[Senate Hearing 109-782]
[From the U.S. Government Publishing Office]
S. Hrg. 109-782
BRIEFING BY REPRESENTATIVES FROM THE DEPARTMENTS AND AGENCIES
REPRESENTED ON THE COMMITTEE ON FOREIGN INVESTMENT IN THE UNITED STATES
(CFIUS) TO DISCUSS THE NATIONAL SECURITY IMPLICATIONS OF THE
ACQUISITION OF PENINSULAR AND ORIENTAL STEAMSHIP NAVIGATION COMPANY BY
DUBAI PORTS WORLD, A GOVERNMENT-OWNED AND -CONTROLLED FIRM OF THE
UNITED ARAB EMIRATES (UAE)
=======================================================================
HEARING
before the
COMMITTEE ON ARMED SERVICES
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
FEBRUARY 23, 2006
__________
Printed for the use of the Committee on Armed Services
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COMMITTEE ON ARMED SERVICES
JOHN WARNER, Virginia, Chairman
JOHN McCAIN, Arizona CARL LEVIN, Michigan
JAMES M. INHOFE, Oklahoma EDWARD M. KENNEDY, Massachusetts
PAT ROBERTS, Kansas ROBERT C. BYRD, West Virginia
JEFF SESSIONS, Alabama JOSEPH I. LIEBERMAN, Connecticut
SUSAN M. COLLINS, Maine JACK REED, Rhode Island
JOHN ENSIGN, Nevada DANIEL K. AKAKA, Hawaii
JAMES M. TALENT, Missouri BILL NELSON, Florida
SAXBY CHAMBLISS, Georgia E. BENJAMIN NELSON, Nebraska
LINDSEY O. GRAHAM, South Carolina MARK DAYTON, Minnesota
ELIZABETH DOLE, North Carolina EVAN BAYH, Indiana
JOHN CORNYN, Texas HILLARY RODHAM CLINTON, New York
JOHN THUNE, South Dakota
Charles S. Abell, Staff Director
Richard D. DeBobes, Democratic Staff Director
(ii)
C O N T E N T S
__________
CHRONOLOGICAL LIST OF WITNESSES
Briefing by Representatives from the Departments and Agencies
Represented on the Committee on Foreign Investment in the United States
(CFIUS) to Discuss the National Security Implications of the
Acquisition of Peninsular and Oriental Steamship Navigation Company by
Dubai Ports World, a Government-Owned and -Controlled Firm of the
United Arab Emirates (UAE)
february 23, 2006
Page
England, Hon. Gordon, Deputy Secretary of Defense, U.S.
Department of Defense; Accompanied by Peter Flory, Assistant
Secretary of Defense for International Security Policy......... 8
Joseph, Hon. Robert, Under Secretary for Arms Control and
International Security, U.S. Department of State; Accompanied
by Anthony Wayne, Assistant Secretary, Bureau of Economic and
Business Affairs, Department of State.......................... 10
Kimmitt, Hon. Robert, Deputy Secretary of Treasury, U.S.
Department of the Treasury; Accompanied by Clay Lowery,
Assistant Secretary for International Affairs, Department of
the Treasury................................................... 10
Jackson, Hon. Michael, Deputy Secretary, U.S. Department of
Homeland Security; Accompanied by RADM Thomas Gilmour, USCG,
Assistant Commandant for Prevention, Department of Homeland
Security; Stewart Baker, Assistant Secretary for Policy,
Department of Homeland Security; and Jayson Ahern, Assistant
Commissioner, Office of Field Operations, U.S. Customs and
Border Protection, Department of Homeland Security............. 13
(iii)
BRIEFING BY REPRESENTATIVES FROM THE DEPARTMENTS AND AGENCIES
REPRESENTED ON THE COMMITTEE ON FOREIGN INVESTMENT IN THE UNITED STATES
(CFIUS) TO DISCUSS THE NATIONAL SECURITY IMPLICATIONS OF THE
ACQUISITION OF PENINSULAR AND ORIENTAL STEAMSHIP NAVIGATION COMPANY BY
DUBAI PORTS WORLD, A GOVERNMENT-OWNED AND -CONTROLLED FIRM OF THE
UNITED ARAB EMIRATES (UAE)
----------
THURSDAY, FEBRUARY 23, 2006
U.S. Senate,
Committee on Armed Services,
Washington, DC.
The committee met, pursuant to notice, at 11:01 a.m. in
room SD-106, Dirksen Senate Office Building, Senator John
Warner (chairman) presiding.
Committee members present: Senators Warner, Levin, Kennedy,
Byrd, and Clinton.
Committee staff members present: Charles S. Abell, staff
director; Leah C. Brewer, nominations and hearings clerk; and
John H. Quirk V, security clerk.
Majority staff members present: William C. Greenwalt,
professional staff member; Ambrose R. Hock, professional staff
member; Gregory T. Kiley, professional staff member; Sandra E.
Luff, professional staff member; Elaine A. McCusker,
professional staff member; Lucian L. Niemeyer, professional
staff member; Lynn F. Rusten, professional staff member; and
Sean G. Stackley, professional staff member.
Minority staff members present: Richard D. DeBobes,
Democratic staff director; Evelyn N. Farkas, professional staff
member; and Creighton Greene, professional staff member.
Staff assistant present: Benjamin L. Rubin.
Committee members' assistants present: Susan Magill and
Cord Sterling, assistants to Senator Warner; Jeremy Shull,
assistant to Senator Inhofe; Meredith Beck and Matthew R.
Rimkunas, assistants to Senator Graham; Russell J. Thomasson,
assistant to Senator Cornyn; and Stuart C. Mallory, assistant
to Senator Thune; Mieke Y. Eoyang, assistant to Senator
Kennedy; Erik Raven, assistant to Senator Byrd; Frederick M.
Downey, assistant to Senator Lieberman; Darcie Tokioka,
assistant to Senator Akaka; Eric Pierce, assistant to Senator
Ben Nelson; and Andrew Shapiro, assistant to Senator Clinton.
OPENING STATEMENT OF SENATOR JOHN WARNER, CHAIRMAN
Chairman Warner. The briefing will now commence.
Two days ago, I went over to the Department of Defense
(DOD) and visited with the Secretary and the Deputy Secretary,
who joins us here this morning, and the Chairman of the Joint
Chiefs of Staff, regarding this port matter. I was carefully
following, as all of us were, the intensity of public interest.
In the course of the briefing, we consulted with Secretary
Kimmitt, who has also joined us here this morning, on the
telephone in that meeting. At the conclusion, I said that my
best advice was that there's a need to get out, and get out
promptly, a full and complete factual picture of what took
place by way of the process of decision. Quite frankly, I
offered some observations what did not, in my judgment, take
place.
In the ensuing 48 hours, I made the decision to do this as
a briefing, for the reason that so many of our colleagues are,
understandably, on the recess period, back in their respective
States, or otherwise engaged, and that, in consultation with
Senator Levin, we would determine, next week, as to whether or
not this committee would once again come together for a formal
hearing.
I also made the decision that I would not have the
principal Cabinet officers themselves here this morning, out of
deference to the other committees of the Senate which have
expressed an interest in having their own hearings. I know the
Senate Banking Committee is contemplating one. The Homeland
Security Committee, which I sit on, together with Senator
Levin, likewise is having one. They all have indicated that the
Cabinet officers would be there. But I felt that this very
distinguished array of witnesses we have this morning would
give an adequate opportunity for all the facts to be heard.
I also made the unusual decision that we'd have this
configuration, such that, at the conclusion of the briefing and
the questions and answers from members to the witnesses, we
could then establish a routine by which press who desire to ask
questions could do so. Having now, for 28 years, been in this
room for hearings and tried to manage press availabilities in
the hallway, I said this subject is entirely too important than
to try and do those hallway press conferences. So, this is the
reason for this set-up. I take full responsibility.
With that, I welcome everybody here, and particularly my
colleagues who have joined, Senator Levin, Senator Kennedy, I
believe, is going to come, and Senator Clinton.
We meet today with regard to the pending acquisition of the
Peninsula and Oriental Steamship Navigation Company (P&O) by
Dubai Ports (DP) World, a government-owned and -controlled firm
of the United Arab Emirates (UAE). We'll discuss the specifics
of this case, and seek some clarity here in this open forum.
We'll try to ensure that the relevant facts be put forth on the
record. It's important that this record be compiled now for
Members of Congress who are actively engaged in their home
districts with the debate on this subject--to determine what
deliberations occurred pursuant to section 721 of Public Law
100-418, as well as what coordination took place to ensure for
the continuing safeguard and protection of the ports, their
cargo, and their surrounding communities.
In my press statements over the last few days, I have
stressed the need to get the facts out in the public domain.
This morning, the President, at a meeting of the Cabinet,
further stressed, wholeheartedly, the importance of getting
those facts out. This briefing today will help facilitate that.
Senator McCain, a valued colleague who is on this committee
made a similar observation here to those that I have made, and
I quote him, ``We all need to take a moment and not to rush to
judgment on this matter without knowing all the facts. The
President's leadership has earned our trust in the war on
terror, and surely his administration deserves the presumption
that they would not sell our security short. Dubai has
cooperated with us in the war on terror, and deserves to be
treated respectfully. In other words,' McCain concluded, `let's
make a judgment when we possess all the pertinent facts.'' I
certainly concur, and have concurred publicly, with similar
statements.
To accomplish our oversight, we must discuss a very
important interagency organization whose charter is to oversee
the foreign acquisitions of U.S. companies and determine
whether a particular acquisition has national security
implications. That organization is called the Committee on
Foreign Investment in the United States (CFIUS). Although CFIUS
was codified by Congress in 1988, the history of this type of
review by successive administrations goes back for over 50
years. It's interesting, since 1988 about 1,500 cases have been
handled. It seems that this structure has served our country
well.
Briefing us today are some of the leaders that represent
agencies that are members of the CFIUS. These public servants
bring a wealth of experience and knowledge to their positions.
I'd like to briefly introduce each member of our panel.
The Deputy Secretary of Treasury is Robert Kimmitt, former
Ambassador to Germany, General Counsel to the U.S. Treasury
Department, and a distinguished veteran of the Vietnam war.
The Deputy Secretary of Defense is Gordon England, whom I
have known for many years and worked very closely with, a
former Secretary of the Navy, and he served as the first Deputy
Secretary of the Department of Homeland Security prior to
returning to the DOD.
The Under Secretary for Arms Control and International
Security, Department of State, is Robert Joseph. Secretary
Joseph held a private meeting in S-407 the other day, and I
think I, and many others, were very impressed with the depth of
your knowledge on Iraq and Afghanistan and those trouble-spots
in the world.
Further, we have the Deputy Secretary of Homeland Security,
Michael P. Jackson, who also served as a former Deputy
Secretary of the Department of Transportation.
Before we begin, I think it's important to recognize that
every single one of us in this room, and all across the United
States--most importantly, our President--shares the same goal:
ensuring our national security. It's important to recognize
that, in my view, the United Arab Emirates (UAE) has played a
key role in working with the United States in the war on
terror. For example, the UAE provides the largest number of
port calls by our naval ships and our merchant ships. Their
airfields have been made available for our military aircraft in
missions in both Afghanistan and Iraq. So, while we must always
ensure that any proposed foreign acquisition does not threaten
our national security, we must also, as a Nation, ensure that
just, fair, equitable treatment be given our allies and
coalition partners in a wide range of transactions.
I'd like to end with a quote from our President, who said,
``If there was any chance that this transaction would
jeopardize the security of the United States, it would not go
forward.'' I share that sentiment. I'm very supportive of the
President's objectives.
Senator Levin.
STATEMENT OF SENATOR CARL LEVIN
Senator Levin. One of America's greatest vulnerabilities in
defending against terrorist attacks is our ports. With over 11
million containers coming into our ports every year--95 percent
of which are never opened or inspected--port security probably
leads the list of our Nation's Achilles' heels.
At the same time, it's been a constant struggle to devote
adequate funds to strengthen port security. According to the
Wall Street Journal, while $18 billion has been spent on
airport security since September 11, the amount spent on port
security has been only $630 million.
Now we discover through the media that the administration
has approved transfer of ownership of port facilities at six
major U.S. ports to a company owned by the Government of Dubai
in the United Arab Emirates. This decision was made without any
consultation with Congress.
The UAE has had an uneven history when it comes to the war
on terrorism. On the one hand, the UAE was apparently one of
only a handful of countries in the world to recognize the
Taliban regime in Afghanistan, whose support of Osama bin Laden
and al Qaeda led to the events of September 11. Millions of
dollars in al Qaeda funds went through UAE financial
institutions. The Pakistani nuclear scientist A.Q. Khan
reportedly used the UAE as a clandestine transhipment point for
nuclear-related materials to Libya and Iran.
On the other hand, as the chairman mentioned, the UAE has
provided the U.S. with access to its ports and territory,
overflight clearances, and logistical assistance for our
military forces in the region. UAE ports host more U.S. Navy
ships than any port in the world outside of the United States.
What is deeply troubling to me about this proposed sale is
the combination of one of America's greatest vulnerabilities to
terrorist attack--our ports--with what appears to me to be a
casual approach to reviewing the sale of U.S. port facilities
to a country with an uneven record of combating terrorism. This
approach has been so casual that the President, as well as the
Secretary of the Treasury, who chairs the Committee on Foreign
Investment in the United States and the Secretary of Defense,
who serves on the committee, learned of the U.S. Government's
approval of the sale the same way that Congress did--after the
fact, through media reports. America's port security is too
critical to be subjected to this kind of casual approach.
Managing U.S. port facilities enables a company's employees to
more easily obtain visas, driver's licenses, and bank accounts
that open a window of vulnerability that could be exploited.
The events of September 11 demonstrate that America is entitled
to total confidence that a country allowed to acquire assets
that are key to our security is as committed as we are to
combating terrorism.
With some decisions, we have to weigh risks. Port security
is one area where it is not in our national security interest
to accept any arrangement that might increase our already
substantial risks and vulnerabilities.
The administration assures us that the pros and cons of
this sale have been weighed and the sale should go forward. But
as I indicated, we now know that the most senior levels of the
administration learned of this decision in the last few days by
hearing about it in the media. As so often happens around here,
the administration now seeks to avoid the checks and balances
of congressional involvement. The White House Press Secretary
recently said that, ``On hindsight, perhaps Congress should
have been notified sooner.'' We weren't notified at all, unless
watching CNN and reading the morning paper constitute
notification. More to the point, Congress should have been
consulted, and not merely notified.
The President's threat to veto any legislation that even
delays this sale in order to give Congress more time to analyze
it shows how out of touch the administration is with the
public's and Congress's legitimate concerns about the
vulnerabilities of our ports. It also demonstrates presidential
disdain for outside views, in general, and congressional views,
in particular.
Thank you, Mr. Chairman.
Chairman Warner. Thank you, Senator Levin.
Senator Kennedy.
Senator Kennedy. Thank you very much, Mr. Chairman--and I
thank you, Senator Levin--for holding this briefing today. I
thank all of our witnesses for appearing before the committee.
The question that must be addressed is whether, and how,
national security was factored into this decision at every
stage. The American people need to have confidence that the
port deal won't undermine national security and that the
administration isn't outsourcing our national security.
The administration isn't known for its competence in
handling critical situations. The only surprise is that the
administration is surprised by the intense reaction of the
American people.
Nearly 4\1/2\ years after September 11, it's obvious that
our ports continue to be extremely vulnerable. The 9/11
Commission warned that terrorists would look for opportunities
like that to do harm as great or greater than September 11.
Last December, the 9/11 Commission issued its final report and
reviewed Federal efforts to implement its recommendations. The
findings were an alarming indictment of Federal failings. With
respect to the Nation's ports, it issues grades of D for
critical infrastructure assessments and cargo screening.
If terrorists were attempting to sneak a nuclear explosive
device into this country, they might include it in 1 of the 9
million containers arriving at our ports every year, 95 percent
of which go undetected.
Over the next 10 years, the Coast Guard believes we need at
least $5.4 billion to secure our ports. That's their estimate,
the Coast Guard's estimate. Yet the administration is only
seeking $46 million for port security in 2006, and its recent
request, for 2007, would actually have eliminated the only
grant program we have that is dedicated solely towards port
security.
If port security is not a top priority for our own
Government, how can we expect it to be a priority for a foreign
government? We cannot risk contracting out our national
security, and we cannot keep nickel-and-diming the Coast Guard
and port security. We need to finally get serious, and we need
to get this right.
Thank you.
Chairman Warner. Thank you, Senator.
Senator Clinton.
Senator Clinton. Thank you, Mr. Chairman.
Well, I join both Senators Levin and Senator Kennedy, and
I'm sure, to follow, Senator Byrd, in expressing our deep
concerns about this decision.
The CFIUS process has been subject to several critical
reports in the last several years; most recently, a Government
Accountability Office (GAO) report last fall which pointed out
that one of its failures was its inability to focus effectively
on national security issues as the statute establishing CFIUS
intended it to do.
This particular decision by CFIUS raises a number of red
flags. The reaction that has been forthcoming by people
throughout our country, I think, is understandable, for three
reasons.
First, we know, from the work of the 9/11 Commission and
other expert commissions, that port security is one of our weak
links. We have not funded it adequately. We have not taken it
seriously. That's a particular concern to me, as a Senator from
New York.
Second, we know, from the press reports--and I assume we'll
get additional information from this briefing--that the process
used to review this transaction appears to be cursory, at best.
A number of provisions were not required of the company, and it
appears, similarly, that the mandatory requirement for an
additional 45-day review, when the entity involved is
government-owned, was ignored.
Third, the track record of this administration on homeland
security, its inadequate funding, its bureaucratic dysfunction
at the Department of Homeland Security, as evidenced, most
tragically, with Hurricane Katrina, but in many other similar
instances over the last 4\1/2\ years, does not create an
atmosphere of confidence when looking at this particular
matter.
