UNDERFUNDED FEDERAL MANDATES BELIE PORT SECURITY

By Diane M. Grassi

As the story unfolds, it is perhaps important to gain some perspective on the underlying facts and historical context of the United Arab Emirates based Dubai Ports World (DPW) since its takeover of London based Peninsular and Oriental Steam Navigation Co. (P&O), before political allegiances and commercial interests totally obscure the main issues at hand. In addition, the capacity of the United States Coast Guard to employ national security processes at U.S. ports of entry has come under much scrutiny, not only since said proposed deal was unveiled to the American people, but as far back as September 11, 2001.

The DPW Company was formed as recently as September 28, 2005. As the result of a merger between Dubai Ports Authority and Dubai Ports International (DPI), two Dubai state-owned facilities, it believed it had a legitimate shot at overtaking P&0. In January 2005, DPI acquired CSX World Terminals. Of note is that U.S. Secretary of Treasury, John Snow, was the CEO of CSX Terminals until January 31, 2003 and was sworn in on February 3, 2003. Secretary Snow has said he has since divested all interest in CSX worth some $72 million, although he continues to receive deferred compensation from CSX reportedly between $5 million to $25 million according to Senator Christopher Dodd (D-CT).

The Committee on Foreign Investments in the U.S. (CFIUS), headed by Secretary Snow, approved the United Arab Emirates taking over port operations of six major U.S. ports in addition to 29 terminal operations on January 16, 2006, having completed an assessment report on December 5, 2005. Among the ports to be included in the deal are Corpus Christi, TX and Beaumont, TX which receive heavy U.S. military equipment shipments including helicopters. U.S. troops also sail on U.S. ships from these two ports. The deal was finalized by DPW’s shareholders on February 13, 2006 after $6.5 billion of the $6.85 billion purchase price was successfully financed by Barclay’s Capital, the investment arm of Barclay’s Bank and Deutsche Bank AG.

CFIUS supposedly went through a 30-day investigatory process in approving the deal, and now acknowledged by Secretary Snow that actually underlings of twelve different U.S. agencies including the Department of Homeland Security and the Department of Defense were responsible for vetting the deal, thereby ruling out national security concerns. However, although we have been given assurances by Secretary of Homeland Security, Michael Chertoff, that the U.S. Coast Guard was involved in the vetting process it is now clearer that they were only peripherally involved in the final assessment.

According to White House spokesman, Scott McClellan, “The intelligence community did assessments to make sure that there was no national security threat.” But intelligence officials now claim that the Community Acquisition Risk Centre known as CARC, overseen by the Office of Intelligence chief, John Negroponte, whose agency was just formed in October 2005, had been asked to begin work on the DPW acquisition as late as November 2005. But CARC’s first director, William Dawson, was only appointed in January 2006. CARC has little to do with counterterrorism activities but is mandated to assess security risks posed by companies doing business with the intelligence community. Thus, all agencies apparently were told that the security issues were vetted and complete when it was CARC which made the security vulnerability assessment.

Prior to CARC’s investigation and vetting of the DPW deal, the U.S. Coast Guard filed an assessment report in December 2005 with CFIUS on port security concerning the DPW deal, which came to light on February 27, 2006 before the Senate Homeland Security and Governmental Affairs Committee, chaired by Senator Susan Collins (R-ME). Senator Collins remarked, “This report suggests there were significant and troubling intelligence gaps.” She was referring to the language included in the report that stated that questions were raised by the Coast Guard that foreign influence, employees and operations made it impossible to assess the threat level by a state-owned Dubai company’s purchase of a firm to manage terminal operations of six U.S. seaports. However, according to testimony by Treasury Secretary Snow in the same hearing, the U.S. Coast Guard report was given to CFIUS after December 5, 2005 when the CFIUS assessment process had already been completed. Therefore, the U.S. Coast Guard’s report was not part of CFIUS’ final determination.

The mixed messages continue and will become unwieldy as time passes, particularly as politics entwines itself into the process. And there is no shortage of discrepancies as concerns the operations of the U.S. Coast Guard with respect to security operations. And testimony of Admiral Thomas H. Gilmour, Assistant Coast Guard Commandant for Marine Safety, Security and Environmental Protection, tried to rebuff any of Senator Collins’ doubts, stating that she was taking that part of the report out of context and that the report, “concludes that DP World’s acquisition of P&O, in and of itself, does not pose a significant threat to U.S. assets in ports.”

