Growing Criticism Over Port Security Puzzles Many in Shipping Industry

Feb. 27, 2006
'We haven't done a good job of explaining how we work'

Feb. 22--Just about any given time, it's possible to find a Greek-owned ship flying a Liberian flag, employing a Filipino crew and carrying cargo from China into a U.S. port terminal managed by a British company that hires American longshoremen.

This is how Wal-Mart, Best Buy, Target and others get their socks and stereos for the U.S. consumer.

So, some in the shipping industry have been taken aback in the past week by growing criticism in Washington and in state capitals to a deal that would transfer control over some operations in several major U.S. ports from a British company to one owned by the government of Dubai.

"To be fair, we're on the edge of the world and we haven't done a good job explaining how we work, so people are confused by it," said Art Wong, a spokesman for the port of Long Beach, near Los Angeles.

Wong lived through a similar controversy about six years ago when China Ocean Shipping (Group) Co., an ocean carrier owned by the Chinese government, was doing such a booming business bringing products to the United States that it sought a bigger landing spot at the Southern California port. Before the company could move to a former Navy base, a groundswell of opposition on Capitol Hill over national security concerns killed the deal.

Critics of the Dubai deal express similar concerns about possible threats from Middle Eastern terrorists. Dubai Ports World, which paid $6.8 billion last week to acquire Peninsular and Oriental Steam Navigation Co., is based in the United Arab Emirates, where one of the Sept. 11, 2001, hijackers lived and others passed through.

In the major U.S. ports where Dubai Ports World would operate terminals - Baltimore, New York, New Jersey, Miami, New Orleans and Philadelphia - many of the shipping lines, the stevedores that load and unload ships and terminal operators have foreign owners.

The top 10 containership fleets are based in Denmark, Switzerland, Taiwan, China, Germany, France, Japan, Hong Kong and Singapore, said Peter S. Shaerf, managing director of AMA Capital Partners LLC, a merchant banking firm that focuses on the maritime and transportation industries. All call on U.S. ports, and some of the shipping lines manage terminals.

Other terminal operators with U.S. operations are based in England, Denmark and Hong Kong.

Panama has the world's largest ship registry, and Liberia is second. Brad Berman, president of the company that runs the Liberian registry, said about 2,300 ships fly that country's flag and that they carry 10 percent of the world's cargo tonnage.

Shaerf described Dubai Ports World as a respected international company.

The Bush administration announced last month that it would nominate David C. Sanborn, director of operations for Europe and Latin America at the Dubai company, to be administrator of the Maritime Administration of the Department of Transportation, which aids marine commerce and ensures that a U.S. fleet is prepared for emergencies.

"The real risk is in a poorly run port. A badly run port is more of a terrorist target than perceived bad ownership," Shaerf said. "This is an international business. If you welcome their commerce, you have to welcome them."

Many U.S. ports, including Baltimore's, have offices and agents overseas to drum up business from foreign companies. Some want shipping lines to visit their terminals, and some want them to run and invest in their operations.

Cosco was operating at Long Beach when the political questions arose in 2000, Wong said. The company still operates there, bigger than ever because of record imports coming to the West Coast from Asia. Although Cosco was barred from moving to the former Navy location, other companies moved to that site, freeing land around Cosco's operation where it could expand.

In Baltimore and elsewhere, P&O, the British company being bought by Dubai Ports World, is largely responsible for loading and unloading container cargo and managing dockside storage.

Administrators work directly for the company - about 65 of them at the port of Baltimore, one of the larger operations - but most of the work is done by American longshoremen.

The Coast Guard, one of the agencies on the front lines of port security, said everyone with an interest in the port is treated the same.

"The Coast Guard recognizes we live in a global economy and that foreign-owned corporations are operating within the United States," said Jeff Carter, a spokesman, in a statement yesterday. "Laws and international conventions are currently in place."

The Coast Guard and other Homeland Security agencies collect information on crews and cargoes and flag a small number of the millions of containers that arrive on the estimated 5,300 commercial ships that make more than 60,000 calls on U.S. ports each year.

The safeguards do not appear to have reassured a growing list of critics of the Dubai deal that includes Gov. Robert L. Ehrlich Jr. of Maryland and Gov. George E. Pataki of New York, both Republicans, and U.S. and state lawmakers of both parties, most representing states where the ports affected are situated.

Some say they oppose any foreign government control, and others say the Dubai case is special because the government involved is Middle Eastern. Several lawmakers have pledged to introduce legislation to stop the deal. Others have called for hearings.

President Bush reaffirmed yesterday his support for the deal and said he would veto any legislation aimed at stopping it.

The deal has sparked a lawsuit by Continental Stevedoring & Terminals Inc. of Miami, which partners with P&O to load and unload cargo at the city's port. The suit claims that P&O is violating its agreement and would make Continental an involuntary partner with the Dubai government.

Many of the deal's critics say they just want more information or further review by the Treasury Department's Committee on Foreign Investment, which examines investments that could pose security risks. The committee reviewed and cleared the $6.8 billion deal in recent months. But lawmakers say the review was done in secrecy and that the committee has released no specifics.

Helen Delich Bentley, a former Maryland congresswoman and a port consultant, said the committee has always operated that way and approved many deals that she objected to.

She said the Dubai deal should not be blocked because it would be unfair to single out one foreign-owned company. But she said foreign ownership should be addressed, with questions about job opportunities examined along with security issues.

"I don't think we ought to pick just one," she said. "I almost give up hope this is a wake-up call. America has been much too complacent."


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