Moreover, according to the Associated Press, this
transaction was approved without many of the ordinary
conditions that are placed on such investments. The
administration did not require Dubai Ports to keep copies of
business records on U.S. soil, where they would be subject to
court orders. It did not require the company to designate an
American citizen to accommodate U.S. Government requests. If
September 11 was a failure of imagination, and Katrina was a
failure of initiative, this process is a failure of judgment.
In the post-September 11 world, port security is too
important an issue to be treated so cavalierly. Only 5 percent
of the cargo entering the United States is inspected. Every
expert whose reports I have read suggest we should be closer to
15 to 20 percent. We have not yet deployed the kind of
technology that everyone knows we need to. We do not yet have
the radiation detectors that everyone has called for. According
to the 9/11 Commission Report, ``While commercial aviation
remains a possible target, terrorists may turn their attention
to other modes. Opportunities to do harm are as great, or
greater, in maritime or surface transportation.''
Port security is national security, and national security
is port security. Instead, we have a decision making process
that did not alert the President, the Secretary of the
Treasury, the Secretary of Defense that several of our most
critical ports were about to be transferred to a foreign
government entity. We've heard, from numerous administration
spokespeople, that those of us who are raising concerns are
somehow out of place, because, after all, it was a British
company that was engaged in these activities selling to the
Dubai company. For many of us, there is a significant
difference between a private company and a foreign government
entity.
Under the Exon-Florio statute, which governs these foreign
investments and the process that you undertook, if we are at
all impacting national security, the full 45-day investigation
of an investment by a foreign government is mandatory if it,
``affects national security.'' Yet the CFIUS board voted
unanimously, according to our information, not to conduct an
investigation that, by my reading of the statute, is required.
Since DP World is controlled by a foreign government, under the
statute the transaction requires a 45-day investigation if it
affects national security.
Secretary Chertoff has claimed, ``We have a very
disciplined process--it's a classified process--for reviewing
any acquisition by a foreign company of assets that we consider
relevant to national security. That process worked here.''
Well, on the face of it, it did not work, because the mandatory
45-day investigation was not conducted.
So, Mr. Chairman, there are numerous problems with this
review process that I think we need answers to. But, in the
larger context of port security, particularly given the
problems we've been having with the Department of Homeland
Security--apparently, the White House is about to issue their
report about Hurricane Katrina, which, just based on the press
reports, has to make you cry, because--What is it saying? Guess
what? We need interoperable communications. Guess what? We need
command and control. Well, guess what? It's 4\1/2\ years after
September 11, and many of us have been saying all of that for
that long. So, it's very troubling that we find ourselves in
this position. I, for one, hope that there are answers, but, at
the very least, I hope the 45-day investigation is carried out,
as required under the statute.
Chairman Warner. Thank you, Senator Clinton.
Senator Byrd.
Senator Byrd. Thank you.
Mr. Chairman, I authored the 1992 amendment that requires
these sorts of transactions to be subject to a 45-day
investigation. This briefing should help to answer the
questions of why that investigation was not carried out and why
there was no consultation with Congress.
I thank you for conducting this hearing. I thank all other
the members, as well.
Chairman Warner. Thank you very much, Senator Byrd.
We'll proceed.
Secretary Kimmitt, my understanding is that we should start
with the Deputy Secretary of Defense.
Again, Secretary England, I thank you and the Secretary for
meeting with me 2 mornings ago and having an extensive briefing
on this subject. I think you, at that time, concurred, in my
observation, it was imperative to get a full set of facts
before the American public so they could, in an informed way,
reach their own individual opinions on this. We respect the
concerns of those that have been expressed so far, but I think
these facts will help allay some of those concerns.
Please proceed.
STATEMENT OF HON. GORDON ENGLAND, DEPUTY SECRETARY OF DEFENSE,
U.S. DEPARTMENT OF DEFENSE; ACCOMPANIED BY PETER FLORY,
ASSISTANT SECRETARY OF DEFENSE FOR INTERNATIONAL SECURITY
POLICY
Secretary England. Senator, I thank you for following up
after that meeting to provide this venue and opportunity to
bring more facts and more clarity to this issue.
First, I do want to provide a perspective from the DOD
point of view regarding our relationship with the United Arab
Emirates, because they are a friend and ally of the United
States, and they do stand side by side with us in this war on
terror. They provide the United States, and also our coalition
forces, unprecedented access. We have overflight clearances and
a lot of logistical support from United Arab Emirates.
Now, as the Senator commented, we have more of our Navy
ships in United Arab Emirates than any other port outside the
United States. Last year in the UAE we had 590 of our military
sealift command ships in the UAE. We had 56 of our warships in
their ports. Last year in the UAE we had 203 ships (naval
warships and Military Sealift command ships) make 502 visits to
UAE ports in fiscal year 2005. By the way, the port at Jebel
Ali is managed by Dubai Ports, so we rely on them, frankly, for
the security of our forces there. There were 75 coalition
partner ships there. Perhaps more importantly, the most
important commodity we have here in the United States, we had
77,000 of our military men and women on leave in the UAE in
fiscal year 2005. That's average at any given time. So, we rely
on them for our security in their country. I appreciate and
thank them for that.
This close military-to-military relationship includes, by
the way F-16s, our very latest version, which we share with
them. They have centers there that we use for training our
forces. We appreciate all their vital military help.
Now, Mr. Senator, specifically regarding this transaction,
first of all, I do want to say that, at the DOD, this review
definitely was not cursory, and it definitely was not casual.
Rather, it was in-depth and it was comprehensive. This was
staffed within the DOD to 17 of our agencies or major
organizations within the Department. During this review
process, there were no issues raised by any agency within DOD,
including our U.S. Transportation Command. That is significant,
because that was a special review measure we put in place to
ensure that any military transportation security issue would be
identified.
For example, as part of the review of these 17 agencies,
which include the Under Secretary of Defense for Intelligence,
our Defense Technology Security Administration, which
eventually approved this transaction. It was approved by the
United States Army. It was approved by the United States Navy.
It was approved by the United States Air Force, by the Defense
Security Service, by the Defense Intelligence Agency, by the
National Security Agency, by the Defense Information Systems
Agency, and, as I said, by the U.S. Transportation Command, and
many others. So, we had a very comprehensive and in-depth
review of this transaction, and no issues were raised by any of
those agencies or departments within DOD. My view is, this was
very clear, it was very comprehensive, it was very direct. We
are very comfortable with the decision that was made.
I also want to just comment that, Senator, you've invited
us to appear before this committee in about 2 weeks and discuss
our Quadrennial Defense Review, and I thank you for that
opportunity. In that review, we have pointed out that, in this
war, this very long war, it is very important that we
strengthen the bonds of friendship and security with our
friends and allies around the world, and especially with our
friends and allies in the Arab world. So, it is important that
we treat our friends and allies equally and fairly around the
world, and without discrimination. Otherwise, it will be
harmful in this war.
The terrorists want us, they want our Nation to become
distrustful, they want us to become paranoid and isolationist.
My view is, we cannot allow this to happen. It needs to be just
the opposite.
So, the DOD, again, Senator, did this in-depth and
comprehensive review. Of course, we were only one part of all
the agencies, but I believe we did this fully in compliance
with the law and our responsibilities.
I thank you for the opportunity for making those comments.
Chairman Warner. Thank you very much. Mr. Secretary, would
you introduce your colleague with you?
Secretary England. Yes. This is Secretary Peter Flory with
me, and the Defense Technology Security Administration reports
to Secretary Flory.
Chairman Warner. Thank you.
We'll now hear from the Department of State. Secretary
Joseph?
STATEMENT OF HON. ROBERT JOSEPH, UNDER SECRETARY FOR ARMS
CONTROL AND INTERNATIONAL SECURITY, U.S. DEPARTMENT OF STATE;
ACCOMPANIED BY ANTHONY WAYNE, ASSISTANT SECRETARY, BUREAU OF
ECONOMIC AND BUSINESS AFFAIRS, DEPARTMENT OF STATE
Secretary Joseph. Mr. Chairman, thank you very much for the
invitation to participate today.
By way of introduction, I would just emphasize that the UAE
is a longstanding friend of the United States. It has been
working with us for many years to create a more stable
political and security environment in the Middle East, a region
of vital importance to not only the United States, but the
broader international community.
As others have stated, the UAE is a key partner in the war
on terror. It does provide outstanding support to U.S. and
coalition ground, air, and naval forces in their operations
involving Iraq. It also provides vital military and political
support to our efforts in Afghanistan, as well as humanitarian
support in both Iraq and Afghanistan.
In addition, I would note that the UAE has worked very
closely with us to disrupt proliferation activities. For
example, the UAE was the first state in the Middle East to join
the Container Security Initiative, which is an effort to screen
containers destined for the United States. It was also the
first state in the Middle East to join Megaports, which seeks
to stop the illicit movement of nuclear and radiological
sources.
In terms of the process, I can assure you, as well, that
State has a very rigorous internal review process for CFIUS
transactions. All transactions are referred to experts in a
wide number of the bureaus, including the Bureau of
International Security and Nonproliferation, the Political
Military Bureau, the Intelligence and Research Bureau, as well
as all relevant regional bureaus that would be involved in any
particular transaction.
In addition, we would also, depending on the transaction,
bring in other experts. One example is that, on telecom
transactions and on the DP World case, our office that works
maritime security issues was fully involved.
Let me just conclude by noting that Secretary Rice is in
the UAE today. That is a reflection of our strong partnership,
our deep relationship. Secretary Rice has made very clear that
the UAE is a stalwart ally of ours and that this deal does
serve our national interests.
Thank you.
Chairman Warner. Thank you very much.
Secretary Kimmitt.
STATEMENT OF HON. ROBERT KIMMITT, DEPUTY SECRETARY OF TREASURY,
U.S. DEPARTMENT OF THE TREASURY; ACCOMPANIED BY CLAY LOWERY,
ASSISTANT SECRETARY FOR INTERNATIONAL AFFAIRS, DEPARTMENT OF
THE TREASURY
Secretary Kimmitt. Thank you, Mr. Chairman and members of
the committee, for this opportunity.
Building on the comments by Deputy Secretary England and
Under Secretary Joseph, I would like to discuss the Committee
on Foreign Investment in the United States, a not-so-secretive
organization now widely known as CFIUS. I'm joined by Assistant
Secretary of Treasury Clay Lowery, who chairs CFIUS at the
policy level, as I do at the deputy's level.
CFIUS is an interagency group comprised of the Departments
of the Treasury, State, Defense, Justice, Commerce, and
Homeland Security, and six White House offices, including the
National Security Council, National Economic Council, and U.S.
Trade Representative.
The committee was established by executive order in 1975 to
evaluate the impact of foreign investment in the United States.
In 1988, Congress passed the Exon-Florio amendment, which, as
Senator Byrd noted, was amended in 1992, empowering the
President to suspend or prohibit any foreign acquisition of
U.S. corporation if the acquisition is determined to threaten
U.S. national security.
CFIUS has evolved over time to keep pace with changes in
the concept of national security. For example, following
September 11, the newly created Department of Homeland Security
(DHS) was added to the committee, and DHS has played a primary
role in reviewing many transactions, including the case at
hand. Further, agencies that are not formal members of the
CFIUS are often called upon to lend their expertise.
CFIUS operates through a process in which Treasury, as
chair, receives notices of transactions and coordinates the
interagency process. Upon receipt of a filing, CFIUS staff
conduct a 30-day review, during which each CFIUS member
examines the national security implications of the transaction.
In addition, the Intelligence Community Acquisition Risk
Center, which is an office under the Director of National
Intelligence (DNI), provides an assessment of the foreign
acquiror.
All CFIUS decisions are made by consensus. Any agency that
identifies a potential threat to national security has an
obligation to raise those concerns within the review process.
If any member of CFIUS raises a national security concern, then
the case goes to an extended 45-day investigation period.
Let me turn now to the DP World review. In contract to some
accounts, the DP World transaction was not rushed through the
review process in early February. On October 17, 2005, lawyers
for DP World and P&O informally approached Treasury staff to
discuss the preliminary stages of the transaction. This type of
informal contact enables CFIUS staff to identify potential
issues before the review process formally begins. In this case,
Treasury staff identified port security as the primary issue,
and immediately directed the companies to DHS.
On November 2, Treasury staff requested an intelligence
assessment from the DNI. Treasury received this assessment on
December 5th and circulated it to the staff members of CFIUS.
On December 6, staff from all agencies on CFIUS met with
company officials to review the transaction and to request
additional information. Ten days later, on December 16, after
almost 2 months of informal interaction, the companies
officially filed their formal notice with Treasury, which
circulated the filing to all CFIUS departments and agencies and
also to the Departments of Energy and Transportation, because
of their statutory responsibilities and experience with DP
World. As Secretary England noted, each Department then
circulates the information throughout their own Departments.
During the 30-day review period, members of the CFIUS staff
were in contact with one another and the companies. As part of
this process, DHS negotiated an assurances letter that
addressed port security concerns. The letter was circulated to
the committee on January 6 for its review. CFIUS, on the basis
of information that they had received from the companies,
information that had been generated inside the Government,
information garnered from the public domain and on the basis of
the assurances letter, concluded its review on January 17. Far
from rushing the review, members of the CFIUS staff spent
nearly 90 days reviewing this transaction.
Another misperception is that this deal was conducted in
secret. Although the Exon-Florio statute requires us to
safeguard business-confidential information while the
transaction is pending, these transactions often become public
through actions taken by the companies. Here, as is often the
case, the companies issued a press release announcing the
transaction on November 29, 17 days before their formal filing.
In addition, beginning in late October, dozens of news articles
were published regarding this deal, well before CFIUS
officially concluded its review.
Mr. Chairman, we believe the CFIUS process worked, from a
substantive standpoint, and we are not aware of a single
national security concern raised recently that was not part of
the CFIUS staff review. However, we respect the oversight
responsibilities of Congress, and, therefore, think it is
important to improve the transparency of the CFIUS process to
Members of Congress.
After testimony before Chairman Shelby of the Senate
Banking Committee last October, we initiated more frequent
briefings on cases that had been cleared by CFIUS. Although
CFIUS operates under legal restrictions on public disclosures
regarding pending cases, we have tried to be responsive to
inquires from Congress. I am open to suggestions on how we can
foster closer communication on pending cases in the future.
In closing, Mr. Chairman, let me stress that all members of
CFIUS understand that their top priority is to protect U.S.
national security. As President Bush said this morning, ``This
deal would not be going forward if we were not certain that our
ports would be secure.''
Thank you, Mr. Chairman.
Chairman Warner. Thank you, Mr. Secretary. Would you
introduce your colleague that you've brought?
Secretary Kimmitt. Again, this is Assistant Secretary of
the Treasury for International Affairs, Clay Lowery, who chairs
the CFIUS Committee at the policy or assistant secretary level.
Chairman Warner. Secretary Joseph, would you identify your
colleague and his role?
Secretary Joseph. Thank you, Mr. Chairman. This is
Secretary Tony Wayne, who is the Assistant Secretary for the
Economic Bureau at the State Department. He plays a key role in
all of these issues.
Chairman Warner. Fine, thank you.
Now we'll hear from Secretary Jackson.
STATEMENT OF HON. MICHAEL JACKSON, DEPUTY SECRETARY, U.S.
DEPARTMENT OF HOMELAND SECURITY; ACCOMPANIED BY RADM THOMAS
GILMOUR, USCG, ASSISTANT COMMANDANT FOR PREVENTION, DEPARTMENT
OF HOMELAND SECURITY; STEWART BAKER, ASSISTANT SECRETARY FOR
POLICY, DEPARTMENT OF HOMELAND SECURITY; AND JAYSON AHERN,
ASSISTANT COMMISSIONER, OFFICE OF FIELD OPERATIONS, U.S.
CUSTOMS AND BORDER PROTECTION, DEPARTMENT OF HOMELAND SECURITY
Secretary Jackson. Thank you, Mr. Chairman and members.
Thank you for having us here today. I appreciate the
opportunity to elaborate upon this transaction and any
questions you may have.
As Deputy Secretary Kimmitt said, we, at DHS, are the
newest member of the CFIUS community inside the Federal
Government. We are taking a very aggressive role in that review
obligation that we have as participants in CFIUS.
I would echo what my colleagues have said. This transaction
received a very sustained, professional, and careful review
within the whole CFIUS group and, in particular, within DHS.
Our first look at this in a formal way came on October 31,
after we had been notified by the applicant that there might be
a transaction such as this. We met with the Justice Department
and several parts of the DHS to review the contours of this
deal, and began working on understanding better the issues
associated with this potential transaction. We met with CFIUS
in mid-November. As Bob Kimmitt has explained, the process
itself then took us through January.
During that time, at the DHS, we involved, in particular,
the Coast Guard and Customs and Border Protection (CBP). I'll
introduce three of my colleagues that I've brought with me
today, Mr. Chairman. Rear Admiral Thomas Gilmour is the
Assistant Commandant for Marine Safety and Security, and had
principal responsibilities for our review of this, as well as
the ongoing security role within Coast Guard. Next, I have
Assistant Secretary Stewart Baker, who heads our policy shop
and who has the primary responsibility at the policy level for
managing our CFIUS review process. Finally, I have Jay Ahern,
who is our Assistant Commissioner for Field Operations inside
of CBP. These organizations and others within the Department,
our legal office and appropriate other parts of the Department,
all engaged in this process.
The concerns that I assume that we'll have a chance to
explore further in response to your questions, sir, will focus,
in large part, I suspect, on port security and how adequate are
our protections in this particular transaction.
Chairman Warner. I would suggest you take the initiative
now to go into that detail.
Secretary Jackson. Okay, I'll be happy to launch into that
and then take any additional questions, sir.
Since September 11, the Federal Government has made
dramatic changes and improvements in port security. I'm going
to try to unpack the various parts of that responsibility, and
just begin, at the overview level, an understanding of some of
those material changes and material improvements that we have
made in port security.
First, I'll describe the role of the Coast Guard a little
bit, in that the Coast Guard has the primary responsibility for
port security. It owns the captain-of-the-port responsibility.
