Bush warns Congress not to block port sale; Sanborn nomination on hold
By Eric Kulisch
President Bush said Tuesday he would veto any legislation to block the acquisition of U.S. port assets by state-owned Dubai Ports World after the leaders of the House and Senate called on the administration to delay the deal, but legislators and political analysts said Congress has enough votes to easily override a veto and kill the sale.
Senate Majority Leader Bill Frist and House Speaker Denny Hastert asked for a moratorium on the $6.8 billion buyout by DP World of port facilities owned and operated by London-based Peninsular and Oriental Steamship Navigation Co. until the administration takes a closer look the transaction and assures Congress that a company owned by the Dubai government does not raise the risk that terrorists will use its marine terminals as gateways for launching an attack. Opponents of the sale claim that the UAE served as an operational and financial base for some of the Sept. 11, 2001 attackers.
In a statement and in television interviews, Frist carefully avoided outright opposition to the sale, which has touched off a political firestorm, saying he just wanted the administration to further examine the matter and explain its decision to Congress.
“If the administration cannot delay the process, I plan on introducing legislation to ensure that the deal is placed on hold until the decision gets a more thorough review,” Frist said.
Sens. Hillary Clinton, D-N.Y., and Robert Menendez, D-N.J., said last Friday they were crafting a bill to bar companies owned or controlled by foreign governments from purchasing domestic port operations.
P&O operates terminals in Baltimore, Philadelphia, Miami, New Orleans and some smaller Texas ports. It has half-stakes in terminal operations at the Port Newark Container Terminal in New Jersey and in Norfolk, Va.
Meanwhile, California Democrat Barbara Boxer placed a hold on the nomination of David Sanborn to be U.S. Maritime Administrator. Sanborn is a top DP World executive for Europe and Latin America.
Boxer said the Senate Commerce, Science and Transportation Committee should not consider Sanborn for the job until Congress acts on the DP World acquisition. Boxer questioned whether someone who works for a company owned by a nation with alleged ties to the 9/11 attackers should be involved in bilateral maritime transport negotiations or co-chair the Presidential Commission on Seaport Security.
After letting opponents define the port security debate for more than a week, the Bush administration, led by the president, finally launched an aggressive defense of the DP World takeover.
In a prepared statement read on the South Lawn of the White House, Bush said, “If there was any chance that this transaction would jeopardize the security of the United States, it would not go forward.
“The company has been cooperative with the United States government. The company will not manage port security. The security of our ports will continue to be managed by the Coast Guard and Customs. The company is from a country that has been cooperative in the war on terror, been an ally in the war on terror. The company operates ports in different countries around the world, ports from which cargo has been sent to the United States on a regular basis,” Bush said.
“I think it sends a terrible signal to friends around the world that it’s O.K. for a company from one country to manage the port, but a country that plays by the rules and has got a good track record from another part of the world can’t manage the port.”
On Air Force One earlier, Bush told the White House press pool, “I really don’t understand why it’s O.K. for a British company to operate our ports but not a company from the Middle East, when our experts are convinced that port security is not an issue; that having worked with this company, they’re convinced that they’ll work with those who are in charge of the U.S. government’s responsibility for securing the ports, they’ll work hand in glove.
“I want to remind people that when we first put out the Container Security Initiative ' UAE was one of the first countries to sign up.”
Under the Container Security Initiative, U.S. Customs officers are stationed in Dubai and other foreign ports to help identify suspicious containers for the host government to inspect before loading onto a U.S.-bound vessel.
“In other words, we’re receiving goods from ports out of the UAE, as well as where this company operates. And so, after a careful review of our government, I believe the government ought to go forward. And I want those who are questioning it to step up and explain why all of a sudden a Middle Eastern company is held to a different standard than a Great British (sic) company. I’m trying to conduct foreign policy now by saying to people of the world, we’ll treat you fairly. And after careful scrutiny, we believe this deal is a legitimate deal that will not jeopardize the security of the country.”
Asked by reporters to respond to threats of legislative action to stop the sale, Bush said, “They ought to listen to what I have to say about this. They ought to look at the facts and understand the consequences of what they’re going to do. But if they pass a law, I’ll deal with it, with a veto.”
At a Pentagon briefing, Defense Secretary Donald Rumsfeld and top military brass said the UAE is a staunch supporter of U.S. policy in the region, and that it quickly chipped in with a donation of $100 million to help America recover after Hurricane Katrina last summer.
Cooperation between the U.S. and UAE militaries is “superb,” said Gen. Peter Pace, chairman of the Joint Chiefs of Staff. “They’ve got great seaports that are capable of handling, and do, our aircraft carriers. They’ve got airfields that they allow us to use, and their airspace, their logistics support. They’ve got a world-class air-to-air training facility that they let us use and cooperate with them in the training of our pilots. In everything that we have asked and work with them on, they have proven to be very, very solid partners,” Pace said.
Administration officials were busy Tuesday countering claims by lawmakers that the inter-agency panel charged with reviewing the sale for potential threats to national security did so in a cursory and secretive manner. Sen. Charles Schumer, D-N.Y., took the lead last week calling for the Committee on Foreign Investment in the United States (CFIUS) to use an additional 45 days permitted under the law to conduct a formal investigation of DP World.
The Treasury Secretary chairs the committee, which includes representatives from 12 agencies such as the departments of Homeland Security, Defense, State, Justice, Commerce and the National Security Agency.
CFIUS typically conducts a 30-day informal staff review of most foreign takeovers, including that of DP World, unless there are red flags. In fact, only 25 transactions out of more than 1,500 have required an expanded investigation in 18 years, according to the Organization for International Investment. Twelve of those cases were sent to the president for a decision and only one deal was ever blocked. In many cases, companies have modified their purchase agreements to meet U.S. requirements or dropped out of the deal if they are unable to meet required commitments.
