Shipping industry veteran C. Thomas Burke purposely strayed off course.

Wrapping up a talk about the Panama Canal at a North Charleston conference Wednesday, the senior adviser to the chief executive of Japan-owned K Line America Inc. suddenly steered his remarks toward the Dubai Ports World controversy.

He then took aim at the political firestorm raging over DP World's plans to buy a company that runs cargo terminals at major U.S. seaports in New York, New Jersey, Philadelphia, Baltimore, Miami and New Orleans.

"It's really sad," Burke said Wednesday.

The Bush administration already has approved the $6.8 billion buyout of Peninsular & Oriental Steam Navigation Co. But as word of the P&O acquisition spread, Republican and Democratic lawmakers sounded alarm bells, saying the deal raises the risk of a port-related terrorist attack because DP World is owned by the United Arab Emirates. Two of the 9/11 hijackers came from that Mideast sheikdom and laundered money through its banking system.

Burke said he was "quite offended" at what he described as a knee-jerk reaction. He pinned some of the blame on the media's lack of understanding of the shipping business and of the way port terminals operate.

The sale to DP World, Burke added, ought to be allowed to proceed.

"It'll be good for the United States and good for international trade," he told the audience.

As it turned out, Burke was preaching to the choir. The feeling among the shipping executives and managers who attended the inaugural Port Productivity Conference last week was that, as far as national security is concerned, the DP World deal is much ado about nothing. But others, including some South Carolina lawmakers and at least one local maritime security expert, say the company's purchase deserves closer scrutiny.

Political fallout

It's been a dizzying and divisive week since the P&O buyout rocketed to the top of the national security agenda, catching the Bush administration off-guard. In that time, Sen. Lindsey Graham, R-S.C., told Fox News that the White House's decision to OK the deal was "tone deaf politically," while U.S. Rep. Henry Brown said Congress "should have had the chance to review this, and other cases like it, before it was approved."

In what some viewed as election-year grandstanding, other lawmakers promised legislation to block the sale, prompting President Bush to respond with a veto threat. Congressional hearings on the matter were held Thursday, while the White House disclosed that Bush was unaware of the sale until after a Cabinet-level commission had signed off on it. Party leaders from both sides of the aisle joined forces in seeking a delay of the sale so it could be studied further.

Late Thursday night, as a result of the furor, Dubai Ports World agreed to delay assuming control of the U.S. ports pending further discussions with the administration and Congress.

Advocates such as Burke feel some of the opposition is being fueled by a combination of fear and prejudice. "It's an undercurrent in all this," he said. "We have to come to grips with the fact that not every Arab is out to kill us."

Bush, whose office acknowledged that Congress should have been briefed earlier about the deal, defended his administration's analysis. "If there was any chance that this transaction would jeopardize the security of the United States, it would not go forward," he said Tuesday.

Industry support

At last week's well-timed port conference in North Charleston, support for DP World seemed pervasive, based on interviews. Even potential business rivals, such as privately held Marine Terminals Corp., said they welcome the company.

"I have no qualms at all if Dubai buys P&O," said Doug Tilden, president and chief executive of Oakland-based Marine Terminals, which runs ports on the West Coast and in the South Atlantic, including a military cargo facility in North Charleston.

Maritime officials stressed that terminal operators such as DP World do not control security in the waterways or on the public docks. That job falls to local port authorities, the Coast Guard and the Department of Customs and Border Protection, which also inspects cargo shipments at many overseas ports.

Also, terminal operators do not own or control public waterways. Most load and off-load cargo on sections of port properties leased from state or local government agencies, typically under long-term contracts.

DP World tried to defuse the controversy, with little success. Ted Bilkey, chief operating officer, told CNN last week that the company "will fully cooperate in putting into place whatever is necessary to protect the terminals."

Bilkey, an American, also said Customs officers in Dubai will be able inspect containers bound for U.S. ports under a port-security effort the company supports. "Security now in our business is a marketing tool," he said. "The shipping companies want to know that you run a secure operation."

