When Dubai Ports World, a port management company based in the United Arab Emirates, announced it had acquired operations at six U.S. ports that previously had been managed by Peninsular & Oriental Steam Navigation Co., it set off a furious Congressional debate over the propriety of allowing a foreign-owned company to manage such a vital part of America's infrastructure. Lost in that debate was the fact that P&O was itself a foreign company, albeit British, not Arab.
When Congress threatened to reject the deal, DP World promptly announced it would divest itself of those U.S. leases. Nevertheless, perhaps emboldened by polls that indicate a clear majority of Americans do not want foreign countries put in charge of security at U.S. ports (even though neither DP World nor any other foreign entity is allowed to manage security at any U.S. port), legislators are pushing ahead with their agendas. Some legislative proposals, for instance, would prohibit foreign ownership of terminal operating companies, while others call for stepped up security measures such as inspecting 100 percent of cargo.
"We're going to monitor this situation very carefully over the next several months," says Erik Autor, vice president and international trade counsel with another retailers' group, the National Retail Federation (NRF) trade association. "This is a case where what happens in Washington can have as much effect on cargo as what happens on the docks."
Paul Bingham, an economist with market analyst Global Insight, adds, "A massive invalidation of existing terminal leases and a fire sale of terminal operating contracts would have real potential for confusion at the top levels of terminal management. It is possible that such confusion could trickle down to affect operations on the docks, especially if inexperienced port managers or federal government employees are brought in to make decisions. The magnitude of the impacts and the risk of this occurring are unknown because disruption of this order is unprecedented anywhere."
Meanwhile, the Retail Industry Leaders Association (RILA) is urging Members of Congress to move cautiously and with careful deliberation before considering any new legislation related to the security of our nation's seaports or commercial cargo. In a letter sent to every member of the House and Senate, RILA called for lawmakers to carefully educate themselves on the strong security measures that are currently in place, before adopting any additional security measures.
"We are asking that lawmakers take a long, hard look at the measures we already have in place before considering new legislation," says Sandy Kennedy, president of RILA. "It has always been our position that port security policies must have the dual objectives of enhancing security and facilitating legitimate commerce. To ensure that this balance is maintained, Congress should be careful to avoid measures that would harm global supply chain efficiency or unnecessarily delay the movement of goods and cargo."
While a great deal has been done to strengthen supply chain security, there are additional actions that need to be taken, including:
Identify additional cargo data that can be used to help enhance targeting of high-risk cargo;
Testing new technology solutions and furthering the development of non-intrusive screening methods overseas; and
Developing a business continuity and restoration plan that will allow for the global supply chain to remain operational in the event of an incident of national significance.
These elements, working to improve supply chain security, must be developed in partnership with the U.S. trade community.