It owns the overall management of security within a port. Our
approach to security is a layered systems of systems. We do not
rely on any one tool, any one person, any one review, any one
single activity to strengthen our port security adequately. The
Coast Guard begins by pushing out our review prior to the
arrival of vessels. It has substantial insight into, and
assessment of, the arriving ships. That is managed through our
Intel Coordination Center in Suitland, Maryland. This is a
facility that involves close integration with the DOD and other
Intelligence Community assets, as necessary. The principal
focus is to look at vessels coming in, and the crews on those
vessels, to make sure that we have an adequate understanding of
any security risks and problems that may be associated with
those inbound vessels.
At the same time, while containers are beginning to be
loaded onto ships, we have, through a variety of programs, a
process to look at that freight. That's a responsibility that
principally resides at CBP. In that arena, we have, since
September 11, made very significant changes in how we manage
the screening of inbound cargo. I'll just mention a few parts
of that.
First, in our Customs Trade Partnership Against Terrorism
(CTPAT) participants who are voluntary, over 8,000 companies,
participate in this. These include shippers, Customs brokers,
and, in the United States, importantly, terminal operators,
including P&O facilities. This is a program that is designed to
bring a security set of measures, everything from physical
security, background reviews of employees, maintenance of
records, special training for security officers, notifications
to the U.S. Government, and ongoing work with the U.S.
Government to secure the supply chain in a multiplicity of
ways.
We also have launched the Container Security Initiative
(CSI) and have a related Megaports program with the Department
of Energy that focuses, as has already been mentioned, on
making sure that we protect against radiological materials
being moved illicitly through the global supply chain.
So, we have, through the Container Security Initiative,
pushed out our review of containers inbound. At the present, we
have 42 locations where Container Security Initiative ports on
foreign soil have signed up, participated, and agreed to work
with us in this process. At present, that 42 locations accounts
for 80 percent of the inbound container traffic. By the end of
the year, we expect that, with other additions to the CSI
program, we will have 50 locations, with up to 90 percent of
the inbound cargo participating.
Why is this important? It begins with the cargo container
headed our way, and we have to have notice 24 hours prior to
the lading. That means that before that container is put up on
a ship, we have, in these CSI ports, a notification. This goes
to our National Targeting Center here in Washington, DC, which
is a hub for analysis based upon past movements and practice,
intelligence analysis, the history of the container that's
being moved by the shippers, by the ocean carriers. We do a
risk analysis. In that analysis, we are screening 100 percent
of all inbound containers. If we find an anomaly that concerns
us, prior to departure, prior to loading in the CSI ports, we
are able to take that container, to run it through various
evaluation tools and decide whether or not we need to do a
physical inspection. If we do need to do a physical inspection,
we do it.
So, we have, on the inbound, a very considerable new regime
of container security that's at work. One of the partners in
this is the DP World in their location in the UAE. They are the
first of the Mid-East nations to join the Container Security
Initiative. They are a valued partner. We have had experience
with them. They are very aggressive in working to cooperate and
to comply with the rules and the guidance that we have through
the various measures we've put in place with CSI.
So, we have had experience in adding to the layers of
security for ports. When we get a container in the United
States, if we have not had a chance to inspect it overseas, if
it is a concern, we immediately take that into account and do
an inspection with our inspection forces here in the United
States.
So, if I can summarize just this portion, what we have is a
supply chain that is global in nature, which is owned, in very
large measure, by global corporations operating ships and
moving freight through a global supply chain. We have, in this
country, in ports, many foreign-owned corporations operating in
ports. Our ports are owned by public authorities in the United
States. Terminals are owned, or leased, typically. There is a
considerable amount of management from ports that is in foreign
hands today, as is P&O. So, the terminal operators manage the
arrival and the inspection and the movement of cargo in and out
of the port.
Just to give you a general snapshot, in the 7 ports where
P&O has their principal operations in the country today, there
are some 829 different terminals, terminal facilities that move
freight--offload freight, store freight, move freight. Of
these, P&O has about 24 terminals in those 7 ports. So, they
are an important player, but they are certainly not the only
player in this process.
When we looked through this transaction, we, therefore, had
a new set of tools, a growing set of tools, an experience with
this particular operator, and a confidence that we could work
with them.
That being said, we took some additional precautionary
measures and sought assurances from DP World that they would
allow us to impose a greater degree of scrutiny than we have
done on ports and port terminal operators already in existence.
First, they had to comply with all the security rules that
the Coast Guard, the captain of the port, and the CBP put in
place at a port. Then we asked for a variety of considerations,
which the organization has agreed to, that we would insist, and
they have agreed, that they continue to participate in the
Customs Trade Partnership Against Terrorism, they would
continue to participate in the Container Security Initiative,
they would assist U.S. law enforcement officials, on demand,
without a formal subpoena, without a lot of process, in giving
us information about their terminal operations, their
employees, their security programs, and any changes in the
employee base that we sought to look at, on a voluntary basis
with immediate and swift cooperation with us. They agreed,
further, that they would maintain P&O's existing security
policies and procedures at the U.S. facilities. There is, by
law, a requirement that any significant change in those
security procedures must be reviewed and approved by the Coast
Guard. The Coast Guard has the authority to come in and to
insist upon any additional measures that it thinks must be
taken.
So, the firm, in addition, agreed, as part of their
assurances, to operate any facilities that they own or control
in the U.S. with current U.S. management structure, to the
extent possible.
So, we expect a great deal of continuity, and we have the
capability of having a good deal of visibility into any changes
in that management, into any changes in that operating process,
any changes in that structure. We can get those in a timely
fashion, and we can make any review that's necessary take place
quickly through the existing rules and authorities that we have
in the Department.
So, in sum, I would just say that we have conducted a
professional, deliberate, and systematic review, that we found
no objection to this transaction, that we went even further and
asked that these assurances be provided to us, and the company
complied with that request.
We are not bashful at DHS about pushing on CFIUS matters.
Some of my colleagues who sit around here have firsthand
experience of DHS pushing in areas where we thought we needed
to push farther. The structure of this deal led us to believe
that we have no national-security-interest concerns to its
going forward.
Chairman Warner. Mr. Secretary, given that your colleagues
have specific responsibilities, and it's your representation
there would be absolute continuity of what's been done in the
past, in the future, I think it would be well to have on the
record some opening comments by both the Coast Guard and the
Customs and Border Security.
Secretary Jackson. Admiral?
Admiral Gilmour. Thank you, Senator.
Chairman Warner. Also, you make reference to the
``assurances.'' Now, is that a document that will be made
available to Congress in open, or is there certain classified
material--I ask both Secretary Kimmitt and Secretary Jackson--
that would be in a classified state?
Secretary Jackson. It is our intention, actually, to make
this open. We have some legal work to finish off to make that
available, but we want to be able to provide that to this
committee and to have you review it and ask questions about it.
[The information referred to follows:]
Exon-Florio prohibits public disclosure of documents and other
information filed with CFIUS and such information remains subject to
this statutory prohibition on public disclosure even after the CFIUS
process is concluded in a particular matter. There is a classified
portion of the record.
Chairman Warner. Secretary Kimmitt--and, therefore, all
information relevant to this transaction will be given to the
public through the committee or other means.
Secretary Kimmitt. We will make available as much as we are
allowed to make public under the law. We can give you more
under the law than we can make public directly.
Chairman Warner. So, there'll be a classified segment to
this record. Is that correct?
Secretary Kimmitt. There is, as I mentioned, Mr. Chairman,
always an intelligence assessment that comes from the
Intelligence Community. That is a classified document. That is
being briefed today, and has been briefed, to members of the
Intelligence Committee. I see no reason why it couldn't be made
available to members of this committee, also.
Chairman Warner. We'll, accordingly, attach the
classification to it.
The assurance agreement, when is the date/time that that's
likely to be made, to the extent possible?
Secretary Jackson. I think, today.
Chairman Warner. Thank you.
Admiral Gilmour.
Admiral Gilmour. Thank you, Mr. Chairman. I'll make a very
brief statement.
The Coast Guard, as Secretary Jackson said, is the Federal
agency in charge of the physical security of our ports. We
follow safety and security of vessels as they arrive, transit
through the port, and as they moor at the facilities where they
are destined.
New authorities given to us since September 11 are the
Marine Transportation Security Act (MTSA) of 2002, which gives
us the authority, and we've developed regulations to regulate
both foreign vessels that come into our ports and domestic
facilities. Also, the International Ship and Port Facility Code
was negotiated concurrently with MTSA at the International
Maritime Organization, and it provides worldwide security of
vessels and facilities.
Also, through our MTSA authorities, we were given the
authority to visit international ports throughout the world to
ensure that their ports met the international requirements. As
we have done this around the world, we have visited a number of
ports in which DP World has facilities, and, indeed, have
verified that those facilities in the countries we've visited
do meet the international requirements.
Thank you.
Chairman Warner. Please proceed.
Mr. Ahern. Thank you very much.
Chairman Warner. Please restate your portfolio of
responsibility once again.
Mr. Ahern. Yes, I will. My name is Jay Ahern, and I'm the
Assistant Commissioner for Field Operations within United
States Customs and Border Protection. I oversee our 322 ports
throughout the United States.
As part of Customs and Border Protection's layered
strategy, as the Secretary alluded to, I think it's important
just to elaborate a bit further on that.
I think it's very important for everyone to realize that
the ports here in the United States are not the first time the
United States Government intervenes or interacts with a
container or a transaction destined for the United States.
That's particularly so in the maritime model. I think that's an
example where we have some great programs in place, and we do
have a very detailed, layered defense that I would like to go
through some detail.
It does begin on foreign soil. As was discussed, we do have
a rule and a requirement that became enacted a couple of years
ago, the 24-hour rule, where we get detailed manifest
information that we can then take 24 hours prior to lading a
vessel in a foreign port to be run through a centralized
national targeting database here in the United States. We can
take current intelligence information and expert rule-based
systems to go ahead and score that particular container for
risk. Based on those containers, 100 percent of all containers
destined for the United States are scored and assessed for risk
before they're placed on a vessel overseas.
Those containers that pose a risk--in the 42 ports where we
currently have United States Customs and Border Protection
officers today, 80 percent of the containers come through those
ports, as Secretary Jackson alluded to, and any of those
containers that pose a risk are then worked, with our targeters
and our officers that are overseas, collaboratively with the
host country counterpart, who have actually entered into a
Declaration of Principles with us to do that. If the risk is
not able to be mitigated or resolved, then we have a process
where we will work with them to go ahead and do elaborate
screening, using high-imaging technology to basically X-ray the
container, and also use radiation detection capabilities to go
ahead and make sure there's no national security concerns with
that container before it gets put on a vessel for the United
States.
Also, I think it's important to talk about the overseas
application of the Customs Trade Partnership Against Terrorism.
As the Deputy Secretary also alluded to, with the number of
people we have in our CTPAT program, we also go foreign to the
point of staffing, which is the suppliers, vendors,
manufacturers premises overseas, where the greatest
vulnerability exists, in my opinion, where we need to take a
look at the security practices, the hiring practices to make
sure that they're compliant with the agreement they've entered
into under the Customs Trade Partnership Against Terrorism.
We've actually concluded 1,536 of those, and we have another
total of 3,389 underway at this point in time to make sure that
we, again, at the point of greatest vulnerability, at the point
of staffing, outside the ports in the foreign location, that
our officers go and assess the risk and take a look at what is
there for physical requirements of the security of the
premises, employee background investigation compliance, things
of that nature, and that's critical for us.
We also, upon arrival here in the United States, we
continue to assess the risk of the vessel before it even comes
into the ports, collaboratively with the Coast Guard. Ninety-
six hours, we go ahead and assess the risk again through an
electronic notice of arrival. We also continue to get entry
information on that particular transaction by the commercial
brokers, who represent the importers, where we then, again,
assess the risk, as we have the ability then to cross-reference
entry information and invoice information against the manifest
information we initially scored.
So, at this point, we've had at least two or three shots to
go ahead and assess risk and intervene if there's a critical
national security risk demonstrated.
Then, upon arrival here in the United States, Customs and
Border Protection officers will go out with the Coast Guard if
there's a risk of vessel, or wait for the containers to be
offloaded. Those at risk, we take our high-imaging technology
again, and our radiation detection capabilities again, dockside
as it's being offloaded, to assess and then to screen that
container right there.
An additional layer--and, Senator Clinton, you alluded to
the radiation portal monitors, and we need to move quicker with
the deployment of that in our seaports. Certainly, you'll get
no disagreement from us. We want to move with all deliberate
speed to get it done. At this point, we have 181 radiation
portal monitors deployed in our seaports, and that accounts for
37 percent of the containers that, after we've done all those
layers that I've spoken to at this point, still receive
irradiation screening as they're departing the port to enter
into the commerce of the United States. As we continue to move
forward through the rest of this year, we'll get up to 294
radiation portal monitors, which would get 65 percent of the
containers. Then, as we move forward with the funding we have
for calendar year 2007, we will get to 80 percent of the
containers entering the United States through the radiation
portal monitors.
So, those are some of the additional layers that we believe
are important to lay out, because I think it's important to
circle back to the 5 percent reference that continually gets
made. Two or 3 years ago, it was 2 percent. I am often asked,
what is the best percent to look at? It's the right percent. We
look at 100 percent of every container, the information coming
into this country, assess that for risk, making sure we focus
our technology and our resources through a layered approach to
focus on those containers that pose a significant risk, and not
to stifle the global trade of this country as we continue to
facilitate legitimate trade through our ports of entry, but to
focus on those that pose a risk. We need to continue to hone
our expert targeting systems and our use of technology and use
of information to focus our resource and technology on the
right percentage of containers.
Chairman Warner. Thank you very much. I thank all of our
witnesses.
We'll now proceed to rounds of questions by the members
present. We will hope to have two rounds. But I'd like to also
say that the chairman has tried to keep all members of this
committee informed in the last 48 hours about the open session
that was taking place, and that if a member was not able to
attend, they could forward to the committee their questions,
and they will be put into the record and responded to by the
appropriate witnesses so that our record is complete.
Following the two rounds of questions, we will have a press
availability. Again, I selected this format so that we could do
it in an orderly and a careful manner, given, I think, the
sensitivity and the importance of this information. There's a
microphone on either side here, and, at your own initiatives,
if you wish to ask a question, members of the press come up,
identify themselves, and propound the question either to myself
or any other members who might remain, or, of course, our
witnesses.
Now, I'd like to lead off with this point. There was a
reference made to this investigation of 45 days. That was an
important point. The word ``mandatory'' was used. As I read the
statute, it's more or less discretionary. But that discretion
is exercised, Secretary Kimmitt, if any of the CFIUS members
decide that it should be done. Perhaps you should clarify that
procedure and the reason it was not done in this case, your
judgment.
Secretary Kimmitt. Mr. Chairman, your description was an
accurate description of how we interpret the Byrd amendment.
First, let me say I have enormous respect for Senator Byrd, not
least because of the great courtesy he showed after the death
of my father, who served under then-Majority Leader Byrd as
Secretary of the Senate.
Senator, we have a difference of opinion on the
interpretation of your amendment. It is now a 14-year
difference of opinion, because this amendment has been
interpreted by successive administrations since 1992 as being
discretionary, as the Chairman described, and that is it would
require a member of CFIUS raising a potential concern for the
process to move into the 45-day investigative period.
I would note, again, going to that point of consistency, in
1997 there was a Singapore Government company called NOL that
bought an American port operating company called APL. That
Singapore Government-owned company today operates ports in Los
Angeles, Oakland, and Seattle. That did not go into the 45-day
period either.
What I will say, though, is that we don't suggest at all
that the amendment is without effect. Quite to the contrary, I
think our most intensive review, this being one of them, is
precisely the case when a foreign government-owned or -
controlled company comes before us. I think you'll find there
is particular scrutiny by the Intelligence Community. I think
particular scrutiny by the security agencies on the CFIUS
panel, most especially State, Defense, Justice, and DHS. But we
do view the amendment as a quite-important one that creates an
important standard that we have to follow, but we do, as the
chairman suggests, see it as discretionary.
Chairman Warner. Fine. Can you state for the record that
the troubling facts to many citizens in this country--indeed,
myself--of the UAE's involvement, to the extent with transfer
of funds at the time of September 11, when, in the
international banking system, the allegations that they
facilitated transit of certain nuclear components, and, indeed,
two individuals, of course, participating in 9/11 had
citizenship there. Were those facts weighed it the context of
deciding to have the 45-day, or not to have it?
Secretary Kimmitt. They were certainly factors that were
taken into account during the course of the review, Mr.
Chairman, and particularly taken into account on the assessment
done by the Intelligence Community.
Chairman Warner. Secretary Joseph and your colleague, do
you have anything to add to this?
Secretary Joseph. No, sir, nothing to add on that point.
Chairman Warner. All right. Fine, thank you.
Now, what is the normal procedure of CFIUS with regard to
advising Congress? I think it's now been pointed out very
clearly that facts relating to this transaction have been in
the public domain as early as November. Is that correct?
Secretary Kimmitt. The first that we can find, Mr.
Chairman, is in October.
Chairman Warner. But it's in the public domain. Now, to
what extent do you, in your normal types of cases, involve
Congress? Do you talk to the committee staffs, or is there some
memorandum that's sent up? Was that procedure followed in this
case? Did not someone intuitively--even though you're not
elected public officials, you certainly have a feeling for the
political system, the strong two-party system we have in this
country--couldn't someone sort of say, ``You know, this looks
like something we ought to talk to some of the committee
chairmen about''?
Secretary Kimmitt. Mr. Chairman, the procedure is that we
brief Congress regularly on cases that have been cleared by
CFIUS. By the Exon-Florio statute, there are very strict
limitations on what we can discuss with regard to pending
cases. We have taken the position that we can respond to
requests from Congress for information, but we cannot initiate
briefings during the pendency of the review, based on the
statute, as it now reads.
Chairman Warner. All right.
Now, my next question, to Secretary England and Secretary
Joseph. We've clearly established that the UAE is pivotal--I
think that's the word that perhaps our President may have
used--but certainly vital in the war on terror, as a partner.