The U.S. Coast Guard continues to struggle to ensure security of U.S. ports due to a lack of necessary funding and aged equipment, nonetheless. Although Homeland Security Secretary, Michael Chertoff, has tried to assure the American people that his agency would still see that the U.S. Coast Guard and U.S. Customs and Border Protection oversee port security, they have only been able to do a marginal job, in spite of mandates since September 11, 2001. The U.S. largely remains vulnerable from inadequate security at points of origin, where manifests are the sole system used for checks and balances of cargo containers.

And there has been disingenuousness concerning the hierarchy of how the various agencies work in concert at U.S. ports. After 9/11, both the U.S. Congress and the White House enacted myriad regulations and legislation to provide better port security, namely the 2002 Maritime Transportation Safety Act, to standardize individual vessel and port security plans and gave the U.S. Coast Guard more duties. But most of the mandates either remain under-funded, yet to be realized, or both. More obvious and perhaps more simple to implement funding for is a plan to standardize security badges to maritime workers, now only required to show a state driver’s license as identification. A new security badge program is finally slated to begin in April 2006. The Coast Guards’ fleet is in need of replacement as most of its vessels are more than 50 years old.

But far more complicated is oversight of foreign-based containers and manifests. And the security of both foreign and domestic ports falls under the auspices of a conglomerate of agencies which includes U.S. Customs and Border Protection, the U.S. Coast Guard, terminal and vessel operators, state and local port authorities, as well as state and local law enforcement.

The regulatory requirements which went into effect in 2003 with the Maritime Transportation Safety Act requires port or terminal operators be responsible for security for its own facilities or the area within the port where cargo is loaded, unloaded or transferred, according the Department of Homeland Security. In addition, port operators are to conduct their own assessments of its assets with the federal government or U.S. Customs and Border Protection providing an overall role. Port operators and owners must mitigate their own security vulnerabilities, not the U.S. Coast Guard or U.S. Customs and Border Protection. The U.S. Coast Guard approves those security plans and is only responsible for overseeing that specific security plans are maintained.

For further clarity, as ships initially dock at U.S. ports, the U.S. Coast Guard has jurisdiction of said ships. After the ship docks, U.S. Customs and Border Protection oversee unloading operations. Thereafter, the ship’s cargo becomes the responsibility of the port operator.

According to Stephen Flynn, a former U.S. Coast Guard commander and now a Senior Fellow at the Council on Foreign Relations, “When Customs says it screens 100% of the cargo, that simply means it scrutinizes the paper work of cargo manifests and of ships headed for the U.S., looking for things that might raise a red flag.” Presently, approximately only 5% of those containers, which raise red flags, are singled out for assessment such as whether a seal is broken, or a container comes from an unfamiliar company or shipper. Use of large gamma x-ray machines can then be used which can expose changes in the density of its contents. Rarely is a container searched by hand, due to the time consumption, which could take up to five hours.

“They’re making their best guess about what they think is a high risk material ….but they assume that the other 95% has come from trusted shippers, known shippers, name brand companies that are not involved with terrorism,” says Flynn. And although the White House keeps insisting otherwise, protection for most of all port facilities are the responsibility of the port operators and left up to gate guards and night watchman, for example, when incomplete inspections are left for the next day, while ships sit at their respective docks, uninspected, if at all.

Unregulated directly by the federal government, port operators administer the contents of the cargo once it is unloaded and its manifests are checked. And manifests, processed by U.S. Customs and Border Protection still remain on an honor system from ports abroad. But ports consist of far more than a dock, and can include warehouses, factories, refineries, bridges and various types of infrastructure. The port operator is responsible for lighting, fencing, locks and background checks of its employees as well as its entire various infrastructure.

Once U.S. Customs and Border Protection receives the manifests in the U.S., should agents see a red-flag they then contact the operator of the port of origin and are reliant upon that country’s security agent to do some kind of inspection or investigation. At best, it is a flawed system without the manpower or funding for more technology to better inspect containers arriving on U.S. shores.

But without mitigating obvious risks in ports of origin in parts of the world where terrorists are known to have access to harm Americans, appears fool hardy. It would seem then, regardless of what transpires as the result of congressional hearings and a more thorough investigation now granted for the DPW deal, that the U.S. government and its elected representatives must become more familiar with available resources and systems in place at U.S. port operations, in need of direct funding. For whatever arrives on U.S. docks will ultimately travel on myriad trains, trucks and aircraft throughout communities of America. In a post 9/11 world, we can no longer afford to unnecessarily take risks with strategic U.S. assets when we know we can do a far better job.