WASHINGTON, DC – The Senate Commerce Committee today announced it will hold a Full Committee hearing on the recent purchase by Dubai Ports World (DP World) of the P&O Port division of P&O Group on Tuesday, February 28, 2006, at 2:30 p.m. in a room 109 of the Dirksen Building.
The hearing will examine DP World’s purchase of P&O Ports and the security role held by the U.S. government at ports. This deal, which allows DP World to gain access to terminal leases held by P&O throughout the world, was accepted by P&O shareholders February 13, 2006. P&O Ports is a multi-national terminal operating company based in the United Kingdom, which leases terminals throughout the world, including six in the United States – New York, New Jersey, Philadelphia, Baltimore, Miami, and New Orleans. DP World is owned by the United Arab Emirates government. This offer was accepted over a similar offer tendered by PSA International.
“This hearing will provide Committee Members the opportunity to clearly understand what the proposed purchase means for terminal operations at ports,” said Commerce Committee Chairman Ted Stevens (R-Alaska). “It is important for us to get the facts and avoid speculation. This hearing will help us make informed decisions to ensure the security at our nation's ports.”
Click here for video of this hearing.
We thank the witnesses who will testify before the Committee, and for their willingness to appear today.
Much has been reported over the past few weeks concerning the proposed port terminal operations transaction between Dubai Ports World, a Dubai-owned company, and P&O Ports, a British company. Many of the reports have contained incorrect or misleading information. Today’s hearing is intended to learn the facts directly from the companies involved, and to have a more global discussion concerning what is being done to secure U.S. ports.
While I agree with many of my colleagues that we need to scrutinize any transaction that involves foreign investment in the United States, particularly when the transaction has even a peripheral effect on national security, there are a few points which need to be made with today’s hearing:
First, this transaction would be one between two foreign-owned companies, subject to federal government approval through the Committee on Foreign Investment in the United States. This is not an agreement between the Dubai company and the federal government. The current terminal operator, P&O Ports, formerly the Peninsular and Oriental Steam Navigation Company, is a company based in the United Kingdom.
Second, neither the British nor the Dubai terminal operator would own any U.S. ports. State and local port authorities own our ports. These companies are terminal operators, and manage American longshoremen in the loading or unloading of cargo from ships, subject to coast guard and customs inspection and security procedures.
Third, terminal operators such as these companies are not responsible for securing U.S. ports. The Coast Guard, TSA, customs and border protection, the FBI, and local law enforcement secure our ports. Cargo arriving at U.S. ports is assessed for risk, and screened accordingly. In many cases, the cargo is screened at foreign ports before being loaded on a shipping vessel.
Fourth, the document released yesterday regarding coast guard’s analysis about this acquisition is misleading because it is only a portion of the overall analysis. After completing its review, the Coast Guard concluded publicly that “DPW’s acquisition of P&O…does not pose a significant threat to U.S. assets”. Fifth, the United Arab Emirates, within which Dubai is located, is a strategic ally of the United States not only in the war on terror, but also generally in that region of the world. I have been to Dubai, and I would remind my colleagues that the U.A.E. allows our U.S. military to dock 56 warships, 590 military sealift command ships, and 75 allied warships at their ports.
Finally, a significant number of terminal operators at U.S. ports today are actually foreign owned or leased. In fact, in Los Angeles, one of our largest ports, Chinese, Taiwanese and Singaporean government-owned companies operate terminals. It is interesting to note that another Singaporean-government owned company lost out to Dubai ports world in its bid for the P&O ports transaction at issue. As Americans, we do need to look at this deal closely to ensure that our national security remains unaffected. But we also must recognize the benefits of a global economy, and avoid unwarranted discrimination among our allies.
Chairman Stevens Q&A with Witnesses
Chairman Stevens: Let me start off with you, Mr. Jackson. There are at least 20 foreign-owned companies, from 11 different nations, including those owned by governments such as China, Singapore, Taiwan and perhaps others, who are operating in 25 states, 11 of them in states represented by Senators on this Committee. Can you tell us, is there some special security threat that D.P. World poses that these other companies, foreign-owned companies, do not pose?
Secretary Jackson: No, sir. Our judgment is that D.P. World does not pose a unique security threat. Chairman Stevens: Could you tell me, you're part of Department of Homeland Security. We're told the Coast Guard had a classified document that was going through the Department of Homeland Security concerning D.P. World. Were you aware of that?
Secretary Jackson: The Coast Guard did an internal assessment of this transaction. The document that they created was for their internal review so that they could render a judgment.
Chairman Stevens: That's not the question I asked you. Were you aware of it?
Secretary Jackson: At the time it was written I was not, no, sir.
Chairman Stevens: Were you aware at the time you passed on the approval of D.P. World?
Secretary Jackson: No, sir, I was not.
Chairman Stevens: Do you think you should have been? Secretary Jackson: In this transaction, in retrospect, I wish I had learned more.
Chairman Stevens: Were you cleared for that access?
Secretary Jackson: Yes, sir.
Chairman Stevens: Do you think Congress needs to legislate further in any way regarding these terminal operators who are foreign-owned, in terms of the operations within our ports?
Secretary Jackson: No, sir. I believe the general security regime that Congress has established will adequately allow to us work with foreign-owned operators, as well as domestically-owned operators.