Now, putting yourself in the position of that nation, proud
nation that it is, and proud of its participation by way of
support to the coalition of forces, if this current question
before both the executive branch and Congress is a full
partner, so to speak, in this--at this point in time--is
perceived by them as not fair, not objective, and they decide
to pull back some of that support, what are the consequences to
our forces fighting in Afghanistan and Iraq? What is the
likelihood that other nations giving similar support--Qatar,
UAE, Kuwait, others--might take notice of this and perhaps
their support could be somewhat diminished? I'd like to ask
about those risks and the consequences.
Secretary England. Senator, I don't believe we've looked at
that specifically, because, frankly, hopefully that's not going
to happen. I'm not going to speculate on that. But, as I
commented, we have, of course, a lot of our ships, people, and
bases use their ports. So, obviously, it would have some effect
on us. I care not to quantify that, because I don't have the
facts to quantify. It would certainly have an effect on us.
I actually believe the issue, though, is a little larger
and perhaps more profound than just the military effect. This
is a very long war, and this is a war not just of military. I
mean, this is a war of relationships, ideas, and values. In my
judgment, it is very important that we maintain the friendship
and the relationships with our friends and allies, and expand
those--and, as I said before, especially in the Middle East and
around the world. I believe there is an American sense of value
here, of fairness, equity, and treating everyone the same, and
not just putting populations or countries in certain
classifications. So, I believe this is a question of equality
and fairness. It is a fundamental value of America. So, my view
is, this is important, in terms of long-term relationships of
the United States and how we treat other countries around the
world. So, I do believe this is a question of equity and
fairness; and, therefore, it's very important that we respond
appropriately.
Chairman Warner. Secretary Joseph, your views? Particularly
at this very hour, when, in Iraq, we see signs that some are
interpreting as the brink of civil war, and we superimpose this
situation on top. I'd like to have your views.
Secretary Joseph. Mr. Chairman, I do think it's a very
important question. It's one that's very difficult to answer.
I can tell you that this issue is now in the Arab media,
it's in the Arab press. It is being portrayed in the context of
the cooperation that the UAE has been providing on the war on
terrorism, as well as in terms of its long-term relationship
with the United States.
As Secretary England has said, the war on terror is a long-
term proposition. It is a war that will go on for years, just
as the war on combating weapons of mass destruction (WMD). In
that context, I would say that the UAE plays a vital role. It
has been a major supporter of our efforts to interdict the
trafficking in weapons of mass destruction and missile-related
materials. It has played an important role in unraveling the
activities of the A.Q. Khan network, which was mentioned
before, and in following up to ensure that all of those who
were involved in that network are appropriately punished, both
because of the actions that they took and also because of the
need to deter others from getting into this business.
Chairman Warner. Fine.
My last question, to the Treasury representatives. Given
that committees of Congress, certainly the Senate--I know of
two who are going to have hearings; possibly the other body as
well--what impact will the time that is required to hold these
hearings have, if any, on the contractual relations with this
situation? Is there allowance and flexibility to allow these
hearings to go forward without any impairment in the
contractual relations?
Secretary Kimmitt. Mr. Chairman, I don't have an answer to
that question. I'd have to have our staff contact the companies
on that point.
[The information referred to follows:]
As an official of P&O Ports North America expressed to Congress in
a letter on June 9, 2006, DP World is taking a range of steps to
proceed with the planned sale of P&O to a U.S. buyer. The company
recently provided potential buyers with financial information related
to the properties. DP World intends to receive ``first round'' bids by
the end of August. Based on the information that DP World has made
available to Congress and to the public, and our own ongoing
discussions with DP World, we believe it remains committed to selling
its assets as promised.
Chairman Warner. Well, I think it should be addressed,
because, speaking for myself, I think it's important that these
committee hearings go forward, that there be some
deliberations; otherwise, obviously, some Senators have in mind
legislation. That would be a time period. I would hope that
things can remain in place until those steps are taken. As a
consequence of those steps, I'm hopeful that this thing can be
resolved.
I thank you.
Senator Levin.
Senator Levin. Mr. Chairman, first I'd like to offer, for
the record, a statement of Senator Bill Nelson and ask that
that be included in the record.
Chairman Warner. Without objection.
[The prepared statement of Senator Bill Nelson follows:]
Prepared Statement by Senator Bill Nelson
Over the last few days as details emerged about the Dubai company
taking over operations at several American ports, a number of concerns
have come to light with the administration's procedures for verifying
the safety and reliability of these sorts of deals. One of the ports
that Dubai Ports World would take over in this deal is the Port of
Miami, so I am obviously very concerned that all precautions are taken
to ensure that we are not letting our guard down and increasing our
risk of being hit by terrorists.
My concern is to ensure that the Port of Miami and all the other
important American ports are safe and unencumbered. Simply put, do we
want the ports that supply us with everything from cars to food, to be
controlled and run as a part of a foreign government, and particularly
one of only three in the world whose foreign policy was to recognize
the Taliban?
Dubai Ports World is wholly owned and controlled by the UAE
government, so I look at this deal in the context of the United Arab
Emirates' performance with regards to stopping international terrorism.
What I have trouble with is a process that raises no flags for a
country whose legal and financial systems were exploited by A.Q. Khan,
the Pakistani scientist who supplied nuclear technology to Iran, Libya,
and North Korea; a country that Mohammed El-Baradei said has a role in
the nuclear black market; and a country whose banking system was used
by Osama bin Laden and al Qaeda to finance September 11.
I am concerned that the system we have for analyzing these deals
may be too permissive. This deal, in the opinion of the panel, raises
no difficult questions regarding security, despite the general
acknowledgment that our port infrastructure is one of the most serious
weaknesses in our homeland defense. As I understand the approval
process, a range of defense, intelligence and homeland security
agencies reviews proposed transactions such as this, and if any of them
raise concerns the deal goes to an additional 45-day period for
intensive review. It has been reported that none of the agencies raised
anything in this case, and so the review period was skipped.
This whole situation raises serious questions about the vetting of
international investment transactions, particularly in the case of
critical national security assets such as ports. Given what we know of
the deal and the approval process, I oppose allowing it to go through.
I for one will require a much higher standard of proof before I am
comfortable with this transaction, and the process that approved it.
Senator Levin. The 9/11 Commission report had a number of
critical statements relative to the UAE involving connections
or links between UAE and terrorists, financing, and a number of
other critical references that I'd like to ask you about.
First, this quote from the 9/11 Commission, ``On March 7,
1999, Richard Clarke, who was the National Counterterrorism
Coordinator, called a UAE official to express his concerns
about possible associations between Emirate officials and Osama
bin Laden.''
Secretary Joseph, what did Mr. Clarke say about that
conversation, the response of the UAE when you talked to him
about this?
Secretary Joseph. Senator, I don't believe I've ever had a
conversation with Mr. Clarke about this.
Senator Levin. Well, then I'm not sure who to ask on this
panel here.
Secretary Kimmitt, maybe you know.
Secretary Kimmitt. Well, Senator, I didn't have a direct
conversation with Dick Clarke on that subject either. What I
would say, however, is that the facts that you just referred
to, plus the facts that have developed since September 11 in
the relationship with the UAE, as well as the facts associated
with the company, the acquiror, were looked at very carefully
by the Intelligence Community.
Again, going back, if I could, to what Senator Byrd said,
remember, Senator, anytime a foreign government-owned or -
controlled company comes in, the intelligence assessment is
both of the country and the company when we take a look at
that. So, we take a look at the facts, certainly, Senator
Levin, the historical facts, but also the facts that have
evolved since then, How has the country responded to those
instances that you've mentioned?
Senator Levin. I understand you've looked at the post-
September 11 facts. You've given us your testimony on that. But
I'm also now asking about the pre-September 11 facts, as to any
links or relationships between UAE and bin Laden. I'm not
suggesting they existed. I'm simply saying that, according to
the 9/11 Commission, the national counterterrorism coordinator
called a UAE official to express concerns about possible
associations. I just need to know from some of you what Mr.
Clarke said. You say, well, you're sure the Intelligence
Community talked to him. Did you read the intelligence reports?
Secretary Kimmitt. I read the intelligence reports that
were prepared on this case.
Senator Levin. Did they say that they had discussed this
matter with Mr. Clarke?
Secretary Kimmitt. I did not see that in the reports.
Senator Levin. All right. Let me keep going here. It seems
to me that since the 9/11 Commission made a representation
about that, that somebody among this group here would have
talked to Mr. Clarke or be certain that Mr. Clarke was talked
to about that conversation that the 9/11 Commission found to
have existed.
Here's what else the 9/11 Commission said, that the
``United Arab Emirates was becoming both a''--``both,'' that's
the key word, ``both''--``a valued counterterrorism ally of the
United States and a persistent counterterrorism problem.'' It's
a mixed bag, according to the 9/11 Commission.
You have given us the one side, where there's a lot of
evidence that there is an ally here which does some valuable
things for us, but according to the 9/11 Commission--and we
haven't had an opportunity to have our staff review the
underlying facts, because this was called so hastily--but
according to the 9/11 Commission, there's a ``persistent
counterterrorism problem'' represented by the United Arab
Emirates.
So, did any of you talk to the 9/11 commissioners about
that representation or finding of theirs? Just raise your hand
if anybody talked to the 9/11 commissioners. Did anybody talk
to them? [No response.]
No, okay.
Next, the 9/11 Commission said that, ``From 1999 through
early 2001, the United States and President Clinton personally
pressed the UAE, one of the Taliban's only travel and financial
outlets to the outside world, to break off its ties and enforce
sanctions, especially those relating to flights to and from
Afghanistan. These efforts achieved little before September
11.''
Now, did any of you talk to the people who pressed the UAE
in the Clinton administration to break off its ties with the
Taliban? Did any of you? If so, give me help here, give me a
hand. [No response.]
Okay. So, none of you talked to the Clinton folks, who,
according to the 9/11 Commission, actually pressed the UAE
before September 11. Those are critical times, before September
11. I'm glad that the UAE has taken some steps, apparently
afterwards, to address some of the antiterrorism needs that the
world has, but there is some evidence in the 9/11 Commission
Report that that was not true just not too many years ago.
Now, I want to read to you a reference one of you made to
A.Q. Khan, and I want to read to you from a New York Times
article, which I think summarizes a point on this question,
that ``the Emirates was also the main transhipment point for
A.Q. Kahn, the Pakistani nuclear engineer who ran the world's
largest nuclear proliferation ring from warehouses near the
port, met Iranian officials there, and shipped centrifuge
equipment, which can be used to enrich uranium, from there to
Libya,'' referring here to the port in Dubai.
Can you expand a little more as to the accuracy of that
statement in the New York Times of February 22, Secretary
Joseph?
Secretary Joseph. Senator, I can tell you that the A.Q.
Khan network stretched over three continents. It had activities
in a significant number of countries. Those countries
included--and this has all been made part of the public
record--Malaysia, South Africa, Turkey, a number of European
countries, including the Netherlands, Germany, and Switzerland.
Yes, the UAE was an important site for A.Q. Khan activities.
I can also assure you that the UAE authorities have been
very helpful in unraveling the network and, as I said, in
pursing those individuals who were taking actions to facilitate
the work of this network on their territory. They have been a
very good ally in the effort to combat WMD proliferation.
Senator Levin. So, you can't comment then on this
particular statement in the New York Times.
Secretary Joseph. Senator, I think I just did.
Senator Levin. No, you said that there were contacts in
other countries, but that doesn't address this issue as to
whether there were warehouses in Dubai, and that it was the
main--the transhipment point for A.Q. Khan, who ran the world's
largest nuclear proliferation ring from a warehouse--warehouses
near the port and shipped centrifuge equipment from there to
Libya. I mean, can you confirm that or deny that?
Secretary Joseph. Well, I can certainly confirm--and,
again, it's part of the public record--that large numbers of
centrifuge parts that were manufactured in Malaysia were
shipped and did transit Dubai.
Senator Levin. Finally, on this one issue----
Secretary Joseph. Senator, if I could----
Senator Levin. Yes.
Secretary Joseph. --because I think this is very important,
the actions that were taken in Dubai led to the interdiction of
the B.B.C. China, which was carrying parts to Libya, and that
had a very important role in the Libyan decision to give up
weapons of mass destruction.
Senator Levin. Finally, the report in February 2004 that
President Bush said that A.Q. Khan's deputy was a man named
Tahir, who ran a business in Dubai, which was a front for the
proliferation activities of the A.Q. Khan network. Was the
President accurate in that statement?
Secretary Joseph. The President was accurate in that
statement.
Senator Levin. So, his deputy ran a business in Dubai which
was a front for A.Q. Khan's network.
Okay, we haven't read the intelligence reports, folks. I
assume we'll get them. But we have a lot of digging here to do.
Chairman Warner. Senator Levin, I inquired about the
intelligence. It was stated that that would be provided to this
committee before sundown today. Is that correct?
Secretary Kimmitt. Actually, Mr. Chairman, I think it was
the assurances letter that was going to be made available.
Chairman Warner. All right.
Secretary Kimmitt. The intelligence would be available to
be brought to you and briefed. I think it's happening with the
Senate Intelligence Committee today. But I think it could be
made available to the committee, it would just be a request to
the National Intelligence Office.
Chairman Warner. Fine. We'll do that. I'll consult with you
as to a time that's convenient for our members.
Senator Kennedy.
Senator Kennedy. Thank you. Thank you very much, Mr.
Chairman. I thank our panel.
As Senator Levin has pointed out, the serious kinds of
issues and questions about the activities of al Qaeda, one of
the very significant observations that were made by the 9/11
Commission, and that was that the areas of most significant
danger for the United States were its ports, its chemical
plants, its nuclear power plants, and its subways and tunnels.
It mentioned all of those areas. In the 9/11 Commission report,
or in the most recent report, in December 2005, they again
point out the grade level in terms of port security is down to
a D. All of us have responsibility in raising that, but it's an
extremely vulnerable area.
I'd like to ask the panel, was there any voice of dissent
in considering the national security issue raised when the
approval for this application came through? Did anyone on the
panel raise any national security concerns at all, or was it
virtually unanimous in the panel that there were no national
security issues that we should be concerned with?
Secretary Kimmitt. Senator Kennedy, I think it would be
fair to describe the process as one that allows all of the
members of the committee to raise any national security
concerns that they have, to have those properly addressed on
the basis of the intelligence information they received,
information from the companies, and if there is need for either
further information or further assurances, that could be done.
But when, on January 17, the committee was asked to make its
judgment on this proposed acquisition, by consensus, they said
that there was not a national security concern, in their mind,
that would require either blocking the deal or sending it to
investigation.
Senator Kennedy. Well, my question is, were there any
individual members that raised that and voted in ``no'' on
that. Was this a unanimous vote?
Secretary Kimmitt. It was a unanimous vote, and, as I said
in response to the Byrd-amendment question, had it not been,
then it would have to go into the 45-day review.
Senator Kennedy. Now, in the definition of the language on
what is considered on national security, the five different
criteria, there are those who believe that those five criteria
are not truly reflective of the kinds of real threats that al
Qaeda or terrorist organizations might pose, that they are more
technical, talking about defense production, defense products,
various materials, technology, and other factors. I'm
interested in what national security test was really applied at
the time of the consideration. Was the test just the test that
is included in these five, or were the issues of the kind of
threat that al Qaeda is posing and the kind of threats that
have been mentioned heretofore in the 9/11 Commission that
Senator Levin had mentioned--were those considered, as well?
Secretary Kimmitt. Decidedly, the latter, Senator Kennedy.
Those statutory provisions are the starting point, not the
ending point, of the national security analysis. Remember, when
the statute was last amended, we didn't even have a Department
of Homeland Security. We, at the Treasury Department, didn't
have an Under Secretary for Terrorism and Financial
Intelligence. The world has changed.
I think it's the question everyone on this side of the
panel--and it's, Mr. Chairman, very unusual to be up here--
struggles with: What is national security? I think we have to
recognize it can never be defined in the abstract. It's a
dynamic concept. I think the way this CFIUS process has been
set up--it's been running this way for 31 years, through
multiple Democratic and Republican administrations--says that
``national security'' is defined by the definition brought to
the table of the representative from each of those departments
and agencies that is on the committee. These are highly
dedicated, professional security officials. Many of them,
Senator Levin, I might say, have been around well before
September 11. I would imagine that they had direct contact with
the 9/11 commissioners and others.
So, the way it works is, people can bring whatever concern
they have to the table, and unless that concern is addressed,
not only can we not approve it at the policy level, it has to
go to a 45-day investigation.
So, I think the short answer is, if you listen just to the
kinds of issues that have been brought to the table, they're
very different than when CFIUS was created in 1975. Exon-Florio
was passed in 1988, amended in 1992. I would say that the
definition that we might have of national security today, in
2006, I think will look a bit out of date even next year. So,
those are a starting point, but not an ending point, and we
trust the security professionals to come to the table with any
concern that they have.
Senator Kennedy. We have some outstanding individuals doing
extraordinary jobs. But you're against a background where, as
we understand, effectively 1,500 of these proposals have been
approved, and only one has not been approved. We are trying to
get a sense of what the standard is going to be used and
whether the standard, in terms of national security, is
sufficiently high that it's going to clearly override a
narrower interest, and that is a commercial interest. That, I
think, is a key issue in this whole debate and discussion.
Secretary Kimmitt. Senator, if I could just respond to
that?
Senator Kennedy. Please.
Secretary Kimmitt. Again, an excellent point. That's
exactly the balance. Remember, the CFIUS process and the Exon-
Florio amendment aren't an end unto themselves, they're part of
a process on how we evaluate these acquisitions. There are many
other aspects to it. No department or agency gives up its
fundamental responsibilities for laws related to the national
security.
You're right that since 1988 there have been roughly 1,500
cases notified. Only one has been disapproved by the President.
But there have been many that have withdrawn because they
weren't going to be approved. In 1989, just as an example,
there were 204 notifications. In 2005, there were 65. What's
happened is people have begun to understand that certain cases
just are not going to get through. So, they don't even come to
us. There's a self-selection process. There's actually a CFIUS
bar--I don't know if they would, these days, admit to that--who
basically advise companies. So, some of these things are just
not going to happen.
