Overseas Firms Entrenched in Ports

Some members of Congress recently proposed legislation that would require that U.S. companies take over terminal management operations at U.S. ports from foreign firms. Logistically, that would be possible, according to Bob Watters, a vice president at SSA Marine of Seattle, the largest U.S.-owned terminal management company, which operates three terminals in the Port of Long Beach, two in Oakland and two in Seattle. Although contracts with the foreign shipping companies would have to be renegotiated, the longshoremen and supervisors working for the terminal firms could simply become employed by new U.S. owners.

But keeping the foreign-owned companies in the ports may be essential for another reason: the nation's need for financing to increase port capacity. Foreign shipping companies, eager to increase their business, will presumably be willing to provide the funding; it is unclear whether enough money can be obtained domestically.

"The numbers being kicked around are that trade will double by 2020, so we'll have to handle roughly twice the numbers of containers -- it's 9 million this year, and will be roughly 18 million by 2020," Flynn said. "So we are going to have to upgrade our facilities significantly. It's a combination of dredging, finding more real estate, buying more gantry cranes, building bridges, roadways, rail heads -- a big investment."

In Virginia, for example, the port authority has estimated that it will need about $10 billion to expand its ports over the next few years, Flynn said.

"If you do this as a state enterprise, you have to go to the good people of Virginia and say, 'We need $10 billion.' How is that going to work, with all the needs to deal with traffic jams and education?" he said. "Or you can turn to a U.S. company. Well, this is a very capital-intensive industry. . . . If we want to own all the infrastructure, I'm not sure where that capital comes from. Americans don't want to save. And they don't want to pay taxes."

That still leaves questions about how relaxed Washington should be about foreign control of certain operations. The Dubai Ports World controversy has caused much criticism of the Committee on Foreign Investment in the United States, the secretive interagency panel chaired by the Treasury Department that reviews foreign takeovers of U.S. firms with national security implications.

The purchase of Inchcape in January by Istithmar, a Dubai company, could stir further debate. In an e-mail, an Istithmar spokesman said, "CFIUS was contacted by Istithmar's U.S. counsel about this transaction and it was determined that approval was not required." But Tony Fratto, a Treasury Department spokesman, said late yesterday, "I cannot confirm that the CFIUS was contacted by parties to that transaction."

The takeover shouldn't arouse alarm, several security experts said. The ship agents employed by Inchcape around the world are almost invariably citizens of the countries where they work, because their jobs require them to handle a wide range of logistical tasks such as arranging for fuel, water, and medical care when ships dock.

Moreover, "they have to undergo, in most cases, background investigations, to permit them to enter the restricted areas of a port, the same as longshoremen and others," said Kim E. Petersen, president of SeaSecure LLC, a maritime security firm in Fort Lauderdale, Fla.

Flynn agreed. "It's hard for me to say this is a big worry," he said. "That's not to say we have no worries about ports. We have lots of worries. But as I try to prioritize what they are, foreign ownership is down on the list. It's just a fact of modern global transportation logistical life."