Chairman Stevens: Mr. Mitre, I go back a long way, and I have a union card myself, as a matter of fact, from a long time ago. But can you tell me, what effect does this really have on your people, who owns this company?
Mr. Mitre: It's very interesting. And as Mr. Yoshitani said, it looks simple, but it is a little more complex than that. There are a couple of things going on. One, you have contract stevedores that run terminals. Then you have foreign vessel owners that run terminals. Contract stevedores are American stevedores, MTC and SSA on the West Coast, basically, with Pasha, a small company. The rest are the Singaporean-owned APL, Maersk, many. But they own ships. It is in their vested interest to make sure that their terminals are ideal terminals, because they need to make sure those ships turn as fast as possible. If you don't own ships and you're a contract stevedore, you don't have the same interests as a terminal operator that owns ships. And I think in this case, and this is just in my own opinion, you are asking me, you have got a foreign company coming in that is a contract stevedore and it is little bit different than ones that own ships and have a vested interest.
Chairman Stevens: It was foreign-owned at the time. It is foreign-owned today by a British company. What difference does it make if it's owned by Dubai? Mr. Mitre: To me, Dubai doesn't matter. To me, I am just talking about a foreign-owned.
Chairman Stevens: Okay, thank you. Mr. Cook, if we were to bar all foreign ownership in U.S. port terminals as some have suggested, would we possess the maritime-related assets to continue to accommodate the needs of our water-borne trade?
Mr. Koch: Absolutely not. Roughly, our guess is somewhere 75 percent or North of U.S. trade is handled by terminal operators that are foreign-owned. Chairman Stevens: Mr. Yoshitani, what would be the effect of Congress precluding foreign investment in terminal operations in U.S. ports?
Mr. Yoshitani: Well, there is quite a bit of foreign investment in terminal operators already. I'm not sure that additional...
Chairman Stevens: I think the suggestion is government-owned foreign operations. I take it that would include China, Singapore, Taiwan, as well as the Emirates, if it passed. That has been suggested, as I understand it.
Mr. Yoshitani: Yes, sir. I'd like to answer that in two parts, if I may. Number one, from a commercial aspect, I don't think there would be any problems with it. Now, we as terminal operators of the association feel that it's totally inappropriate for us to be making any judgments as to the security profile of Dubai or any other company for that matter. So I would like to take a pass on that. Chairman Stevens: Thank you.
Chairman Stevens: I would commend to you the Wall Street Journal commentary today entitled "Fact, not Fear,"from former Senator Cohen and Admiral James Loy about this situation Mr. Bilkey. I do think there are some things that we can do to calm these waters. I hope we can. I for one really deplore the position of the UAE on Israel. I don't know of any Senator that doesn't. But on the other hand, I do greatly admire what this country has done to assist us following the great difficulty that we had in finding a secure port in that region. So I do hope that we can find a way to let this process go through a further review and recognize the fact that after all it is a purchase of a contract from a British company by the government of Dubai. And I hope that the processes we're pursuing now will strengthen our American laws, as both Senator Cohen and Admiral Loy have suggested. They make some suggestions to you as your company, and I would commend them to you because they seem to be very reasonable suggestions that could be made, could be pursued, particularly with regard to some kind of transparency with regard to D.P. World's running of their systems that they use in the ports in helping us understand how they affect hiring practices and security procedures. Both of those suggestions really merit, I think, your consideration. Let me thank all of you. Admiral Gilmour, we're sorry to keep you all afternoon, but we know your agency was involved. We appreciate your courtesies, Secretary Jackson, Mr. Ahern. And I look forward to seeing you sometime out at Los Angeles again, Mr. Mitre. The rest of you, thank you very much for your contribution. The statements that have been submitted will be in the record. As Senator Kerry indicated, he might have some questions. I have no requests from any other senator. But I do hope that you'll respond. Yes, sir?
Mr. Bilkey: Mr. Chairman, I just wanted to make one point since it's been brought up on a number of occasions. We serve everyone. The largest Israeli shipping company is one of our largest customers.
Chairman Stevens: What did you say?
Mr. Bilkey: The largest Israeli shipping company is one of our largest clients.
Chairman Stevens: Where?
Mr. Bilkey: We serve everyone. In many of our terminals around the world.
Chairman Stevens: That's interesting. Do you have any Jewish members of your board?
Mr. Bilkey: No, sir.
Chairman Stevens: I didn't expect any. Thank you all very much for your patience.
Witness Panel 1
Mr. Jayson AhernAssistant Commissioner for Field Operations, Customs and Border ProtectionU.S. Department of Homeland Security
Mr. Michael P. JacksonDeputy SecretaryDepartment of Homeland Security
Witness Panel 2
Mr. H. Edward BilkeyChief Operating OfficerDP World
Mr. Christopher KochPresident and Chief Executive OfficerWorld Shipping Council
Mr. Tay YoshitaniSenior Policy AdvisorNational Association of Waterfront Employees
Mr. Robert ScavoneExecutive Vice President, Strategic Planning & DevelopmentP&O Ports North America, Inc.
Mr. Michael MitrePort Security DirectorInternational Longshore and Warehouse Union