So I think when we look at the statistics, you look at the
fact that, again, this is generated in the private sector,
these people generally come in early, and very often they find
it's just not going to happen, or they're told, ``If you're
going to have an issue, it's going to be with the Department of
Homeland Security or Justice or Defense. Go work it out with
them.'' If it can't be worked out, it's not going to go
forward. It doesn't have to go to presidential decision for the
deal not to go forward.
Senator Kennedy. Well, just finally, because my time is
up--and I appreciate your response--I think the concern that
you have on issues of national security is, each individual is
bringing their own definition. We don't have a clear standard
for oversight so that others could really tell whether they are
meeting that responsibility and that obligation. That is at
least a concern of this Senator.
Thank you, Mr. Chairman.
Chairman Warner. Thank you, Senator Kennedy.
Secretary Kimmitt. If I could, Mr. Chairman, just respond.
They bring, of course, that view of national security based on
the responsibilities of their departments and agencies set by
legislation passed by Congress. There are many committees of
jurisdictions, we're finding out, who have an interest not only
in this process, but in the national security process.
Again, though, I think it's going to remain a dynamic
concept. I think the statute is a starting point, but not an
ending point.
Chairman Warner. Thank you.
Senator Clinton.
Senator Clinton. Thank you, Mr. Chairman.
I just want to see, Secretary Kimmitt, if we can nail this
down. As I read the Treasury Web site, section 837(a), known as
the Byrd amendment, requires--requires--an investigation in
cases where the acquiror is controlled by, or acting on behalf
of, a foreign government. Do you agree that DP World is
controlled by, or acting on behalf of, a foreign government?
Secretary Kimmitt. It certainly is owned by a foreign
government. I don't have the full text of what the Web site
says. With all due respect to our Web site, I look to the law--
--
Senator Clinton. Well, this is quoting the law.
Secretary Kimmitt.--and the interpretation that's been
given by our general counsel, which I reconfirmed this morning.
Senator Clinton. Well, that's fine, but I'm reading the
language of the law, and the law requires an investigation
where the acquiror is controlled by, or acting on behalf of a
foreign government--and I think we can agree that DP World is
controlled by, it's owned by a foreign government--and the
acquisition, ``could result in control of a person engaged in
interstate commerce in the United States that could affect the
national security of the United States.''
As I understand your testimony, you're saying that that
second provision is not met, because no one in the CFIUS
process, in the administration, thought that this transaction
could affect--a very low standard; we're not talking about
damage, we're talking about affect--the national security. Is
that basically the testimony?
Secretary Kimmitt. My testimony, Senator, is that the way
the process has run for 14 years through three administrations
has been that an agency has to register a national security
concern before it can go into the investigation. I would say,
for a State-owned case, it is a lower threshold of concern than
it would be for a non-State-owned company making an
acquisition. But we do not see it as mandatory. As the chairman
said, we have, and administrations have, consistently seen that
to be discretionary.
I would also say, because you made the point about the GAO,
the GAO has done terrific work in this area. They're as
knowledgeable as anybody in the city about the CFIUS process.
They have more continuity on this than anyone. This has been a
subject of review on their part four times. They've never
endorsed it, but they've never taken exception to our view.
I think it is just an interpretation difference. But I
would also say companies are looking for ways to get as much
information as they can to us prior to making their
application.
Senator Clinton. Well, Secretary Kimmitt, I understand the
point that you have made. You've made it very persistently. But
the bottom line is that what is discretionary is the
definition, that this very low standard could affect the
national security of the United States, in your view, and in
the view of everyone who participated in this CFIUS process,
was not met. That is the discretionary element. Because if
there was a trigger that it could affect the national security,
then it was mandatory, because you had a government-owned
entity and the effect on national security. So, clearly the
bottom line is that, in this CFIUS review, no one from any part
of the administration raised any issue, including the issues
that Senator Levin just raised with you, that in any way raised
a concern about an effect on national security. That is the
conclusion.
Secretary Kimmitt. No, Senator, if I may respectfully
disagree. All of those concerns were raised. All of those
concerns were addressed. Because they were addressed to the
satisfaction of individuals who had to make an individual, as
well as an institutional, judgment that the national security
interest of the United States was not adversely affected----
Senator Clinton. It doesn't say ``adversely affected.'' It
says ``affect.'' It's not even the requirement of ``adverse
effect.'' It's just ``affect.''
Secretary Kimmitt.--that based on the interpretation that
has been consistent since 1992, the members of the CFIUS
reached the conclusion that they did.
Senator Clinton. But how many requests for approval have
come from country-owned entities that were called both a
problem and an ally, that had a track record that raises
serious questions about America's national security? There
haven't been any. I find this kind of a circular argument. The
bottom line to me is that you looked at all of this, or failed
to look at all of it, and concluded that it did not affect the
national security.
But let me move on. Secretary Jackson, I want to ask you to
respond to a couple of the public comments that have been made
by former officials of the Department of Homeland Security.
Joseph King, who headed the Customs Agency's antiterrorism
efforts under the Treasury Department and the new Department of
Homeland Security, said, ``national securities are well
grounded.'' He said, `` `A company the size of Dubai Ports
World would be able to get hundreds of visas to relocate
managers and other employees to the United States. Using
appeals to Muslim solidarity or threats of violence, al Qaeda
operatives could force low-level managers to provide some of
those visas to al Qaeda sympathizers,' said King, who for years
tracked similar efforts by organized crime to infiltrate ports
of New York and New Jersey. `Those sympathizers could obtain
legitimate driver's licenses, work permits, and mortgages that
could then be used by terrorist operatives.' ''
Do you agree or disagree with Mr. King's assessment?
Secretary Jackson. I disagree with Mr. King's assessment.
Senator Clinton. Why do you disagree?
Secretary Jackson. Because we have a multiple set of layers
here. First of all, I believe that there will be substantial
continuity, and any change in the management that the firm
would be sending here would be something that we'd have a
chance to explore in detail and to do very detailed assessments
and reviews of.
Second, the process for awarding visas would include
appropriate reviews that would allow us to explore possible
linkages to terrorism. That's very much a part of what we do.
The State Department might care to join in that conversation,
as well.
But I believe that we have a set of tools available for us
to have a great deal of visibility into the personnel
associated here, and to make sure that you are a lawful
permanent resident or a U.S. citizen for access to these jobs.
Senator Clinton. Well, let me ask you this, Secretary
Jackson. Clark Kent Irvin, who served as the Inspector General
of the Homeland Security Department from 2003 to 2004, has
written, in an op-ed published today, ``It is true that at the
ports run by the Dubai company, Customs officers would continue
to do any inspection of cargo containers and the Coast Guard
would remain in charge of port security. But, again, very few
cargo inspections are conducted, and the Coast Guard merely
sets standards that ports are to follow, and reviews their
security plans. Meeting those standards each day is the job of
the port operators. They are responsible for hiring security
officers, guarding the cargo, and overseeing its unloading.''
Secretary Jackson, this is your former Inspector General.
Do you agree or disagree with what he said?
Secretary Jackson. I agree, in part, with what he said. I
disagree with other parts. Let me just unpack that a little
bit.
I believe that we have much more substantial inspection and
screening than is suggested by the comments that you read to
us.
Senator Clinton. Well, he was your Inspector General. These
aren't my comments. This is the man who was the Inspector
General of your Department for 2 years.
Secretary Jackson. He's writing an op-ed, and he didn't
have opportunity, or didn't choose to take the opportunity, to
explain fully the layered security system that both I have
talked about and that my colleague from CBP has talked about.
So, the idea that we are passively allowing containers to flood
through the country without some substantial amount of scrutiny
is just simply wrongheaded.
Could we do more? Absolutely. Are we trying to improve and
deepen and strengthen our tools? Every single day. Secretary
Chertoff made a commitment, after he finished his initial
review of the Department's programs in summer of last year, to
strengthen and deepen, through a program called Secure Freight,
our review and our analysis of that.
But I would tell you that quote does disservice to the work
that the CBP is doing to evaluate inbound cargo.
Senator Clinton. Finally, if I could ask, Mr. Chairman, was
the White House coordinator----
Chairman Warner. We'll have a second round.
Senator Clinton. Okay.
Chairman Warner. Could you reserve the question until then?
Senator Clinton. Okay.
Chairman Warner. Because I am quite anxious. We, I think,
had an excellent briefing, thus far. We'll have another round
of several minutes for each Senator to ask questions, at which
time you'll be accorded that opportunity. I must say that I am
impressed with your question on the law. I have sent for the
statute. I'd like to read it myself, because there is clearly
that phrase ``the acquisition results in control of a person
engaged in interstate commerce in the United States that
could''--I repeat, ``could affect the national security.''
In that context, Secretary Kimmitt--I think we've been over
it, but it's so critical--are there some minutes that were
taken, or kept, of the various CFIUS meetings, at which time
presumably these questions were raised and there was a colloquy
between the members on the issues?
Secretary Kimmitt. Mr. Chairman, I'd be glad to locate
those records and respond to that question.
[The information referred to follows:]
Exon-Florio prohibits public disclosure of documents and other
information filed with CFIUS and such information remains subject to
this statutory prohibition on public disclosure even after the CFIUS
process is concluded in a particular manner. While the statute does not
prevent our disclosure of information in response to the committee's
oversight request, it does prohibit any disclosure of the information
to the public. These confidentiality provisions are, of course,
intended to assure companies that their proprietary business
information will not be publicly disclosed, thereby encouraging them to
make full disclosure to CFIUS of their proposed transactions and other
relevant facts. This full disclosure is important in order that CFIUS
be able to evaluate properly any potential national security issues
raised by a proposed transaction.
While CFIUS does not produce a report of its findings or a report
following the 30-day period, we have enclosed copies of unclassified
documents that we believe will be helpful in informing you about CFIUS
actions in this case. They were provided by the Office of International
Investment, Department of the Treasury, from the CFIUS case files for
the notices submitted by DP World on December 15, 2005, and March 3,
2006. They include the DP World filings with CFIUS; press releases and
articles; electronic mail; informational briefs provided by the
companies and related correspondence.
We have substantial confidentiality interests in the deliberative-
process information and law-enforcement-sensitive materials that have
not been produced or have been redacted from these documents. We also
have withheld or redacted information that did not relate to the DP
World transaction as unresponsive to your request, as well as
information that would identify agency employees below the senior
level.
No classified information is being provided with this paper. The
intelligence assessments before CFIUS during its consideration of the
December 15, 2005, filing were: (1) the December 5, 2005, Intelligence
Community Acquisition Risk Center (CARC) assessment; and (2) the
December 28, 2005, Defense Intelligence Agency assessment. The National
Intelligence Council led an Intelligence community collaborative effort
to produce an all-source, all-threat National Security Threat
Assessment for the March 3, 2006, filing. I understand that these
reports were previously provided to Congressional Intelligence
Committees.
Chairman Warner. I think it would be helpful for this
committee, to the extent that it doesn't involve the executive
privilege.
Secretary Kimmitt. All right.
Chairman Warner. Does your colleague wish to add anything?
Secretary Kimmitt. No.
Chairman Warner. All right.
You've explained, certainly, in the discussions I've had
with you and with the Defense Department--although the
Secretaries of State, Treasury, Defense, Homeland--the
Secretaries themselves compose the CFIUS board where the final
decision resides. This decision starts with a group of, I
presume, thoroughly seasoned and experienced civil servants. Is
that correct?
Secretary Kimmitt. Yes, sir.
Chairman Warner. I'm trying to look at all of the steps
that are taken.
Secretary Kimmitt. Sure.
Chairman Warner. When you say ``if anyone raised a
question,'' it would have triggered this investigation, under
your interpretation--so, that's the civil servant level--if
someone had triggered it, then it goes to an Assistant
Secretary level? Is that correct?
Secretary Kimmitt. That's correct.
Chairman Warner. Then either through the Deputy Secretaries
or Under Secretaries through--to the Secretary, if they feel it
is necessary----
Secretary Kimmitt. That is correct.
Chairman Warner. So any one of those series of individuals,
in fulfilling their review process, could have triggered the
need for this investigation.
Secretary Kimmitt. Any one of those institutions, yes, Mr.
Chairman.
Chairman Warner. Now, would you go into the technical
status of the contract today? Does that contract terms and the
situation permit someone, at this point in time, saying, ``Upon
reflection, and given the very conscientious concern of
Congress and many citizens across the United States, we should
take a look at that 45 days''?
Secretary Kimmitt. Mr. Chairman, as I said in response to
your earlier question, I do not have that information. As a
general matter, the CFIUS review is a national security review.
Other agencies of the Government get involved, as necessary, on
antitrust and other matters. We may have that answer ourselves.
If not, I think we could obtain it. But I just don't have it
available to me right now.
Chairman Warner. We have your assurances, at the earliest
opportunity you will transmit your opinion on that question,
and response to it, to this committee.
Secretary Kimmitt. Yes, Mr. Chairman.
[The information referred to follows:]
All CFIUS decisions are made by consensus of the entire committee.
The review process allows for any agency that sees a potential threat
to the national security, as is its obligation, to raise those concerns
within the review process. In such a case, an extended 45-day
investigation period would commence.
The Exon-Florio amendment prohibits disclosure to the public of any
documents or information about a transaction that is provided to CFIUS
or the President pursuant to Exon-Florio. Federal employees could be
subject to criminal and other sanctions for making an unauthorized
disclosure of such information.
Chairman Warner. All right. I thank you.
In reading--and I've studied this question intensively for
the last 72 hours, certainly--so much of the press refers to
phrases like this. I'm not trying to fault the press, and
that's one of the reasons I want to get these facts out,
because these professionals in the press want to be accurate.
But there are headlines like, ``Port Security Operations Sold
to the UAE at Six Ports,'' others I've seen where the public
has the perception that the UAE is buying these facilities,
acquiring them, in title.
Let us be exactly explicit as to what this contract
provides and what it is that they get and what they do not get.
Secretary Jackson. Mr. Chairman, DP World's contract allows
it to acquire the assets of P&O Ports. Those assets--let me
divide into a couple of categories. First, what they are not.
They are not buying a port. Ports are publicly owned
facilities, typically by the State or local----
Chairman Warner. States or municipalities or others.
Secretary Jackson. Exactly. So, they are not buying a port.
They are not buying a portion of the port. Typically, the
relationship is a long-term lease from a port authority to a
terminal operator. So, what is principally at stake here,
first, is long-term leases for operating a particular terminal
that are granted by a public institution at the State or local
level.
Second, there are some services provided for other terminal
operators or other ocean carriers responsible for terminal
operations. These are stevedoring services, for example, and
sometime warehousing service that are associated with the
movement of cargo globally.
So, essentially, they're buying the authorities, the leased
landhold authorities, some infrastructure that is associated
with managing of terminal operations, including equipment
necessary to operate these facilities.
Chairman Warner. Now, by virtue of those acquisitions, does
this company, or others involved elsewhere, get a better
insight into how we go about the security relationships? I have
to believe that they're part of this agreement, which requires
inspection at the point of origin of a container, and many
containers are point of origin in UAE, that they have a very
good idea of what the security requirements are as that
container moves from a port of embarkation to the United
States, and, therefore, by virtue of this contract, they don't
get any better understanding or more insight or more control
over the security. Is that correct?
Secretary Jackson. Yes, sir. I think it's generally
correct. Let me try to elaborate on some components of that.
First, there are certain things that they do as a terminal
operator which involve the definition of security plans under
Coast Guard-approved rules. The Coast Guard would then go in
and inspect compliance with those rules. The same thing applies
with the Customs and Border Protection. They establish
procedures, rules, guidelines, and security requirements.
Again, the terminal operator complies. We inspect, we audit, we
oversee.
There is a series of things that are at the heart of our
security processes that are not exposed to the terminal
operator. I would tell you, one very important one, for
example, is the calculus that goes in, in our targeting center
with CBP, to decide which specific containers are going to be
audited, examined, studied, opened, and further scrutinized.
So, that would be an example of something that a terminal
authority would have no visibility into. They simply are told,
``We're taking that one, and we're doing this with it.''
So, there is a substantial amount that is behind a veil
that's not seen by the terminal operator. It's a partnership
every day out there on the terminal working the other security
issues.
Chairman Warner. The United States, the business interests
in our country, haven't expressed a great deal of interest in
trying to do this management. I think that's one of the reasons
that foreign operators are involved in so many of our ports. Is
that correct?
Secretary Jackson. There are a large number of foreign-
owned firms that are operating in the United States in terminal
operating agreements. There are many foreign-owned ocean
carriers that, themselves, have subsidiaries that do
termination operations in the United States and globally. So,
this is not an industry dominated by U.S. assets.
Chairman Warner. Fine.
To Secretary England, in my consultations with you and
Secretary Rumsfeld, the Chairman of the Joint Chiefs was
present. We look upon the Joint Chiefs as an independent entity
that has, first and foremost, in their hearts and minds every
day every hour of the day--our security. Did they participate
in this decision and, likewise, concur in the issue that they
would not be a security risk?
Secretary England. Pardon me, Mr. Chairman. I'm not sure of
the extent that they're a formal part of the process, but, of
course, the military services report directly to the chairman,
and all the military services were, indeed, part of this
process.
I do know the chairman concurs in the findings of the
Department. Again, I would stress that this question about what
level of security--I mean, we don't go just to an arbitrary
level. Literally anyone who has any issue on any subject
dealing with the security of these transactions is free to
raise them, and they do. So, this is about as broadbased and an
open process as you could possibly have. Literally anyone can
comment in this regard.
Chairman Warner. There was no negative comment, to the best
of your knowledge, coming from the Joint Chiefs.
Secretary England. No, that's correct. There were no
negative comments in the entire Department.
Chairman Warner. Fine. Thank you.
Senator Levin.
Senator Levin. Thank you, Mr. Chairman.
First, on the issue which Senator Clinton has raised, I
don't see how you can interpret the statute two ways. It is not
a discretionary statute. The statute says that the President,
or the President's designee, ``shall make an investigation.''