CFIUS reviewed 65 cases last year.
Although officials said they found no derogatory information about DP World, the same cannot be said for Israeli Internet security firm Check Point Software Technologies, which has proposed to purchase Sourcefire. CFIUS has launched a 45-day investigation of the sale, indicating there are red flags it wants to look at more closely, according to a Check Point statement. The main concern appears to be the potential transfer of computer network technology, especially since Sourcefire develops secure systems for Defense Department and intelligence agencies.
Broader input was gained in the port case by inviting the departments of Transportation and Energy to participate in the deliberations, said Clay Lowery, assistant secretary for international affairs at Treasury, at Washington press conference.
Lowery said the administration’s review of the case was actually longer than 30 days because the two companies involved briefed the administration before they even announced DP World’s bid for P&O on Nov. 23.
Jayson Ahern, CBP assistant commissioner in charge of field operations, told Shippers NewsWire his office first reviewed aspects of the pending transaction on Oct. 31.
“Because it is a state-owned company we do look at it with a little more extra care,” Lowery said. Officials, however, stressed that DP World is not an unknown entity to DHS because the department has established relations with Dubai Customs, the port authority and the company to implement U.S. cargo security programs.
“In many respects these guys have built up a track record” that is “fairly solid,” Lowery said.
DHS officials expanded on comments by Homeland Security Secretary Michael Chertoff over the weekend that CFIUS insisted on extra safeguards to further guarantee U.S. national security.
DP World agreed that it would continue to participate in the Container Security Initiative and the Megaports Initiative (a related Energy Department program to supply large-scale nuclear detection equipment at ports) for conducting automated and physical inspections of ocean containers in Dubai, and P&O’s commitments to carry out best practices for security under the voluntary Customs-Trade Partnership Against Terrorism program would transfer to DP World, said Stewart Baker, assistant secretary for policy.
“So now what had been voluntary is now a mandatory program,” Baker said.
Ahern emphasized that DP World will only be a port tenant in charge of handling cargo at a specific terminal within certain ports, and will not be in charge of security or overall port activity.
Cargo entering the United States is subject to 24-hour notification prior to lading at a foreign port, overseas inspection at any of the 42 ports participating in CSI, and extra private sector controls when being shipped by companies participating in C-TPAT, as well as port and vessel security clearances from the Coast Guard, Ahern said.
“None of those layers go away as a result of this business transaction,” he said. As for the widely held perception that Dubai would start flooding the port with foreign employees of unknown backgrounds, Ahern said unionized longshore labor would continue to work the docks and that any DP World officials who are not U.S. citizens would need to go through the fairly rigorous application process for a work or visitor visa.
Coast Guard Adm. Thomas Gilmore added that the sea service expects to complete a baseline inspection of the P&O facilities by the end of the week to make sure there are no security gaps before the property transfer occurs.
Asked if it is fair to single out Dubai for extra scrutiny because some the 9/11 hijackers were born in or passed through the country, Baker replied, “it is fair to observe that many countries have residents who have committed acts of terrorism.”
Members of Congress are also upset that the administration has not revealed any of the reasoning behind its decision in favor of DP World. Administration officials have repeatedly said the deliberations of the committee are classified, but the law does not prevent disclosure of confidential material to Congress.
The Exon-Florio amendment that gave life to CFIUS in 1988 specifically gave the president maximum control and discretion in determining whether to slow or block a foreign investment.
But Frist said in a statement that the “CFIUS process needs to be more transparent and include a role for Congress that includes reviewing these deals, and possibly voiding them if necessary.”
After last year’s uproar over the handling of Chinese offshore oil producer CNOOC’s attempt to buy U.S. multinational oil company Unocal, the Bush administration agreed to add transparency to the process for Congress.
The administration followed that agreement by giving the port sale more than 30 days of scrutiny, getting other agencies and the intelligence community involved early on, and agreeing to brief Congress on a quarterly basis about CFIUS reviews in the pipeline, Lowery said.
The administration’s bad luck, he said, is that briefings on the DP World sale were scheduled to begin last week, but by then members of Congress had caught wind of the deal and began a campaign to derail it from moving forward.
Asked why state and local officials responsible for ports affected by the deal were not informed about the pending sale, Baker noted that DP World’s bid became public news in November.
Meanwhile, some are beginning to question whether DP World received favorable treatment because Treasury Secretary John Snow’s former company had business ties to the port operator.
Snow was chairman and chief executive officer of Jacksonville, Fla.-based CSX Corp., which owns the largest railroad in the eastern United States, until early 2003. CSX sold its international port terminal business, CSX World Terminals, to DP World for $1.1 billion in January 2005. CSX World did not operate any terminals in the United States.
Lowery told Shippers NewsWire that department lawyers looked closely at the situation and concluded there was no need for Snow to recuse himself from the decision because the CSX sale to DP World occurred nearly two years after Snow had left the company.
Opposition to the sale continued to mount in Congress and at the state level. Many lawmakers held press conferences at ports affected by the transaction and said they support legislation to block the sale. New Jersey Gov. Jon Corzine has decided to sue the federal government to stop the sale, according to the Associated Press and New Jersey newspapers. Corzine said he wants to halt the deal until the state can gain access to the documents used by the federal government to approve DP World’s application. The state plans to argue that the approval violates New Jersey sovereignty by preventing it from assessing the risks and cost to the state.
And the Port Authority of New York and New Jersey will also file suit to break its lease with P&O Ports and prevent DP World from taking over Port Newark Container Terminal, Chairman Anthony Coscia said.
DP World has reportedly sent officials to Washington to salvage the transfer of port facilities from P&O, according to several news accounts.