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Key questions about the Dubai port deal



Coast Guard
United Arab Emirates
Peter King
Susan Collins

CNN -- The DP World deal to obtain the right to operate in U.S. ports has engulfed Washington in controversy since the deal was announced in February. Below are some answers to key questions about the deal and the resulting controversy:

1. What's happening at America's ports?

In October 2005, the London-based Peninsular & Oriental (P&O) Steam Navigation Company agreed to be purchased by DP World, a Dubai-based ports company owned by the United Arab Emirates (UAE). On February 10, DP World won the right to acquire P&O after it outbid PSA International, a Singapore-based company, with a final bid of $6.8 billion.

As part of the worldwide deal, DP World gained the right to operate in six major U.S. ports, including terminals in the New York/New Jersey area, Philadelphia and New Orleans. (View a detailed look at the major ports)

2. Why is the DP World/P&O deal controversial?

The Committee on Foreign Investment in the United States (CFIUS), a government body led by the secretary of the U.S. Department of the Treasury and consisting of representatives from other government agencies, approved the deal on January 17 after the company gave assurances that employee lists and other information would be made available. DP World agreed to an additional 45-day review after the controversy erupted.

Many lawmakers argue that allowing a foreign-owned company, particularly a company owned by the UAE, undermines national security. They note that two of the 9/11 hijackers came from the UAE and that they drew funding from Dubai banks before the attack. The UAE also was one of only three nations to recognize the Taliban's regime in Afghanistan.

Rep. Peter King of New York, a Republican and chairman of the House Homeland Security Committee, also charges that CFIUS did not conduct a thorough investigation into any terrorist ties DP World may have.

However, backers of the deal, including the White House, point out that the UAE has been a strong ally in the war on terror since September 11. Furthermore, the U.S. Navy calls on the port of Dubai, and the U.S. Air Force uses the UAE airfield to launch missions into Iraq and Afghanistan, and losing access to those facilities would seriously undermine the U.S. military's ability to operate in the area.

3. Do other foreign-owned companies operate in U.S. ports?

Yes. In fact, three-quarters of cargo containers go through terminals leased by foreign companies. P&O, a British company, continues to operate the ports until its purchase by DP World is completed and, according to the Washington Post, large companies based in Denmark, Singapore, Taiwan and South Korea operate U.S. terminals. And a Chinese company operates a terminal at the port of Long Beach, California.

4. So, would DP World be worse at security than other foreign-owned companies?

It's difficult to say. Ultimate responsibility for port security rests with the U.S. Coast Guard, which boards about 25 percent of incoming ships to search for safety violations, and the U.S. Customs and Border Protection service, which physically examines about 7 percent of incoming cargo containers. The terminal operators are responsible for the physical security of their own facilities. (View a breakdown of who is responsible for port security)

In early March, Idon Ofer, the CEO of Zim Integrated Shipping Services, a large Israeli shipping company, in a letter to Sen. Hillary Clinton, D-New York, said "[d]uring our long association with DP World, we have not experienced a single security issue in these ports or in any of the terminals operated by DP World."

On Sunday, the CEO of DP World, Mohammed Sharaf, told CNN "We need to clarify to the American people ... it's a misunderstanding or misconception of us as DP World, what sort of an operator we are."

"We need to educate the people in America that we are truly a global company, and it is not in our best interest to get into those areas where we feel or our customer feels that security is an issue," Sharaf said.

5. Why did the Bush administration initially approve the deal?

The Bush administration says the CFIUS review looked at the security implications of the deal and found nothing that would lead it to block the deal. The company also gave assurances that they would provide additional information to the government.

However, a memo released by Sen. Susan Collins of Maine, the Republican chairwoman of the Senate Homeland Security and Governmental Affairs Committee, suggests that the Coast Guard had concerns that they did not have enough intelligence to make a final decision. But the Coast Guard said those concerns were later resolved when the company agreed to provide more information.

6. What are lawmakers doing now?

A bipartisan group of senators -- led by Sen. Charles Schumer, D-New York, and Sen. Norm Coleman, R-Minnesota -- has proposed legislation that would require the president to provide Congress with the report resulting from the 45-day review and give Congress the final say on the deal.

California Rep. Duncan Hunter, Republican chairman of the House Armed Services Committee, would prohibit any foreign entity from owning facilities that the Department of Defense and the Department of Homeland Security deem critical to national security.

Collins would change oversight of the Committee on Foreign Investments in the United States (CFIUS), the administration panel that reviewed and approved the ports deal.

7. Why doesn't America run its own ports?

American companies do operate terminals in U.S. ports, but shipping is, by its nature, a capital-intensive and global business, and many U.S. operators have been bought by international shipping conglomerates. Some U.S. operators also have had problems with shipping workers' unions.

8. Can the U.S. just shut out foreign operators?

Theoretically, yes. Port terminals are usually owned by a port authority and leased to operators. If foreign operators were barred from holding such leases, it is unclear whether a U.S. operator could be found to outlay the large capital expenses necessary to operate the terminals.

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