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February 22, 2006

Security and the Sale of Port Facilities: Facts and Recommendations

By and

The sale of facilities at six U.S ports by a British-based company to Dubai Ports World, a government-owned company in the United Arab Emirates, has raised concerns among many in the homeland security community. While a review of the facts suggest no apparent security issues, these concerns do reflect the importance of ensuring that the system created by Congress to review the sale of foreign investments in the United States is functioning properly. Congress should take 45 days to review the sale to Dubai Ports World. Because Congress has not closely reviewed this oversight process since 9/11, a brief delay is reasonable and warranted.

 

Security and Substance

Outsourcing Is Not the Issue. That the facilities at six U.S. ports will be foreign-owned is not significant. These facilities are already owned by a foreign company, the London-based Peninsular and Oriental Steam Company. Indeed, much of the maritime infrastructure (e.g., ships, containers, and facilitates) that supports U.S. seaborne trade and travel, which accounts for about 1/3 of U.S. GDP, is already foreign-owned. The globalization of maritime trade began decades ago, and this sale reflects the continuing globalization of a sector long-dominated by transnational firms.

 

Additionally, none of the infrastructure at these ports relates to military or national security facilities. The Defense Department controls the facilities that it uses to ship military goods.

 

Security Standards Will Not Change. Security standards for ports are governed by the International Shipping and Port Security (ISPS) Code, which is based on U.S. maritime laws adopted after 9/11. The same law applies to any company operating in the U.S., regardless of its origin.

 

The U.S. Coast Guard is responsible for overseeing the implementation of ISPS. Every U.S. port has a Coast Guard officer who is the Captain of the Port and is responsible for coordinating all port security. The Customs and Border Protection agency and the Coast Guard, not the owner of the port, conduct security screening on individuals and cargo that enter the port.

 

Not a Terrorist Gateway. Dubai Ports World is a holding company, and it will have little to do with the day-to-day management of these port facilities. Its ownership alone does not entitle its employees to access any classified or sensitive security information unless, as now, they meet the requirements of ISPS and U.S. law. Moreover, almost all of the employees at these facilities are U.S. citizens. As well, with over $6 billion invested, no company would want to see its facilities used by terrorists. Finally, terrorist tradecraft does not involve high-profile purchases of companies. Terrorism infiltration, like criminal smuggling, involves penetration by individuals. That is a challenge for any company.

 

The UAE Is an Ally. Since 9/11, the UAE has provided unprecedented cooperation to the United States in the war on terrorism, including finding, arresting, and turning over high-ranking al-Qaeda operatives and participating in the U.S. Container Security Initiative to screen cargo bound for the U.S. That Dubai Ports World is owned by the UAE should reassure Americans.

 

The Review Process

The Omnibus Trade and Competitiveness Act of 1988 created the Committee on Foreign Direct Investment in the United States (CFIUS). The Secretary of the Treasury heads CFIUS, and 11 other agencies participate in it, including the Departments of Defense, Justice, Commerce, and Homeland Security. The committee's task is "to suspend or prohibit any foreign acquisition, merger or takeover of a U.S. corporation that is determined to threaten the national security of the United States." The process is designed to be non-partisan and non-political because these decisions should not be based on political considerations but solely on the merits of the transfer and appropriate security concerns. CFIUS reviewed the Dubai Ports World transaction and did not find any problems.

 

A Reasoned Approach

Congress certainly has the responsibility to ensure that the CIFUS process is being implemented as it intended. However, Because Congress has not taken the opportunity to review the CFIUS procedure since its implementation in 1988, it should take 45 days to review the Dubai Ports World deal. The country needs confidence in the procedures meant to ensure that foreign investment does not harm national security and this reasonable delay for review is the way to provide it.

 

James Jay Carafano, Ph.D., is Senior Research Fellow for Defense and Homeland Security, and Alane Kochems is Policy Analyst for National Security, in the Kathryn and Shelby Cullom Davis Institute for International Studies at The Heritage Foundation.

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