Wednesday, February 22, 2006

Port Ownership Brouhaha

This flap over the so-called ownership of port facilities is great theater. But, despite the Shakespearian hand wringing, it seems to be about as deep as a Benny Hill skit.

First off, the United Arab Emerites is not buying any U.S. harbor or port of entry. Ports are generally owned by the local governments or, more often than not, a municipal corporation such as the Port Authority of New York and New Jersey or the Illinois International Port District (which uses a catchy rendition of Anchors Aweigh on its web site). Selling a harbor or port to a foreign country would be like selling Manhattan Island to a group of tourists who arrived unannounced with a handful of trinkets. Oh, wait . . . forget I said that.

What might happen (if the President gets his way), is that the company responsible for port operations at several U.S. ports might be sold to a company controlled by the United Arab Emerites. Read that carefully. It means that the only thing changing hands is the ownership of the company that holds the contracts to load and unload vessels, control truck access, and otherwise manage the port facilities. Also, based on good reports from NPR (1 and 2), with respect to NY/NJ, the only operation in play is one of six terminals only two of which are currently operated by American companies.

The political problem is that this proposed sale comes in the midst of the continuing focus by the White House, Customs & Border Protection, the Coast Guard, and others on cargo security. The message the administration has sent commercial importers is that cargo security is the government's current primary focus. That is why so much pressure is being put on importers to participate in C-TPAT and why the U.S. is asking trading partners to participate in the CSI (that's Cargo Security Initiative, not TV crime drama).

Stick with me here. What I am about to say will sound racist. It is not.

It kind of looks bad to the average Joe or Jane for the administration to be outsourcing any part of the port operations (including some elements of security) to a middle eastern nation with "Arab" in its name. Couple this with the fact that the UAE figured tangentially in the 9/11 attacks in that some of the hijackers traveled through the country and its banks were apparently used to handle the necessary cash. Two other factors come into play. First we are talking about the Port of New York here. Lower Manhattan is visible from the port. The World Trade Center stood on land owned by the Port Authority of NY & NJ. So, people are bound to be sensitive. Second, we are in the middle of midterm election season. If there is political hay to be made, now is the time to do it. Everyone wants to look strong on security and this is an issue tailor made for tough sounding soundbites.

But, we need to dig a little deeper. We need to keep in mind that the port operators are, in the words of NPR, the baggage handlers. They are not the front line of port security. That front line is Customs and the Coast Guard. Security clearance starts with the electronic transmission of manifest data prior to loading the vessel in the foreign port. That data is reviewed by Customs and the Coast Guard for targeting. Customs can order the ship not to leave the foreign port if it is concerned about the manifest data. The Coast Guard can intercept vessels prior to arrival.

Upon arrival, Customs inspectors have another opportunity to physically inspect the vessel and the cargo. While only a small percentage of cargo is physically inspected by a human, the issue is not the quantity of inspections but the quality of targeting which cargo to inspect. Part of that targeting equation is whether the importer is a C-TPAT member. A greater percentage of cargo is subject to electronic inspection including x-rays and radiation detectors. In addition, containers are now required to have secure seals that show tampering. Truckers are not permitted to enter the port area without proper clearance. There are, in other words, lots of layers and most are not within the control of the port operator. Cargo security is surely not perfect but there is no such thing as perfect security.

So, what is going on here? Well, the President screwed up by not being more up-front with the local authorities, Congress, and his own party about this. Also, a full review by the Committee on Foreign Investment should have been conducted to avoid charges that the sale was pushed through. With the politics aside, the administration could have focused on the facts of its case.

But, as it is, they seems to have shot themselves in the foot. Which, given recent events, is an improvement in aim.

1 comment:

Anonymous said...

Excellent Post!