No surprise

The sale of P&O and its U.S operations should have come as no surprise. DP World's first takeover bid was announced in late November. It then had to raise the price to counter a competing offer from a company owned by Singapore's government.

The idea of foreign-based maritime firms operating on U.S soil is nothing new. In fact, it has become the norm, partly because U.S. companies have had little appetite for the industry's razor-thin profit margins, experts said. P&O, for example, is a British concern, and many shipping lines are based overseas.

"It's part of a trend," said Bernard S. Groseclose, president and chief executive of the South Carolina State Ports Authority and chairman of the American Association of Port Authorities. "In this industry, the maritime industry, it's becoming increasingly foreign-controlled."

The P&O sale, if approved, would not directly affect operations at the Port of Charleston because the SPA manages all of its container terminals itself, Groseclose said. "At the end of the day, I'm happy we have the system we have," he said.

While he doesn't think the DP World deal poses any immediate or discernible threat to seaport security, the SPA chief said he was not surprised by the controversy and emotion it has dredged up.

"It's a perception issue," Groseclose said. "It's the perception that we're giving up control."

It's difficult to predict what course lawmakers will take, he said. But Groseclose noted how Congress, citing national security concerns, torpedoed plans a few years ago by a Chinese shipping line that wanted to open a container terminal at the former Long Beach Naval Station in California.

A closer look?

Others, such as maritime security expert Lucy Duncan-Scheman, founder of Safe Ports Inc., said the sale of P&O to DP World needs to be examined more closely.

"This is the first time we've seen a state-owned entity do this," Duncan-Scheman said. "That gives me pause for concern."

Specifically, she'd like to learn more about the Bush administration's review of the deal. "I find it perplexing that it got through the vetting process very quickly," she said. "I think the Congress is spot on by saying, 'Let's slow this way down and do a thorough and transparent analysis to make sure there are no issues.' "

Duncan-Scheman said it's impossible now to know how closely the White House reviewed potential ties between the P&O deal and other sensitive foreign businesses that Dubai's government-run investment arm has acquired. Last month, for example, it bought one of the largest shipping agents in the world, Inchcape Shipping Services, which services and refuels the U.S. Navy fleet in Dubai. "How do these purchases relate to one another?" she asked.

J. Ron Brinson, retired president, chief executive and executive director of the Port of New Orleans who lives in the Charleston region, said he's in favor of the Dubai takeover.

"You can see why people want to debate it, but at the end of the day, put it in the right context," Brinson said. "They aren't buying or taking over our ports."

Brinson's hope is that the controversy will fix attention on the bigger issue.

"We should be talking about exactly what the federal government is going to be doing over the long run to help enhance port security," he said. "We have a long way to go."

Global operator

P&O Ports operates 29 container terminals and provides logistics services in more than 100 ports, giving it a presence in 19 countries. In the United States, in addition to the six ports it manages that have drawn recent attention, P&O also provides stevedoring services at 23 port terminals, including 10 along the Gulf Coast and several on the Atlantic Coast in addition to those it manages. The company also oversees passenger terminals at many of the ports it manages, including New York and Miami.

Among the ports worldwide that P&O manages where shipping companies provide direct service to and from Charleston are:

--Baltimore

--Miami

--New York/New Jersey

--Antwerp, Belgium

--Buenos Aires, Argentina

--Colombo, Sri Lanka

--Le Havre, France

--Mundra, India

--Nhava Sheva (Mumbai), India

--Qingdao, China

--Shekou, China

--Southampton, England

High-level authorization

The Committee on Foreign Investment in the United States, which gave the go-ahead to Dubai Ports World's buyout of P&O, is an interagency committee chaired by the secretary of the treasury and composed of the secretaries of state, defense, treasury and commerce, the attorney general, the U.S. trade representative, the director of the Office of Management and Budget, the chairman of the Council of Economic Advisers and the assistants to the president for National Security, National Economic Policy, and Science and Technology. Some recent news reports have said the secretary of Homeland Security also is a member.

 

Reach John McDermott at 937-5572 or jmcdermott@postandcourier.com.