DHS officials defend review of Dubai port operator
Bush administration officials tried hard to undo the damage from Monday’s revelation that a Coast Guard intelligence report raised security concerns about Dubai Ports World’s proposed takeover of U.S. terminals weeks before the $6.8 billion deal was quietly approved in mid-January by an interagency review board.
Opponents of the sale said the report should have trigged a more in-depth 45-day investigation. The Bush administration’s interpretation of the law governing foreign investments is that the longer review period is not necessary unless an agency on the Committee for Foreign Investment in the United States (CFIUS) voices dissent. Officials say that the Coast Guard signed off on the deal after some initial doubts about the services ability to investigate the takeover of Peninsular Oriental and Steam Navigation Co. assets.
Sens. Charles Schumer, D-N.Y., and Olympia Snowe, R-Maine, sent a letter to Homeland Security Secretary Michael Chertoff asking for details about when the department became aware of the memo, and how it resolved concerns about intelligence gaps raised in the internal Coast Guard memo.
The Intelligence Coordination Center document “shows that the CFIUS evaluation of the DP World takeover was dangerously incomplete. We believe that intelligence gaps in the areas of operations, personnel, and foreign influence are simply unacceptable and any uncertainty as to the veracity and integrity of DP World’s security in these areas should have warranted the immediate initiation of the 45-day investigation,” the letter said.
But John Negroponte, the director of national intelligence, said a special risk assessment unit determined that the threat to U.S. national security of DP World operating terminals in the United States was “low.”
“We didn’t see any red flags in our inquiry,” he told the Senate Armed Services Committee during a hearing Tuesday morning. The national intelligence assessment was separate from the review conducted by the Coast Guard.
Terry Cross, vice commandant of the Coast Guard, issued a statement explaining that audits conducted by the sea service of P&O’s U.S. operations since January are not a sign that the agency is in the dark about the transaction, but rather part of normal precautions to monitor the situation.
The checks of P&O facilities, as well as those of DP World in foreign countries, coupled with guarantees for quick access to records about personnel and operations, have reinforced the agency’s comfort level with its initial decision to approve the sale, he said.
“In fact, the Coast Guard will have more information about the affected terminals under DPW ownership than it currently does under P&O’s ownership,” he said.
Michael Jackson, deputy secretary of Homeland Security, went even further in testimony to the Senate Commerce, Science and Transportation Committee, stating the government had “more visibility into the operations of DP World, if this transaction is consummated, than we do in any other terminal operating company.”
During a Homeland Security and Government Affairs Committee hearing Monday, however, Sen. Carl Levin, D-Mich., questioned the assertion by Stewart Baker, assistant secretary for policy and international affairs, that the assurances for subpoena-free access to DP World records eliminated any potential gaps.
Baker said that under the agreement DHS can know about the background of employees and other matters.
“You can know, but you don’t know,” Levin asserted, adding that checks should be done in advance of approval.
Jackson disputed charges that agencies hastily conducted the CFIUS review, saying DHS spent more time on the DP World transaction than many others that undergo a 45-day review because an informal review began prior to the company filing its formal application for a security clearance.
DHS is “not at all bashful about raising issues related to these transactions” or asking for additional time to review them, Jackson said. But he said in retrospect he wished he had learned about the internal Coast Guard intelligence memo earlier.
He also acknowledged that the administration did a poor job of consulting with Congress and promised to better inform lawmakers about details of the new 45-day review.
CFIUS previously reviewed DP World when the state-owned company acquired CSX World Terminals from Jacksonville, Fla.-based railroad company CSX Corp., noted DP World Chief Executive Officer Ted Bilkey.
None of the nine CSX terminals are in the United States.
But the assurances did little to appease many lawmakers, unwilling to trust the Bush administration’s decision-making, and intent on scuttling the sale because of concern that the United Arab Emirates was identified by the FBI and the 9-11 Commission as a financial and operational base for some of the Sept. 11, 2001 hijackers, sided with the Taliban and served as a transshipment point for nuclear components headed for Libya, North Korea and Iran.
