Overseas Firms Entrenched in Ports
Friday, March 10, 2006
The decision by Dubai Ports World to abandon its effort to take over terminal operations at six U.S. seaports was a victory for the numerous politicians who have thundered in recent days that foreign companies have no business handling U.S. port operations.
But foreign firms remain deeply embedded in nearly every major port in the country. And transferring ownership of those operations to U.S. companies could cause serious problems in an industry in which nearly all of the shipping is controlled by foreign interests. An immense amount of capital from those foreigners will be required to expand the nation's port system in coming years as global commerce continues to burgeon.
For an example of the industry's international nature, consider Inchcape Shipping Services, a London-based company that provides ship agency services -- arranging the smooth arrival and departure of vessels -- at 200 ports around the world, including more than two dozen in the United States. Inchcape was purchased in January by a Dubai company whose chief executive, Sultan Ahmed bin Sulayem, also heads Dubai Ports World.
Or consider Maersk, a Danish shipping giant. Its U.S. subsidiary operates much of the commercial fleet that serves the U.S. Navy, which means that its vessels transport items such as fuel and ammunition to U.S. military operations abroad.
Theoretically, such arrangements involve security risks. Terrorist operatives might infiltrate Inchcape or Maersk and send strategic information about ship or fleet movements to enemy forces. Many maritime security experts consider those risks small, especially compared with the lack of reliable policing at dozens of ports in poor countries that send goods to the United States.
But whatever the security ramifications, foreign ownership dominates the maritime industry, including the U.S. facilities where giant ships dock and unload thousands of containers filled with products for U.S. consumers.
"There is no other part of our critical infrastructure that is owned by foreign interests the way the maritime infrastructure is," said Stephen E. Flynn, a former Coast Guard commander and a port security expert at the Council on Foreign Relations.
Because of the Dubai ports flap, the public has learned that the majority of terminals at U.S. ports -- especially big ones such as Los Angeles and Long Beach in California, and New York and New Jersey -- are managed by companies from Singapore, Taiwan, Denmark, South Korea and other countries. And as President Bush pointed out in defending the Dubai Ports World deal, the port-management company targeted for takeover, Peninsular and Oriental Steam Navigation Co., is British.
In this highly globalized business, crews typically come from Southeast Asia or Eastern Europe, flags are often Liberian or Panamanian, and few large container ships are owned by U.S. interests. (A 1920s-era law called the Jones Act requires ships plying routes between U.S. ports to be U.S.-owned, but they are minor exceptions.)
There is an important reason why terminals are usually managed by foreigners: The shipping companies themselves are largely foreign, and they have generally sought to control terminals so that they can be certain of having the most reliable, efficient facilities possible for loading and unloading their vessels quickly to reduce costly time in port. That arrangement has suited local port authorities; they want to ensure that their ports will draw enough traffic to generate revenue and employment.
"Why are there so many foreign terminal operators? There are no global American liner companies anymore -- that's really the crux of it," said Peter Shaerf, managing director of AMA Capital Partners LLC, a merchant bank that specializes in transportation.
That development goes back to the 1970s and 1980s, when U.S. shipping firms struggled to compete with foreign lines that employed low-wage crews and were subject to looser regulations concerning safety, crew training and other issues. In the 1990s, much of the once-mighty U.S. merchant marine fleet was bought by foreigners, as Singapore's Neptune Orient Lines snapped up APL (better known as American President Lines) and Maersk purchased Sea-Land from CSX Corp.