policies. In an unusually strong rebuke, U.S. Ambassador to Islamabad Nancy Powell stated in Januarythat Pakistan is being used as a "platform for terrorism" and that this must stop. Later in the month,an unnamed U.S. State Department official was quoted as saying that the amount of infiltration ofIslamic militants across the Line of Control into Indian Kashmir was increasing and that Pakistanwas not doing enough to halt it. (75) Leading U.S. military commanders overseeing OperationEnduring Freedom have complained that renegade Al Qaeda and Taliban fighters are able to attackcoalition troops in Afghanistan then escape across the Pakistani frontier. They have expresseddismay at the "slow pace of progress" in capturing wanted fugitives, especially Taliban leaders, inPakistan and have urged Pakistan to "do more" to secure its rugged western border area. (76) The U.S. Special Envoyto Afghanistan Khalilzad stated in February that, "There are some key Taliban figures in Pakistan... some Al Qaeda people in the border areas" and that the U.S. government "will not accept" theseindividuals being allowed to "find refuge" in Pakistan. (77) In the same month, the two senior members of the SenateForeign Relations Committee -- Sen. Lugar and Sen. Biden -- expressed "deep concern" that"elements of Pakistan's powerful Inter-Services Intelligence agency might be helping members ofthe Taliban and Al Qaeda operate along the border and infiltrate into Afghanistan." (78) In a security-related matter that may affect future Pakistan-U.S. anti-terrorism cooperation,late-2002 and early-2003 press reports citing U.S. intelligence officials indicated that Pakistanappears to have provided nuclear weapons-related technologies to North Korea beginning in thelate-1990s and possibly continuing through July 2002. (79) Subsequent reports suggest that Iran's nuclear program may alsohave benefitted from Pakistani assistance in the past. (80) Islamabad adamantly denies that any such transfers haveoccurred. In October 2002, Musharraf gave Secretary of State Powell a "400% assurance" that suchtransfers to North Korea are "not taking place now." When asked about past transfers, SecretaryPowell said, "The past is the past and there isn't a whole lot I can do about it." In March 2003, theBush Administration declared that it had "carefully reviewed the facts relating to the possible transferof nuclear technology from Pakistan to North Korea, and decided that they do not warrant theimposition of sanctions under applicable U.S. laws." (81) Congressional oversight of U.S.-Pakistan relations in a March 2003 hearing of theSubcommittee on Asia and the Pacific of the House International Relations Committee includedMember expressions of concern about possible links between Al Qaeda and Pakistan's largestIslamic party; about Musharraf's possibly continuing support for "Kashmiri terrorists;" about thepossibility that "lower-level operatives within the ISI" may be assisting Al Qaeda and Talibanfugitives; about possible ISI involvement in regional heroin trafficking; about Pakistan's possiblenuclear weapons proliferation activities and "contradictions" in U.S. nonproliferation policy towardthe region; about the role madrassas play in raising levels of Islamic radicalism in Pakistan; andabout problems with Pakistani democratization and the danger of the United States "giving fullrecognition to a military coup" through continuous waivers of democracy-related aidrestrictions. (82) Pakistan-U.S. anti-terrorism cooperation has been broad in both scale and scope, and hasrealized tangible successes since October 2001. Yet the wide range of U.S. concerns about relationswith Pakistan indicate that such partnership between the two countries may be undermined. Areduction of U.S. cooperative efforts could result from increased indications of suboptimal levelsof Pakistani commitment or from exacerbated Pakistan-India tensions that are linked to infiltrationin Kashmir. Differences over weapons proliferation and human rights violations could triggerfar-reaching restrictions on future U.S. aid to Pakistan. The Islamabad government, for its part, maycome under increasing pressure to adjust its foreign policy to more accurately reflect the sentimentsof Pakistan's opposition parties, especially the virulently anti-Western Islamists. This could erodePakistani cooperative efforts and is made even more likely as domestic violence and publicdisturbances in Pakistan continue. Given such numerous and substantial potential disruptions topresent levels of Pakistan-U.S. anti-terrorism cooperation, it may be unwise to assume that suchcooperation is sustainable in the middle- and long-term. Figure 1. Map of Pakistan Note: Boundary representations not necessarily authoritative.
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Pakistan is a key front-line ally in the U.S.-led anti-terrorism coalition. After September2001, Pakistani President Musharraf ended his government's ties with the Taliban regime ofAfghanistan and has since cooperated with and contributed to U.S. efforts to track and captureremnants of Al Qaeda and Taliban forces that have sought refuge inside Pakistani territory. Pakistan's cooperation has been called "crucial" to past and ongoing U.S. successes in the region, butthere is growing concern that the bilateral relationship is fragile and may be undermined bypotentially disruptive developments in the areas of weapons proliferation, democracy-building, andPakistan-India relations. Remaining proliferation- and democracy-related aid restrictions on Pakistan were removedin the final months of 2001, and the United States continues to make large aid donations to Pakistanand to support that country's interests in negotiations with international financial institutions. Thereare concerns that October 2002 national elections in Pakistan were not sufficiently free and open byWestern standards and that the military-dominated government in Islamabad intends to remain inpower through manipulation of constitutional and democratic processes. This possibility led someMembers of the 107th Congress to seek the renewal of aid restrictions or a modification of thePresident's waiver authority until such time that a more robust democratic process is sustained anda civilian-led government effectively is in place. There also is concern that possibly growinganti-American sentiment in Pakistan and the potential "re-Talibanization" of that country's western provinces bordering Afghanistan could adversely affect U.S. interests in the region. During 2002, the United States took an increasingly direct, if low-profile, role in both lawenforcement and military operations being conducted on Pakistani territory. These operations haveled to favorable results in tracking and apprehending dangerous Islamic militants, but the activitiesof U.S. personnel in the country have led to increasing signs of anti-American backlash and Pakistanisovereignty concerns. Recent electoral gains by a coalition of Pakistani Islamist political parties areviewed as an expression of such sentiments that may lead to reduced Pakistan-U.S. cooperation incounterterrorism operations in the future. The civilian Parliament and Prime Minister that wereseated in Islamabad in November 2002 may powerfully influence the course and scope of future U.S.presence in the region. This report reviews the status of Pakistan-U.S. anti-terrorism cooperation in the areas of lawenforcement, intelligence, and military operations. U.S. arms transfers to and security cooperationwith Pakistan are also discussed. A following section addresses the major domestic repercussionsof Pakistan-U.S. counterterrorism efforts, the ways in which such efforts are perceived bynewly-empowered Pakistan Islamists and their followers, and the possible effects these dynamicsmay have on future Pakistan-U.S. cooperation in this realm. The final section assesses the overallstatus of Pakistan-U.S. anti-terrorism cooperation and key points of U.S. concern. Broaderdiscussion of bilateral relations and relevant legislation is found in CRS Issue Brief IB94041, Pakistan-U.S. Relations . This report will be updated periodically.
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