Now, the word ``shall'' is not discretionary. The word
``shall,'' I think you'd agree, Secretary Kimmitt, is a
mandatory word. Would you agree with that, so far?
Secretary Kimmitt. I would agree with that, Senator.
Senator Levin. Okay.
Secretary Kimmitt. So far.
Senator Levin. Good. Well, now we are going to get to the
rest of the sentence, ``where the takeover could affect--could
affect--the national security of the United States.'' Are you
saying that there is not one department that looked at this
that thought that the takeover of these facilities could affect
the national security? You may have reached a conclusion that
with all of the added protections, that it doesn't impact the
national security. But I'm asking this question. Is it, there
is not one agency in this Government that believes that this
takeover could affect the national security of the United
States? Is that what you are telling us?
Secretary Kimmitt. Senator, what I'm saying is that there's
been a consistent interpretation in the executive branch of
that law since 1992. Our feeling is that the law, going back to
1988, when it was first passed, brings before us any case that
affects the national security. Our view has been to give
meaning to that phrase. I accept what you said with regard to
``shall,'' but as to the ``could,'' which isn't ``shall,'' we
have basically taken the position, as have previous Democratic
and Republican administrations, that that is only triggered if
concerns about potential harm to the national security have not
been resolved. This is really not a political point, because I
don't think we do the country a justice when we politicize
national security. I'm not saying that you're intending to.
But, in the last 5 years of the previous Democratic
administration, there were 21 foreign government-owned cases.
One went to investigation.
Senator Levin. Well, maybe they decided that, in none of
those cases, it could affect national security.
I'm asking you whether----
Secretary Kimmitt. But, Senator, you said ``mandatory.'' In
other words, it's----
Senator Levin. If--no, no. What's mandatory is if it could
affect national security, then it has to go to that
investigation.
Secretary Kimmitt. Sure.
Senator Levin. That's what the law says.
Secretary Kimmitt. In this administration, in the first
term, from 2001 to 2005, there were 43 such cases, 4 of which
went to investigation. The determination was different here,
because no one raised a concern.
Senator Levin. And----
Secretary Kimmitt. All concerns----
Senator Levin. No, I'm----
Secretary Kimmitt. Could I rephrase that? This is really
important. Concerns are raised. They're raised from the start.
I mean, it was really exceptional here that we had the
Intelligence Community, weeks before anything was filed, do
their assessment of many of the factors that you've brought up.
By the way, the Intelligence Community is not just the Central
Intelligence Agency (CIA). We all have intelligence elements in
our departments, and we looked particularly closely at some of
the terrorist financing points that you made.
But the consistent interpretation of administrations has
been if those concerns could not be resolved, we go to
investigation; if they have been resolved, the deal is cleared.
Senator Levin. I can't go back and argue whether a statute
has been interpreted one way or another, because the question
is whether or not it is interpreted correctly in the matter
before us. This isn't a court. We write laws. If agencies
ignore the law, even though they have been ignored before,
apparently, or misinterpreted before, or----
Secretary Kimmitt. No, I don't----
Senator Levin. Well----
Secretary Kimmitt.--I don't----
Senator Levin.--Secretary Kimmitt----
Secretary Kimmitt.--I don't think----
Senator Levin.--let me finish now.
Secretary Kimmitt. Yes, sir.
Senator Levin. An ambiguity has been found in a statute
which is unambiguous. The statute says--and I'm just going to
read the words again and go on to another issue--that ``an
investigation shall be made''--that's mandatory--if the
acquisition, ``could affect the national security of the United
States.'' It is saying--it seems to me it is obvious, it is
clear, even by your own actions, the fact that additional
requirements were imposed here, that this acquisition ``could
affect'' the security of the United States.
If you want the law changed--I don't care which
administration you represent--if any administration wants the
law changed, this or a previous one, come to Congress and
change it, but do not ignore it.
Secretary Kimmitt. Sure.
Senator Levin. I'm going to leave it at that, because I
have to go on to other--you have given us your position on it.
That's----
Secretary Kimmitt. But, respectfully, if I could respond
briefly. We didn't ignore the law. We might interpret it
differently. But the fundamental fact here, concerns were
raised, they were resolved. If they hadn't been resolved, then
the national security could have been affected.
Senator Levin. If the national security could be affected,
then this law requires an investigation, period. Not just what
you call ``resolution of concerns.'' It requires that 45-day
investigation. That's what the law says. If you don't like it,
you--and I'm looking at you as representative of either this
administration or any other administration--if the executive
branch doesn't like it, come to Congress and change it. Don't
interpret it away. That's my plea to any executive branch.
I want to finish my questions.
Chairman Warner. I'll give you the time. Let me make a
suggestion here. I think that the Senators raise a very
important issue. I note that the Attorney General of the United
States is a member of the CFIUS. Is that correct?
Secretary Kimmitt. That's correct, Mr. Chairman.
Chairman Warner. Then I would suggest--and I will join with
my colleagues, but, through you, let's start it--to have him
prepare a memorandum as to the interpretation of the law by
this administration and other administrations and how the CFIUS
process has been conducted consistent with those
interpretations. So, in that way, this committee and other
Members of Congress and others interested will have some
clarity to what has been done. But, I must say, as a lawyer
myself, reading this, on the face, my colleagues raise a
legitimate question.
[The information referred to follows:]
Deputy Secretary Kimmitt's March 31, 2006, letter to Chairman
Warner responds to this matter.
The enclosure referred to was received and has been retained in
committee files.
Senator Levin. I don't want to sound skeptical of the
Attorney General's opinion, which will be forthcoming, but I
would also suggest we ask the Senate legal counsel to give us
an opinion.
Chairman Warner. I concur in that. We'll do that.
Secretary Kimmitt. Let me say this. I think it is a valid
question. I said that when it was first raised by Senator
Clinton. It's been one of the tough questions. That's why I
have a Q&A in front of you. Senator, our faithful staffs tried
to anticipate what the tough questions are. This is a tough
one. It's a close call. I think that we have applied it
consistently. We may have a difference on it. But I will say,
again, I think the most important thing is, it doesn't suggest
that security concerns were not raised. They were raised, they
were resolved, we moved on.
Senator Levin. A quick few questions if I can.
Chairman Warner. Yes, go ahead.
Senator Levin. Is it true that the UAE was one of a handful
of countries that recognize the Taliban? That statement was
made, I think, either in the 9/11 Commission report or
somewhere else. Is that accurate?
Chairman Warner. That goes to the State----
Senator Levin. State Department?
Mr. Wayne. Yes, Senator, that is accurate. They made a
strategic decision after September 11 not only to cut those
ties, but to deepen and strengthen their relationship with the
United States, and to join us in fighting the war on terror.
But, yes, they did have relations with Taliban before. They've
cut those off. The presence of our troops there, and our
facilities, underscores that. They have progressively worked
with us on counterterrorism, on cutting off the financing of
terrorism, on cutting off the flow of weapons of mass
destruction.
Senator Levin. When did our troops first visit those ports?
What year, approximately? How long have we been using their
facilities?
Secretary England. Senator, I don't know. I can go back----
Senator Levin. All right, just give us that, if you would,
for the record.
Secretary England. Okay.
[The information referred to follows:]
The U.S. Navy has made periodic port calls to the UAE since the
1970s. Regular use of the UAE ports began during the preparation phase
for the first Gulf War in 1991.
Secretary England. I can answer they were using it when I
was Secretary of the Navy in my first term, so at least the
last 4 or 5 years.
Senator Levin. But the fact that they allowed us to use
their ports doesn't satisfactorily answer why they were one of
a handful of countries that were recognizing the Taliban even
at the same time they were using our ports. That sort of
symbolizes the duality here, where we have an ally most of the
time, or recently. But not too many years ago, even while they
were giving us access to their ports, they were also doing
something that very few other countries in the world did, which
was to recognize a terrorist regime that was hosting a
terrorist organization.
My final question. The Clinton administration, and I
believe I read this, attempted to get the UAE to strengthen its
money-laundering laws prior to September 11. Now, I don't know
where I read it, but was that accurate? I think I read that
they were frustrated by the lack of a positive response at that
time. Now, this is pre-September 11. Can someone tell me if
that's accurate or not?
Mr. Wayne. Senator, I don't know if, pre-September 11, we
tried to get them to strengthen those laws. Post-September 11,
we did try to get them to strengthen those laws. They have now,
several times strengthened those laws.
Senator Levin. Right.
Mr. Wayne. They've also cooperated with us in freezing the
funds of a number of terrorist groups, including a group called
the al Barakat group that was operating out of Dubai. That
group has been shut down. Since 2000, they've frozen $1.3
million of funds in 17 different accounts based on the U.N.
sanctions.
Senator Levin. Thank you.
Mr. Wayne. We've had a very close relationship in working
on terrorist finance with them. In the region, they've actually
been a leader in setting up new standards for controlling the
Hawala or the informal money-exchange system.
Senator Levin. It is very welcome, and there is no doubt
about that. The question I was asking is, pre-September 11,
because we need constancy and longstanding commitments, it
seems to me, and that's one of the factors that we ought to be
looking at when we look at the question of port security and
reliability of a government that takes over any of our
facilities. But I'll leave it at that.
Thank you, Mr. Chairman.
Chairman Warner. Thank you very much, Senator.
We'll turn to you, Senator Clinton. I might like to, once
again, say that, at the conclusion of Senator Clinton's 5
minutes, we will engage in a press availability, at which time
those desiring to propound questions to anyone here on the
dais, please go to the microphone, identify yourself, and ask a
question.
Senator Clinton.
Senator Clinton. Thank you, Mr. Chairman.
I want to just get additional information about how CFIUS
actually operates. How many times did CFIUS meet to consider
this transaction?
Mr. Lowery. Senator, the CFIUS met once, and then it
reviewed documents, both in early November, early December,
mid-December, and in mid-January. But there was one official
meeting that I know of.
Senator Clinton. So, there was one official meeting. Are
there quorum and proxy rules for conducting business for CFIUS?
Mr. Lowery. No. I think the way that CFIUS operates, an
invitation goes out to all the agencies to come to the
meetings, and they're usually attended by all the agencies,
unless there's an outstanding exception or something. The
agencies work through the processes together in that particular
meeting. Then they go back and they individually, because it is
a committee, do their own analysis on the transactions.
Senator Clinton. I understand the chairman has already
asked for minutes of the meeting. I assume it's that one
meeting that CFIUS held that the chairman asked for minutes
from?
Chairman Warner. Senator, it seems to me that we should be
given the record of all levels of deliberation and such minutes
as recorded at all levels of that deliberation.
[The information referred to follows:]
See response on page 31.
Senator Clinton. Was the White House Coordinator for
Homeland Security, Frances Townsend, apprised of the CFIUS
review?
Mr. Lowery. My understanding is that when the transaction
was initiated, or review was initiated, there was an e-mail
that went out to the White House and including, I believe, to
the Homeland Security Council. That is my understanding.
Senator Clinton. Now, by executive order, the assistant to
the President for National Security Affairs sits on CFIUS. Was
the National Security Advisor, Steven Hadley, apprised of the
review? Was he at the meeting that was held?
Mr. Lowery. The National Security Council was certainly
apprised of the meeting. I don't know exactly who would have
been at that meeting.
Senator Clinton. Was the Secretary of Homeland Security,
Michael Chertoff, both apprised of the review and at the
meeting where the decision was made?
Secretary Jackson. The Secretary was not at the meeting.
The Department was aware of the transaction, obviously, and
deeply engaged in it.
Senator Clinton. Now, one of the concerns that we have in
the New York/New Jersey area--Senator Menendez and I have been
working, along with my colleague Senator Schumer, Congressman
King, Congressman Fossella; it's a completely bipartisan,
bicameral concern--is that--there is no requirement that the
Federal Government consult with, or take into account, the
views of State and local officials. Do you think that we should
look at providing some kind of requirement, especially when we
get to the area that we're most concerned about, a government-
owned entity, a potential effect on national security, that
there ought to be consultation with State and local officials?
Secretary Kimmitt. Senator, that's a question I hadn't
considered. A very good question. I would have thought that the
companies would have done that. Because one company, of course,
is already a resident of the State, another is wanting to come
in to conduct operations there. With the press reports that
showed up in the New York Times, Wall Street Journal, Miami
Herald, Baltimore Sun, and elsewhere, I guess I would have
thought that that would have begun, I think, the question of
whether the Federal Government has a responsibility in an
acquisition like this to reach out, is one I'd like to consider
and come back to you on.
[The information referred to follows:]
Certain CFIUS agencies and subcomponents historically have worked
very closely with State and local officials. While laws relating to
information and document privileges generally preclude the provision of
case-specific information to these officials, CFIUS believes that
cooperation with State and local officials can be and is achieved
through existing working relationships.
CFIUS has worked to improve communication with Members of Congress
so that it can perform its oversight responsibilities more effectively.
However, it is the position of the administration that any information
provided to Congress must not compromise proprietary corporate
information provided to CFIUS by the companies.
Senator Clinton. Thank you.
Thank you, Mr. Chairman.
Chairman Warner. Thank you. Thank you, Senator Clinton,
Senator Levin, and all who participated in this.
We will now proceed to a press availability. Those
desiring, please approach a microphone.
I'd like to also, respectfully, ask that the questions be
germane to the subject at hand. These witnesses are here for
that purpose.
Tony, we'll start on the right.
Mr. Cappacio. Tony Cappacio of Bloomberg News. To Senator
Clinton and to Senator Warner, and Secretary Joseph and
Secretary England might be able to elaborate a little bit too,
but, Senator Clinton, after the hearing today, do you
anticipate legislation next week, bipartisan legislation, to
block the consummation of the business deal by March 2?
For Secretary Joseph and Secretary England, if such
legislation is introduced, debated, and passed, what impact
might that have on our relations in the Arab world as we're
trying to develop allies for the long war?
Chairman Warner. Let me first address the question. I
think, at this point in time, the President has stated very
clearly his concerns about this situation as it relates to a
broad range of our foreign policy decisions and the like. Now,
I respect those Members of Congress--indeed, of my own party,
as you might imagine--who have come forward with these various
ideas. I think it is unwise, speaking for myself, to try and
speculate what's going to take place in the coming days and
weeks. I do think it's important that the administration
cooperate fully with those hearings the committees of the
Senate and the House schedule. As a consequence of those
hearings, I'm sure that there will be further cooperation
between the administration and Congress. I am, in my own heart,
confident that this matter can be reconciled.
So, that is my view, but I yield to my distinguished
colleague from New York. You have a very major port, and I
think you have----
Senator Clinton. We do.
Chairman Warner.--stepped up to this issue very quickly.
Senator Clinton. Thank you, Mr. Chairman.
Tony, there will be legislation introduced. There will be
probably several pieces of legislation, most of it bipartisan.
There will certainly be legislation to require the 45-day
investigation. It seems, to many of us, that, on the face of
the statute and given the circumstances of this transaction,
that should have been undertaken, but, in the absence of it, it
should now be ordered.
That may be the first step in trying to resolve this
matter, to understand more fully exactly what all of the
factors were and to guarantee that the questions that many of
us have, those that we've raised here and those that have been
raised by colleagues on both sides of the aisle, are fully
taken into account.
Mr. Cappacio. Secretary England and Secretary Joseph, what
impact might that kind of legislation have on our relations
over there?
Chairman Warner. Again, they don't know how exactly the
legislation would read. With all due respect to the bill that's
been introduced, as we all know, in my 28 years here, the bills
are modified substantially as they proceed on the individual
chamber floors, then go to conference, where often further
modifications take place. So, I'm not going to interfere with
the asking of the question, but I make that observation.
Secretary Joseph. Let me just say that the UAE today is a
good friend, and it's a good ally. As my colleague said, after
the events on September 11, the government of the UAE made a
strategic decision to be on the right side of the issues and
has cooperated with us very extensively on the war on terror,
as well as on combating weapons of mass destruction.
I think what we need to do is, we need to treat the UAE
fairly, as we would any other friend or ally. I would not want
to speculate on the consequences of legislation that has not
yet been proposed.
Mr. Cappacio. Thank you.
Chairman Warner. On the left.
Mr. Rosen. Yeah, thanks.
Chairman Warner. Yes.
Mr. Rosen. Ira Rosen, with CBS. This is for Commissioner
Ahern. I think everybody would agree that the threat of weapons
of mass destruction is really the paramount threat going right
now, yet only one of the six ports that are under question--
only one of them is equipped with a working radiation detection
system. Why is that?
Mr. Ahern. What has happened at this point is our
deployment footprint--we've been moving them out incrementally
based on the site surveys that are done by us and by our
contractor who does the installation of the radiation portal
monitors (RPM). One of the first stages of implementation that
we actually took was on the Northern Border, where we didn't
have as much information in advance of container or truck
crossings coming into the country. As we take a look at the
maritime model, we've had a lot of different opportunities to
put layers of defense out in front of the arrival of the ports.
So, we made some of those determinations initially, knowing
that we had confidence with the information coming in, knowing
we had the ability to screen and vet that information for
security concerns, and as also as far as with the forward
deployment of our CSI teams overseas in 42 ports.
So, we looked at seaports as a phase-3 implementation, and
we're in that process of implementation at this point in time.
As I stated, 181 RPMs at this point in time, 37 percent of the
container traffic, and we'll continue to deploy as we go
forward.
Mr. Rosen. But you don't have the machines that could
really screen the devices that people are most concerned about.
Shouldn't that be priority one?
Mr. Ahern. I think priority one was pushing our defense in
depth as forward as we possibly could in the process and not
wait for them to arrive in the ports in the United States. This
is an additional layer in our security that adds to the ones we
have already placed.
Chairman Warner. The chair notes--and I think it's a very
significant and important thing--there a number of press that
are going to ask questions. So, I would hope that you would
just have the one question; then, if absolutely essential, a
quick follow-up.
Thank you.
This is to accommodate your colleagues who are standing in
line patiently.
Ms. Cornwell. Thank you. I'm Susan Cornwell, with Reuters.
I have a question for the administration officials here.
