The purchase by Dubai World Ports, a company controlled by the government of Dubai, of Peninsular & Oriental Steam Ship Navigation Co., parent of P&O Ports, from its British owners, set off yet another political crisis. P&O operates terminal facilities in 29 ports, six of which are in the US: New York, Newark, Baltimore, New Orleans, Miami and Philadelphia.A key fact overlooked in the debate about DPW’s acquisition is that it actually gives the US government the chance to extend its range of influence over international port security.
International trade is by definition a global proposition. A problem faced by the US government in exercising regulatory control over the security of international trade and supply chains is that most of the parties to the transactions lie outside the regulatory jurisdiction of the US. P&O, the number four terminal operator in the world, operates in 18 nations. This gives the US government the opportunity to negotiate additional security requirements with P&O for its operations both in the US and its other ports, thereby extending its influence at port operations over which it has no control, and gaining valuable information about port security at the non US ports. Working with DPW, a state owned firm, has the collateral benefit of aligning the interests of the Dubai government with US security and commercial interests.
Reviewed
The purchase was reviewed by the Committee on Foreign Investment in the US. CFIUS reviews the acquisition or control of domestic companies by foreign citizens and foreign investments in the US that could affect national security. It is chaired by the Secretary of the Treasury, and is comprised of 11 U.S. agencies, including Defense, Treasury, Commerce, DHS and NSA. The Committee reviewed the acquisition by DPW of the P&O’s operations in the US, and found no reason to warrant a further review.
There is no one model for describing how ports operate in the US. There are variations among the ownership, management and operations among the ports. For the most part, control of the ports is vested with ports authorities that have overall responsibility for management of the ports. In some instances the port authority operates the terminals themselves, in others the operation of the terminal is contracted out or leased to a terminal operator. At some ports the ocean carriers own and operate their own terminals. A significant number of US terminals are operated by foreign-based firms. P&O operates specific terminals within ports in the six cities, not the entire port operations. For example, they operate the cruise ship terminal on Manhattan’s west side, Port Newark Container Terminal (a joint venture with Maersk), and facilities in Newark and Jersey City to discharge automobiles.
Security
Security at the ports is overseen at the federal level by the Coast Guard and Customs and Border Protection. CG has the lead responsibility for the security of the vessel and the port. They implement and enforce the Maritime Transportation and Security Act of 2002, which sets standards and requires security programs for the port and vessel operations. They also enforce standards and requirements for the International Ship and Port Security Code. The ISPS code was adopted by the International Maritime Organization, and member states are required to follow the provisions for port and vessel security. The port authority and terminal operations are required to have security plans under MTSA. These security requirements exist independently of the ownership of the terminal. The ports authority have their own (or contracted) security operations. If the port authority is a member of the Customs-Trade Partnership Against Terrorism, then it has agreed to assess the security within its operations and with all the parties with whom it does business, and to take action to improve security where deficiencies are found.
CBP is responsible for the security of the cargo and determining the risk of each shipment destined for the US. All documents are evaluated for risk before the cargo is released. Via the Container Security Initiative, CBP inspectors are stationed at 42 ports. Containers that are determined to be high risk are examined before they are loaded onto the vessel, either by CBP inspectors or inspectors from the foreign customs administration. When cargo arrives within the customs territory of the US it is within the legal custody of CBP and cannot be released from the terminal without authorization by CBP. The terminal operator is not allowed to inspect or tamper with the cargo until it has been released from custom’s custody. Customs alone determines which cargo should be inspected and sets the location and conditions where cargo it designates to inspect is actually inspected. The inspections are carried out by and under the direct supervision of CBP.
The Terminal
The terminal is one of the key nodes in international ocean transportation. When a vessel arrives at terminal within a port, the carrier makes arrangements with a stevedoring company to employ longshoremen to unlade the vessel. The terminal separately employs stevedores to move the cargo from vessel-side to the location where the container will be stored until it is ready to be moved. It can only be moved once it is released by customs, and the carrier authorizes its release.
The cargo’s trip through the terminal is its entrance point into the US. It is part of a process that began in a foreign country when the cargo was ready for shipment to the US. It may have been loaded into a full container at the factory. If it was less than a full container load it may have been shipped to an intermediate warehouse or to a facility at the port where it was consolidated with other cargo to fill a container. There are many iterations of how cargo arrives at a foreign port destined for the US. Many security experts believe that the trip from the factory to the foreign point is when the container is most vulnerable for tampering or substitution with a complete counterfeit container. Container movement is a segmented process, with no one entity having control throughout the process. Moving a container that contained a WMD or other implement of terrorism would most likely require an internal conspiracy among personnel at the carrier, stevedore, terminal and drayage operator to keep the container within the control of conspirators
International
The point is that there are many business processes that comprise the movement of cargo around the world. International trade is just that—international. The ownership of any particular segment of the transportation and logistics piece of international trade is not particularly relevant. The arrival terminal is important but by no means the critical segment of movement of cargo from a security standpoint. The decision to allow DPW to proceed with its acquisition of P&O may not have been handled well from the political standpoint, but it was the right decision from the security standpoint. To change that decision would be to believe that we can retreat back within our own borders to protect our homeland security in the era of globalization.
About the author: Philip W. Spayd
Prior to joining Global Trade Systems in January, 2004, Mr. Spayd served for twenty five years with the US Customs Service and Department of Homeland Security, working in the US and representing US Customs globally. He was a founding director of Operations Safe Commerce, the first public-private partnership to develop mechanisms to enhance the security of international supply chains. Mr. Spayd was awarded the Coalition of New England Companies for Trade (CONECT) Annual Person of the Year Award for his contributions to the facilitation of international trade in New England. You may contact him by email.