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- Feb. 24, 2006 -


Port “Ownership Controversy Mostly Has It Wrong, but May Be Good for Security in the End



The News: Controversy rages in U.S. over the purchase of port/terminal operator Peninsular and Oriental Steam Navigation Company by Dubai Ports World, which would give United Arab Emigrates-based company operating leases for terminals in six U.S. ports. In late breaking news, Ports World announced it would delay closing parts of the transaction.

The Impact: The story is often misreported, but may highlight issue with port security that have nothing to do with who manages the terminals, and the generally poor productivity of U.S. ports.

The Story: Talk shows hosts, cable news and politicians on both sides of the aisle are having a field day with the potential of Dubai-based Dubai Ports World managing all or part of six U.S ports, after the company won the bidding war for U.K. operator Peninsular and Oriental Steam Navigation Company (P&O) against a rival from Singapore.  The concern stems from some terrorist ties to the United Arab Emigrates (UAE), of which Dubai is a part. Two of the 9-11 hijackers were from UAE, and the elements inside the country have been linked to terrorist funding.  However, the U.S. government maintains the government of UAE itself is a key ally in the fight against terrorism.

In late breaking news, Dubai Ports World today has announced it will delay taking operating control of the U.S.-based terminals in response to the U.S. concern. Some politicians have immediately labeled the move a "smokescreen" that should be dismissed.

Finding real facts in the discussion isn’t easy, and its plain many commentators simply don’t understand how the ports work. Nonetheless, the raging controversy is causing substantial political activity.

Typical are comments this week from New York Rep. Peter King, who said, "I would urge the president to freeze the contract, hold this contract, until a full and thorough and complete investigation can be conducted."

Hard to find in the news is the fact that these ports and terminals in New York and New Jersey, Philadelphia, Baltimore, Miami, and New Orleans, were already being operated by a foreign-based company – P&O. Or that container/cargo screening is and will continue to be performed not by World Ports or any other port/terminal operator, but by the U.S. Customs and Border Protection Agency.

Agency spokesperson Leha Yoon told SCDigest that “100% of international inbound cargo inspections are performed by Customs and Border Protection,” and that the agency will continue to have responsibility for the inspections as the scope and nature of the inspections expand.

The head of the port of Philadelphia added, “The terminal operators do not run security. That is managed by a combination of the U.S. Coast Guard, Homeland Security, and Customer and Border Protection.”

Some commentators suggested that even if Ports World didn’t perform cargo security operations, it is possible the some unspecified terrorist types could learn U.S. security processes and later exploit them.

It’s hard to see where this will all wind up, but may in the end serve to useful purposes. The first will be to highlight the still unsecured nature of U.S. ports, a status which has nothing to do with who is operating the terminals. A still small percentage of inbound containers receive detailed inspection, and security has to start with inspection at the outbound port. As we reported in Supply Chain Digest, the U.S. for a long while showed tepid interest in the excellent outbound screening program the port of Hong Kong had piloted that if implemented worldwide would substantially improve security.

Second, the productivity of U.S. ports as well behind the best in the world – as much as six times less efficient than leading ports in Asia, by some estimates.  This productivity gap – causes by a variety of factors, including labor issues – in part explains why U.S. companies are not major port operators on the world stage.

Whether Ports World ultimately prevails in it fight or not, if the controversy spurs the U.S. to address these two issues, it will have done a lot of good.

What are your thoughts on Ports World assuming terminal operation in U.S ports? Do terminal operator really impact security? Might this spur the U.S to address port security and productivity issues in the end? Let us know your thoughts.

Related stories:

The Future of Cargo Security – Port of Hong Kong Implements New Screening Technology


Article key words: Global supply chain, transportation, ocean shipping, supply chain security

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