We know what your decision was, but I'm wondering if, given
perhaps what you've heard today and also the political fallout,
whether you, any of you, now think that a 45-day investigation
might be a good idea. Then I do have a quick follow-up.
Chairman Warner. I think, in my question to that, the
Secretary Kimmitt has said you will get me the information as
to the flexibility under the law. But go ahead with the
question.
Secretary Kimmitt. I think what you had indicated, Mr.
Chairman, was a request for flexibility under the contract.
Chairman Warner. That's right, yes.
Secretary Kimmitt. I'll have to find that for you.
[The information referred to follows:]
See response on page 32.
Chairman Warner. Correct. I stand corrected. But do you
wish to further amplify my observation?
Secretary Kimmitt. I think essentially it goes to the point
that Secretary Joseph said. Because it involves pending
legislation, I'm not in a position to comment on it. The
administration would have to comment on that in a statement of
administration position.
Ms. Cornwell. But the legislation hasn't been introduced
yet.
Secretary Kimmitt. No, but, as Senator Clinton says--and I
think she, Senator Menendez and other members had pretty
clearly indicated that it was coming--I just think that the
administration will provide its views at the appropriate time.
Ms. Cornwell. Okay. The follow up is, In all the history of
CFIUS, how many of these 45-day investigations have there been?
Any details of them would be appreciated, too.
Secretary Kimmitt. I have only the number since 1988, when
the law came into place. There were 25 cases that had gone into
investigation in the period 1988 through 2005.
Chairman Warner. Thank you.
On the left.
Mr. Rugaber. Chris Rugaber, at BNA publications. Some
critics of CFIUS have said that there may be a reluctance to
open a 45-day investigation, out of concern over chilling
foreign investment in the United States and whether it would
send a bad signal to foreign investors. Was that issue
discussed? How was that issue discussed in the CFIUS meetings?
I was also wondering if the Senators shared that concern that
perhaps security was not given as much a priority, and that
perhaps worries over foreign investment were given too much of
a priority.
Chairman Warner. Well, stating, myself, having intensively
looked at this whole situation, and I wanted to carefully await
the facts. I think the administration is to be commended for
the manner in which we were so forthcoming--I don't find that,
at this point in time, there was a breach of the procedure that
would have in any way resulted in a lessening of our security
considerations. That's my opinion.
Now, as to your first question, you directed it to which
member of the panel here, the first part of your question?
Mr. Rugaber. Well, Secretary Kimmitt or anyone----
Secretary Kimmitt. I'd be glad to answer.
Senator Clinton, did you want to respond?
Senator Clinton. Please go ahead.
Secretary Kimmitt. Okay. The U.S. has pursued an open
investment policy since the beginning of the CFIUS days in
1975. We believe that the world economy works best on the basis
of free and fair trade, flexible exchange rates, and free flow
of capital across borders, which means an open investment
policy.
Foreign investment in the United States supports between 5
million and 6 million jobs. It's 20 percent of our exports, $30
billion a year in research and development (R&D) investment.
It's a very powerful part of the American economy. Of course,
we're the key part of the world economy.
At the same time, our first priority as government
officials, whether political appointees or career, is to
protect the national security. So, although we operate in the
context of an open investment policy, the process of CFIUS, in
spite of what you've read by many people, is driven by one
thing: Does anyone in the committee have a national security
concern? If so, the case is not going to go forward.
Chairman Warner. Thank you very much.
Gentlemen?
Mr. Kulisch. Hello. Eric Kulisch, American Shipper
Magazine. I have a question. Will Dubai Ports World set up or
operate as a North American incorporated subsidiary, have a
U.S. board, be subject to U.S. laws, like U.S. companies? That
often takes place when foreign companies invest here, and
related to that----
Chairman Warner. Let's take this question, in seriatim.
Go ahead. Secretary Kimmitt, do you want to take it, or
Secretary Jackson?
Secretary Kimmitt. I think I'm going to defer to Stewart
Baker, the Assistant Secretary of Homeland Security, who had
been most directly in touch with the company on that.
Mr. Baker. Yes, my understanding is that the company will
be taking over P&O North America, which is a U.S. company. They
do not have plans to change corporate structure at this time.
Chairman Warner. Thank you very much.
On the left? Yes.
Ms. Hess. Pam Hess, with United Press International. Could
you tell me how many non-U.S. entities control port terminals?
I think you mentioned that there are 877 in the country. Could
you tell me if there are any correlative arrangements at
airports? Are there any foreign companies in charge of port
terminals? Or in the airport terminals?
Secretary Jackson. The number that we mentioned was in
these 7 cities, 829 facilities.
Ms. Hess. Okay.
Secretary Jackson. That is not data that I have right here.
We might be able to try to get that for you, that shows you,
all across the country, how many terminals there are and how
many have foreign ownership and how many domestic. We do not
have that information, ourselves, completed. I believe we're
trying to get some better data on that.
[The information referred to follows:]
Secretary Jackson did not respond in time for printing. When
received, answer will be retained in committee files.
Mr. Hess. The arrangements at airports, are they any
different?
Secretary Jackson. Yes, they are. This is a fundamentally
different process at U.S. airports. There are a whole different
set of rules, and you're basically operating under the
authority of an airport authority with different air carriers
and freight forwarders having access to very delimited portions
of the airport.
Mr. Hess. Right, and is there----
Chairman Warner. Thank you. No, we have so many people
waiting. I appreciate that.
This gentleman?
Mr. Meek. Good afternoon, Mr. Chairman. Thank you for the
opportunity to ask a question. I'm James Meek, from the New
York Daily News.
I have a question for each of the Deputy Secretaries--and
I'd appreciate all of them answering; it's a yes-or-no
question, unless the answer is yes--and for Under Secretary
Joseph. Can any of you think of any occasions since the 2001
September 11 attacks where the United States has requested the
United Arab Emirates authorities to cooperate on a
counterterrorism investigation or have requested information
which they have subsequently refused or gave an unsatisfactory
response to or delayed a response to? Any occasion since
September 11.
Secretary Kimmitt. I'm not aware of any.
Secretary England. I am not aware of any.
Chairman Warner. Secretary Joseph, please address the
microphone. Thank you.
Secretary Joseph. I'm not aware of any either.
Secretary Jackson. Neither am I.
Chairman Warner. Thank you very much.
Mr. Meek. Thank you very much, gentlemen.
Chairman Warner. Question?
Ms. Turner. Thank you, Mr. Chairman. Trish Turner, with FOX
News.
Secretary Kimmitt, of the 45-day investigations, you said
there were 25, I believe, between 1988 and 2005. Can you give
us some idea, or give us an example, preferably, of what would
send this to a 45-day investigation that would set it apart
from what we're talking about here?
Mr. Chairman, I have a question for you.
Secretary Kimmitt. The view of any member of CFIUS that the
national security interest could be adversely affected.
Ms. Turner. But can you give us some kind of example of one
particular case that was sent to this kind of review?
Secretary Kimmitt. I don't have that immediately available
to me, but if you get in touch with us after this, we'll be
glad to take you through that with what we can. Again, you
might want to take a look at the statute, the way that it is
written. What you want is companies to provide business,
proprietary, and other confidential information to you so you
can assess these very carefully. We do have limits on what we
can discuss publicly. We have more flexibility, as I said, in
what we can share with Congress.
Senator Clinton. But, Mr. Chairman, I think it would be
useful for the committee to get those examples, because if this
definition of ``national security'' is kind of a moving target,
we need some idea of what the field looks like.
[The information referred to follows:]
We endeavor to protect information about the companies from public
disclosure, including for proprietary business reasons, but we would be
pleased to provide the chairman and committee members a briefing on the
transactions that went to investigation.
Chairman Warner. Assuming that the reason for the
investigation was prompted by national security. It could have
been others, could it not?
Secretary Kimmitt. Well, it could have been other reasons.
Essentially, though, this is an interagency process.
Chairman Warner. Right.
Secretary Kimmitt. You operate by consensus. So, in each
one of those cases, at least one member was not prepared to
recommend that the transaction proceed after the 30-day period.
Chairman Warner. We're looking at the triggering mechanism
of those investigations.
Secretary Kimmitt. I understand the very important question
that Senator----
Chairman Warner. There are----
Secretary Kimmitt.--Clinton has raised.
Chairman Warner.--25 instances, and the triggering
mechanism----
Secretary Kimmitt. Right, and what we've done--again, the
tradition has been that we do, on a quarterly basis, a
briefing. I have to say it hasn't included this committee. We'd
be welcome to include this committee--it's generally Banking
and Financial Services on the Senate and House sides,
respectively--of cases completed during that quarter. We could
bring up these different cases and either look at all of them
or whatever subsection is important for you.
Chairman Warner. We'll work it out.
Secretary Kimmitt. When it comes to completed cases, we
have a lot more flexibility.
Secretary Jackson. Mr. Chairman, if I could just add to
what Bob said. I think it's also very important to focus on
what he earlier spoke about, in terms of cases withdrawn from
consideration. There are a not-insignificant number of cases
that go through the 30-day process, and it becomes clear they
are not going to get over the finish line. So, I think that the
full complexity of cases includes those that got a significant
amount of scrutiny and were subsequently withdrawn.
Chairman Warner. So the 25, in reality, is much larger.
Secretary Jackson. Yes, sir.
Secretary Kimmitt. It could be larger. I didn't mention
those, Michael, in part because it's a little bit tougher for
us to talk about those.
Chairman Warner. All right.
Secretary Kimmitt. I mean, if a company's done the right
thing and said, ``This isn't going to work,'' we don't want to
penalize them, and then have to go into great detail why.
Chairman Warner. Understood.
Secretary Kimmitt. I think you'd rather have the system
come to the conclusion this isn't going to work, they walk away
from the deal. But it is larger.
Chairman Warner. Right.
Ms. Turner. Mr. Chairman, may I just ask you--I don't think
you've said----
Chairman Warner. Can you speak up a little louder?
Ms. Turner. I don't believe I've heard you say if a hold
isn't placed on this particular transaction before Congress has
had a chance to work its will, if you will, are you willing to
support legislation that would place a hold on this
transaction?
Chairman Warner. I'm not going to speculate on that. I'm
really confident that these matters now being brought to the
attention--now, the public having had a full disclosure of the
facts that are available, I think it's going to work itself
out. So, I'm not going to participate in trying to speculate.
Ms. Turner. Thank you.
Chairman Warner. But we will get the information that
Secretary Kimmitt promised. Thank you very much.
Mr. Straw. Thank you, Chairman. My name is Joseph Straw.
I'm from the New Haven Register, and my question is for the
Treasury Department officials.
Per current statute, does the President have the authority
to stay the ruling, or is the only option either to void it or
let it stand? Parallel to that is the issue of a 45-day
investigation. Was that only applicable prior to the CFIUS
vote, or can the President enact that himself now?
Secretary Kimmitt. If I understood your question correctly,
now that approval has been given, the process can be reopened
only if is discovered that the parties provided false,
misleading, or incorrect information.
Ms. Atkinson. Hello. Sheryl Atkinson, from CBS. Did anybody
on the committee discuss, anticipate, or have any conversations
about the idea that this deal might not be well received by the
public, that there would be sensitivities to it and/or (b)
anticipate any political issues with the deal?
Secretary Kimmitt. I haven't asked that question. I will
give you the best answer I can give. Before I came back into
the Government last summer, there was quite a bit of attention
on the CNOOC deal, when the Chinese National Overseas Oil
Corporation was looking to acquire Unocal, in competition with
Chevron. That case was never formally notified to the Treasury
Department. The 30-day process was never begun. Yet, there was
considerable press attention and hearings on the Hill. In this
particular case, the people that I have talked to who conducted
the review, I think once they saw the stories start appearing
in mainstream newspapers and also some of the specialty press
as early as October, some of which had headlines that says,
``Arab Company to Acquire Port,'' to the best of my knowledge
we didn't get a single question from either the press or
Congress.
So, I think, to some degree, because so many of the people
involved in the process had lived through the CNOOC process,
they might have made the judgment that this didn't have quite
the press or political sensitivity.
I think the White House has said that it would have been
good for us to have engaged Congress earlier. I certainly
support that. I've indicated some of the problems that we have
under the law. In being as forthcoming as we might like to be,
I'd like to continue that discussion. But I can't really figure
out why a case like this, that did show up in these major
papers in New York, in Baltimore, in Miami, and national
papers, as well as ones overseas, wouldn't have occasioned some
question. It doesn't solve the issue. We're up here now dealing
with the security concerns that have been raised. But I think
that might have had an effect on the people doing the review.
Ms. Atkinson. Just a quick follow-on, if I may. Do you
understand the public sensitivities that some people are
addressing, just on a professional level, or do you think this
is way off base?
Secretary Kimmitt. I certainly understand and accept them.
Every question that has been raised, either by the public or
their elected representatives, is absolutely legitimate. As I
said earlier, I think we've looked at these questions. We're in
the process of trying to explain the way that we looked at them
and how we resolved them. But they're certainly legitimate. We
work for the American people.
Ms. Atkinson. Thank you.
Chairman Warner. Thank you. I must advise everyone that
we've been having a 2\1/2\-hour hearing, and it's important to
try and continue to give the facts as asked by the press. But
I'm going to have to cut it down to two more questions from
either side. Thank you very much for your very good cooperation
in making----
Secretary Kimmitt. Mr. Chairman, if I might add----
Chairman Warner. Yes.
Secretary Kimmitt.--they are welcome to follow up with us
in the Departments.
Chairman Warner. Surely.
Secretary Kimmitt. We've had a major outreach. In fact, I
think one of the reasons I have to leave is, I have two
scheduled press availabilities, as do other colleagues. So,
please don't take this as the end of it. We need to answer
these questions. We understand it. They've been raised
legitimately, they need to responded to professionally.
Chairman Warner. I thank you for that.
On this side?
Mr. Liang. Thank you, Mr. Chairman. John Liang, with Inside
Defense. A question for Secretary England.
Mr. Secretary, during your testimony, you mentioned more
than one DOD agency and office that had looked at this
particular case. One of the offices you did not mention,
however, was the Office of the Under Secretary of Defense for
Industrial Policy. Could you characterize--which is currently
being run by a career civil servant in an acting capacity--
could you characterize for us what that office's comments were
concerning this case? How close are you to forwarding a name to
the President and Congress as to who's going to be the next
appointee for that role?
Secretary England. I'm not quite sure where the nominee is
for that office, although we have, indeed, interviewed several
people. So, that is in the process of being filled.
We sent this out to 17 agencies. I do not believe that's
one of the ones in DOD, because that's really not a national
security issue. They are part of our Acquisition, Technology,
and Logistics (AT&L) organization. So, we go to AT&L; they
distribute it within that department. So, I'm not sure where
all they go within that total component. Industrial policy is
part of AT&L and has the CFIUS lead within that component and
we do get a definitive answer from them.
It doesn't go out to them as a separate, independent
organization within DOD. They answer as part of AT&L.
Mr. Liang. Thank you very much.
Ms. Caldwell. Good morning. Leanne Caldwell, Pacific Radio.
To the administration officials, I think it would be really
helpful if you could be specific about the amount of foreign
companies, or foreign companies run by foreign governments, who
do have a--some sort of stake in our ports. Since you have
generally said that there are these situations, to the
Senators, do you think it's a double-standard that this is an
Arab-based company that we are questioning?
Chairman Warner. All right. You make that request for
information. I'm not sure we have all the facts here, at the
moment. Do we?
Secretary Jackson. Mr. Chairman, we've committed to try to
get additional facts----
Chairman Warner. Just provide it for the record.
Secretary Jackson. We'll provide it to the committee.
[The information referred to follows:]
Secretary Jackson did not respond in time for printing. When
received, answer will be retained in committee files.
Chairman Warner. I thank you very much.
Senator Clinton. May I respond to that for a minute, Mr.
Chairman?
Chairman Warner. Yes.
Senator Clinton. We hear, on a fairly regular basis, that
we live in a post-September 11 world. Sometimes that's used as
a declarative statement, and sometimes it's used as a political
attack. But the fact is, we do live in a post-September 11
world, and I think it's important that, whatever the
interpretations of the statute was in the past, that there is
now a necessity for a heightened scrutiny. I don't think this
has to do with the nationality of the company so much as the
track record that Senator Levin and others have laid out, and
the fact that it is a foreign government-controlled and -owned
entity. Senator Menendez and I will be introducing legislation
to prohibit government-owned entities from controlling, owning,
and managing our ports. We don't let them do it to our
airports. There's a very different standard. Yet, the potential
for danger and damage to our country is as high, or higher.
This is not in any way directed at any particular country,
but, as a matter of national security in the post-September 11
world, I think we have to take a hard look at this.
Secretary Kimmitt. Mr. Chairman, could I----
Chairman Warner. If I may, I'm confident that Congress will
perform that oversight. There are means by which to, first,
clarify any ambiguity in this law--that's number one--and,
second, to emphasize the importance of the ports as a part of
our security system.
Secretary Kimmitt. Mr. Chairman, if I could.
Chairman Warner. Yes.
Secretary Kimmitt. I would just say, as Senator Clinton
did, let's put the law aside. We'll take a look at that, and
maybe agree to disagree, and maybe we'll find common ground. I
agree with everything else you've said in your statement. We
have to adapt our national security review to the circumstances
at hand. It's a post-September 11 world, it's also a post-July
7 world. Who would have thought Britain would have been hit the
way that we were? We look at things very differently.
This Community Acquisition Risk Center is a very important
development, the Intelligence Community getting involved in
this. We'd like to see that operation expanded a bit from a
resource-and-personnel perspective to take a particularly close
look. We know they did a good job here. There was no rush. The
company came in, in advance. They took 33 days to look it over.
I think that's where you start your really deep look on
foreign-owned and -controlled companies, whether they be from
the Mid-East or elsewhere.
Chairman Warner. We'll take a last question from this side.
Mr. Starks. Chairman Warner, Tim Starks, from Congressional
Quarterly. Is it your view that the best way to diffuse this
situation is for the administration to voluntarily conduct a
45-day review, if it's possible, without legislation? Do you
have any concerns, or do any of the administration officials
here have any concerns, about whether, legally speaking,
Congress can legislatively halt this process or order a new
review before March 2?