Democratic Sens. Barbara Boxer of California and Byron Dorgan of North Dakota announced during a Commerce, Science and Transportation Committee hearing that they intend to fight the deal no matter what the new 45-day investigation agreed to by DP World and the White House over the weekend reveals.
“The right answer to this doesn’t require 45 days, in fact I don’t think it requires 45 minutes. People say, ‘We don’t want to offend anybody. What about offending common sense here?
“I think this proposal is nuts, ” Dorgan said.
“Why is America, particularly in an era of terrorist threats, not able to manage its own port facilities? Have we become so numb on this notion of outsourcing and offshoring and the orgy of globalism that we can’t understand our responsibility for our own national security interests, our own national economic interests?
“It is a global economy, but that doesn’t mean you have to stop thinking clearly. Our own economic and national security interest ought to persuade us to just say no. The sooner we say it the better,” he said.
The Coast Guard intelligence document “flatly contradicts” assertions that the port sale was thoroughly examined, said Sen. John Kerry, D- Mass., who questioned the competence of officials involved in the process.
“The secretaries of Homeland Security and Treasury look like Keystone Kops trying to escape blame,” he said in a statement.
As further evidence of the administration’s lax review of DP World’s investment, Kerry and Sen. Bill Nelson, D-Fla., pointed to a report in Monday’s Jerusalem Post that Dubai Customs actively enforces the Arab boycott of Israel. According to the report, which is likely to further damage DP World’s chances for approval in Congress, Dubai Customs requires certificates of origin showing that no shipments imported into the country contain products made in Israel.
U.S. law bars firms from complying with Arab government efforts to boycott Israel.
“We should not be rewarding companies that support discrimination against our key strategic ally and the Middle East’s only democracy,” Kerry said in a statement.
DP World handles cargo for Israeli container line Zim Integrated Shipping Services Ltd. at various ports around the world.
Bilkey reiterated that DP World has consistently expressed its intent to operate P&O Ports North America as a separately incorporated U.S. legal entity while retaining much of the current management structure and personnel. DP World agreed last week to submit to a second CFIUS review and insulate headquarters from any operational control of the U.S. assets to give the administration time to persuade Congress to allow the transfer of domestic terminal rights.
DP World has to complete the overall transaction as scheduled on March 2 because the acquisition is governed by takeover laws in the United Kingdom and is not controlled by DP World.
“By March 15 we have to mail checks worth (more than) $6.8 billion to the shareholders and in view of that we voluntarily tried to put together a scheme that would put us in a totally separate situation,” Bilkey told the committee.
DP World plans to merge its two Caribbean terminals with the North American subsidiary once the deal is finalized, he added.
Many senators said in opening statements that the DP World controversy underscores the need to improve the overall state of the nation’s port security.
Sen. David Vitter, D-La., said he will reintroduce a budget resolution again for a separate port security grant program to keep the focus on port security, and to make sure the unique needs of ports are addressed. The Bush administration has proposed lumping port security into a catch-all grant program for critical infrastructure.
Sen. Kay Bailey Hutchison, R-Texas, called for quick passage of her bill directing the expansion of the Container Security Initiative to station U.S. Customs officers in foreign ports.
And during a separate hearing last week, Sen. Hillary Clinton, D-N.Y., said Customs and Border Protection should be inspecting at least 15 percent to 20 percent of all inbound containers compared to the 5 to 6 percent that are physically inspected now.
CBP does screen shipping documents for all containers to detect anomalies that help it target which containers to scan or unload.
Despite the gaps in the port security system, “there is no evidence that terminal facilities’ operations conducted by foreign-controlled companies are any less secure, or in any way less compliant with security regulations, or in any way less cooperative with U.S. government security authorities than U.S. controlled companies,” Christopher Koch, president of the World Shipping Council, testified.
The U.S. does not have the capacity to handle the huge volumes of international trade without foreign terminal operators because they process more than 75 percent of ocean cargo.
Michael Mitre, port security director for the International Longshore and Warehouse Union, suggested that contract stevedores such as DP World have less incentive to do a good job maintaining security than foreign carriers who service their own vessels and need to make sure their end-to-end operations are not disrupted.