Chairman Warner. I would just generally say I think
Congress, being a coequal branch of the Government, could enact
such legislation--hopefully it wouldn't come to that, but I
think it would probably have the authority--certainly, at that
point in time, the administration would recognize the very
strong sentiment in Congress. On the other hand, the President
has made explicit in his statement with regard to the veto--
but, again, I do believe this thing--it's my own opinion--can
be worked out satisfactorily so that there's a reconciliation
of the views of Congress and the executive branch that's in the
best interest of our national security.
I thank you for that question. I thank all who have been
present. I think we've made a contribution that's very
important at this time. This briefing is adjourned.
[Questions for the record with answers supplied follow:]
Questions Submitted by Senator Saxby Chambliss
REVIEW PROCESS
1. Senator Chambliss. Secretary Kimmitt, to block a foreign
acquisition of a U.S. corporation, the President must find that: (1)
there is credible evidence that a foreign entity exercising control
might take action that threatens national security; and (2) provisions
of law do not provide adequate and appropriate authority to protect
national security. Is the Committee on Foreign Investment in the United
States (CFIUS) process of a 30-day review sufficient to assess issues
of this complexity?
Secretary Kimmitt. The Exon-Florio amendment provides the President
or his designee with sufficient time to consider the national security
implications of a foreign acquisition of a U.S. company. The filing of
notice with CFIUS (or the committee) begins an intensive 30-day
investigative period that provides the committee with sufficient time
to investigate most transactions fully. In many cases, the committee
has more than 30 days to conduct its examination because many companies
approach the committee in advance of a formal filing. This informal
pre-filing notification allows CFIUS members and the Intelligence
Community to prepare for formal consideration of a transaction. If any
CFIUS agency determines that national security concerns remain after
the conclusion of the 30-day investigative period, that agency is and
should be empowered to require an extended investigation. This ensures
that all members of the committee have the time necessary to consider
the full range of a transaction's national security implications.
During the 30-day investigative period, CFIUS agencies are able to
consider information from multiple sources, including the filing,
follow-up discussions with the companies, and unclassified and
classified data sources. In addition, mitigation agreements between the
parties to a transaction and the Departments of Defense, Justice, and
Homeland Security or other agencies are frequently negotiated before
the parties file a notice with CFIUS. This is particularly common for
telecommunications cases that go through the FCC regulatory licensing
process. If any CFIUS agency determines that national security concerns
remain after the conclusion of the 30-day period, such agency can
request an extended 45-day investigation. Finally, it is important to
note that the vast majority of cases that are notified to CFIUS do not
raise national security issues and are easily reviewed within the 30-
day investigative period.
2. Senator Chambliss. Secretary Kimmitt, the CFIUS process requires
the evaluation to consider the record of the acquiring foreign entity
as to compliance with U.S. laws and regulations and the shareholders
(and others) with influence over the foreign entity including foreign
governments. In this case, what was the assessment of the U.S.
Government over influence of a company owned by a foreign government?
Secretary Kimmitt. The committee's assessment of DP World's record
of compliance with U.S. laws and regulations, which included
consideration of the records of its principal shareholder, was informed
by several sources. In the first review of the DP World transaction,
CFIUS requested and received an assessment of the transaction from the
Director of National Intelligence's (DNI) Intelligence Community
Acquisition Risk Center (CARC). The CARC conducted a thorough
assessment of the proposed transaction, which CFIUS member agencies
reviewed carefully before making a determination on whether or not to
proceed to a further 45-day investigation. CFIUS also requested and
received an assessment of the transaction from the Defense Intelligence
Agency, as well as extensive analytical input from the National
Counterterrorism Center. After DP World filed a second notice (under
the Exon-Florio amendment), an all-source assessment was conducted by
the National Intelligence Council of any potential threats arising from
the proposed transaction.
Among other things, CFIUS considered the degree and type of
influence of the ruler of Dubai over DP World and the relationship of
Dubai and the United Arab Emirates (UAE) to the United States. The
committee's deliberations included consideration of potential threats
emanating from the UAE. It also included consideration of the UAE's
cooperation with U.S. authorities through the Container Security
Initiative, MegaPorts, various terrorist financing initiatives, and the
conflicts in Iraq and Afghanistan.
DECISIONMAKING PROCESS
3. Senator Chambliss. Secretary Kimmitt, who made the decision to
approve this transaction given the delegation was to the Secretary/
Cabinet level?
Secretary Kimmitt. The Exon-Florio amendment provides authority to
the President alone to suspend or prohibit a foreign acquisition where
the foreign acquirer might threaten to impair the national security. It
does not confer authority to approve or disapprove of transactions. On
behalf of the President, the committee reviews proposed foreign
acquisitions of U.S. companies, and if national security concerns
remain at the end of the 30-day investigative period, any agency may
recommend a further 45-day investigation. At the end of such
investigation, CFIUS provides the President with a recommendation.
Under the Exon-Florio amendment, the President may suspend or prohibit
a merger or acquisition or take no action, allowing the acquisition to
proceed.
In the DP World transaction, because the companies informed the
U.S. Government of the proposed acquisition well before filing, CFIUS
agencies had approximately 90 days to review the transaction. After
carefully reviewing the transaction, CFIUS agencies agreed that an
extended 45-day investigation was not necessary. CFIUS consists of six
Departments and six White House agencies. The Departments of Energy and
Transportation were also invited to participate in the DP World case
and, given their relevant expertise, were involved in the investigative
process. After carefully considering all available facts, CFIUS
determined by consensus that the proposed acquisition by DP World did
not present a threat to national security.
4. Senator Chambliss. Secretary Kimmitt, why were the President and
other senior leadership not informed of this decision?
Secretary Kimmitt. CFIUS agencies agreed that there were no
national security issues to warrant a further 45-day investigation, and
thus the case was concluded. The Administration supports a high level
of political accountability for CFIUS decisions and is committed to
ensuring that senior, Senate confirmed officials play an integral role
in examining every transaction notified to the committee. The Treasury
Department and other CFIUS agencies have recently put in place
mechanisms to ensure that senior CFIUS officials are better apprised of
CFIUS reviews and investigations and their disposition, even when the
cases raise no national security issues. In addition, we have put in
place an internal process to keep senior officials, including the
Secretary, better apprised of CFIUS activities generally.
5. Senator Chambliss. Secretary Kimmitt, what consideration was
given to the political and national security implications?
Secretary Kimmitt. The Exon-Florio amendment provides for a
national security review of foreign acquisitions of U.S.-based
businesses engaged in U.S. interstate commerce. In the DP World case,
as in all cases, CFIUS gave the national security implications of the
transaction top consideration, The committee considered the full range
of national security issues in assessing the proposed DP World
acquisition of Peninsular and Oriental Steamship Navigation Company.
AUTHORITIES ON ACQUISITION
6. Senator Chambliss. Secretary Kimmitt, the CFIUS process involves
evaluation of foreign companies' interest in acquiring U.S. companies.
What are the authorities of the provision related to transactions from
one foreign company to another?
Secretary Kimmitt. The authorities of the Exon-Florio amendment
cover potentially any transaction in which a foreign person acquires
control of a U.S.-based business engaged in U.S. interstate commerce.
Therefore, the sale of any controlling interest in a U.S.-based
business by one foreign owner to another, including the sale of only a
partial interest in that business, would be subject to Exon-Florio.
CONCURRENCE ON AGREEMENT
7. Senator Chambliss. Secretary Kimmitt, CFIUS seeks unanimous
agreement among CFIUS agencies on the recommendation to the President.
Did any CFIUS members non-concur with the final decision? Did any
member concur but with issues? If so, what issues were raised and how
were they addressed or resolved?
Secretary Kimmitt. After thorough examination of the issues, at the
conclusion of the 30-day investigative period of the proposed DP World
acquisition of the Peninsular & Oriental Steamship Navigation Company,
CFIUS determined by consensus that a further 45-day investigation was
not warranted. I would note that because the companies informed the
U.S. Government of the proposed acquisition well before filing, CFIUS
agencies had approximately 90 days to review the transaction. Further,
the Department of Homeland Security (DHS) negotiated an unprecedented
assurance letter with DP World with respect to law enforcement, public
safety, and national security.
REPORT SUMMARY
8. Senator Chambliss. Secretary Kimmitt, if an investigation is
conducted, a report and recommendation are sent to the President. Is
there a summary or report of this decision? If so, please provide a
copy.
Secretary Kimmitt. Regarding the DP World investigation, due to the
fact that CFIUS completed its work at the end of the 30-day
investigative period and did not go into a further 45-day
investigation, CFIUS did not prepare a report and recommendation to the
President.
NOTIFICATION PROCESS
9. Senator Chambliss. Secretary Kimmitt, the CFIUS process requires
a review and determination to be complete within 30 days unless an
investigation is pursued. According to press information, the CFIUS
process was set into motion in December 2005. Describe the timeline to
assess the filing--was any of this over the holiday?
Secretary Kimmitt. The attorneys involved in the transaction
brought the proposed transaction to the attention of CFIUS on October
17. By early November, the companies had provided to CFIUS
comprehensive information about the transaction and CFIUS had requested
an Intelligence Community Threat Assessment. On November 29, the
companies publicly confirmed the transaction. The Intelligence
Assessment was circulated to CFIUS in early December. The companies met
with CFIUS on December 6 to discuss the transaction. The companies
filed with CFIUS on December 16. CFIUS began its formal review on
December 17, 2005, and concluded on January 17, 2006. Thus, the CFIUS
evaluation of the transaction lasted substantially more than 30 days.
Section 800.404 of the Exon-Florio regulations stipulates that the
review days are calendar days. However, pursuant to CFIUS regulations,
if a review ends on a holiday or weekend, it is moved forward to the
next business day.
10. Senator Chambliss. Secretary Kimmitt, what process of
notification did you employ within the review process?
Secretary Kimmitt. During the CFIUS review process, Treasury, as
the CFIUS chair, routinely communicates with other CFIUS agencies, the
filing companies, and their legal counsel to notify them of relevant
developments. This communication takes the form of unclassified and
classified e-mail, faxes, phone calls, and meetings.
MAKE-UP OF CFIUS
11. Senator Chambliss. Secretary Kimmitt, the CFIUS membership is
comprised of 12 executive branch agencies. What role did the
Intelligence Community have in assessing the national security
(threats, warning) implications?
Secretary Kimmitt. CFIUS consists of six Departments and six White
House agencies. In addition, CFIUS invites other Federal agencies to
participate in investigations on a case-by-case basis when they have
expertise relevant for a particular case. For example, the Departments
of Transportation and Energy have participated in CFIUS reviews. The
Intelligence Community (IC)--primarily the Intelligence CARC and the
Defense Intelligence Agency (DIA)--has played a long-standing and
important role in the CFIUS process, not as a voting member, but as
providers of intelligence assessments of the foreign acquirer and the
transaction. The Office of the DNI--via the National Intelligence
Council--is now providing an all-source assessment of any potential
threats arising from proposed transactions.
12. Senator Chambliss. Secretary Kimmitt, what is the experience
level of the CFIUS and how are they selected for membership?
Secretary Kimmitt. Each CFIUS agency staffs its own CFIUS
activities and chooses its own staff. Depending on the nature of the
transaction and the business of the U.S. target company, an agency may
include staff from several offices in its agency to review and analyze
the national security implications from its agency's perspective.
SECURITY COMMITMENTS
13. Senator Chambliss. Secretary Kimmitt, the Dubai Ports World
signed a letter of assurances making commitments to meet and maintain
security standards for the port terminals. What are those security
standards?
Secretary Kimmitt. The companies committed to maintain no less than
their current level of membership in, cooperation with, and support for
the Customs-Trade Partnership Against Terrorism, the Business Anti-
Smuggling Coalition, and the Container Security Initiative (CSI). They
also committed to their current level of membership in, cooperation
with, and support for the March 2005 Memorandum of Understanding with
the U.S. Department of Energy to support CSI by cooperating and
restricting the trafficking in nuclear and radioactive materials. The
companies committed to provide advance written notice to the DHS before
making any material change with respect to its cooperation/membership/
support, and to meet with any DHS designated U.S. Government officials
prior to implementation. In fact, the DHS agreement with DP World
provides assurances with respect to law enforcement, public safety, and
national security that DHS does not have from other terminal operators.
14. Senator Chambliss. Secretary Kimmitt, what government agency is
responsible for overseeing these commitments?
Secretary Kimmitt. The DHS signed the assurance letter with DP
World and has the responsibility for overseeing the commitments.
15. Senator Chambliss. Secretary Kimmitt, what is the enforcement
mechanism if the commitments are not maintained?
Secretary Kimmitt. DP World's assurance letter to DHS includes two
enforcement mechanisms. For a material breach of any representation or
commitment in the letter, DHS may seek any remedy available at law or
equity in a U.S. court of law. For any materially false or misleading
representation or commitment or omission of material information in the
assurance letter, in addition to other remedies available at law or
equity, DHS may request that CFIUS initiate a review to determine the
impact on national security and the appropriate response to protect
national security.
______
Questions Submitted by Senator Bill Nelson
INTERCOUNTRY DIALOGUE
16. Senator Bill Nelson. To the panel, given that the Dubai Ports
World buyout of Peninsular and Oriental (P&O) Steamship Navigation
Company is a global buyout, has the administration contacted or worked
with any other countries faced with this situation about their mutual
concerns and level of comfort with having their port operation taken
over?
Secretary England. The Defense Department did not contact or work
with foreign countries faced with this situation about their mutual
concerns and level of comfort with a take over of port operations by a
foreign acquirer. At the interagency level, we understand that there
was some informal discussion with several countries where the
acquisition of P&O Steamship Navigation by Dubai Ports World would
result in DPW assuming responsibility for the off- and on-loading of
cargo at terminals in their ports.
Secretary Joseph. It is true that Dubai Ports World is assuming
operations of some container terminal and other facilities in a number
of countries. Based on press reports and information from our
embassies, the transaction appears to have generated much less public
interest or concern in those other countries than it has in the United
States. The U.S. Government did not reach out specifically to foreign
governments regarding this transaction, but our intelligence review
necessarily included information derived from numerous foreign
countries. In addition, the CFIUS did draw on the judgment of its
member agencies and their extensive experience in cargo and port
security in reaching the conclusion that the risk management provisions
in current law and regulations, in numerous bilateral and multilateral
cooperative efforts, and in the DHS assurances letter provided by the
companies was sufficient for purposes of clearing this transaction in
the original CFIUS review.
The U.S. Government is working with other countries every day to
enhance vessel, cargo, and port security. For example, the DHS is
working in the CSI led by U.S. Customs and Border Protection with
numerous other countries, including the U.K. and Dubai, to screen cargo
before it ever reaches U.S. shores. DHS is also working in the
multilateral World Customs Organization to promote the adoption
worldwide of standards for cargo security best practices. Through the
U.S. Coast Guard, DHS is working to enforce global facility and vessel
security standards in the International Ship and Port Facility Security
Code. We are working with foreign governments on a daily basis to
enhance vessel, cargo, and port security as well. The Justice
Department, including the Federal Bureau of Investigation and DHS's
Immigration and Customs Enforcement, is working on a bilateral and
multilateral level investigating and bringing terrorists that may harm
U.S. ports to justice worldwide.
Secretary Kimmitt. Our assistant secretary communicated with his
counterparts in a few countries in which DP World is now operating.
They explained that they had reviewed the transaction--in most cases
from a national security perspective--and did not have any concerns.
Secretary Jackson. The DP World transaction did not involve the
``take over'' of any U.S. ports. Through its acquisition of P&O, DP
World sought to acquire the leases at 24 terminals in the U.S. That's a
relatively small part of the operations in the six ports where they
would operate terminals, including New Orleans, Houston, Miami, Newark,
Baltimore, and Philadelphia. The company's CFIUS filing indicated that
DP World would also assume responsibility for P&O equities at other
ports, but those equities consisted of stevedoring and labor operations
where P&O was not the designated terminal operator.
Terminal operators do not run ports and do not provide or oversee
security for the entire port complex. That is the responsibility of the
government and the local port authority, which is usually a government
agency.
Terminal operators ordinarily sign a long-term lease for waterfront
property in the port. They build a pier for ships, cranes to unload the
ship, a parking lot to store the containers they unload, and perhaps a
small management office. They make their money lifting containers out
of ships and holding them for shippers. The business is very
competitive.
Terminal operators, such as DP World, conduct business throughout
the world. The administration has not had specific discussions with
other countries about how comfortable these countries are with the
conduct of terminal operations in their countries. DHS addressed all of
its national security concerns during the CFIUS review of the
transaction.
RESPONSIVENESS TO INQUIRIES
17. Senator Bill Nelson. To the panel, how responsive was Dubai
Ports World and the UAE Government to inquiries? What documents did you
request and did you feel that you received full cooperation?
Secretary England. For the Defense Department, we thought Dubai
Ports World and the UAE Government were responsive to inquiries. The
DOD did not request additional documents; however, at the interagency
level we noted that where other member agencies requested documents,
the companies and the UAE Government were responsive.
Secretary Joseph. The State Department defers this question to the
Treasury Department, the Chair of the CFIUS.
Secretary Kimmitt. DP World was extremely cooperative. They came to
CFIUS well before the transaction was publicly announced. They met with
CFIUS, including the Department of Transportation, on December 6 to
discuss the transaction. They promptly provided all information
requested. They worked closely with CFIUS throughout the U.S.
Government's consideration of the transaction, which lasted
approximately 90 days.
Secretary Jackson. Most requests for information and documents made
before and during the CFIUS review were made through the Department of
the Treasury, the interagency Chair for CFIUS, so Treasury is in a
better position to respond to the portion of the question addressing
any specific document requests. Both DP World and P&O responded
promptly to all inquiries that were made directly by DHS and DHS feels
that it received full cooperation before and during the CFIUS review.
FOREIGN POLICY TOOLS
18. Senator Bill Nelson. Secretary Joseph, what assurances can you
offer that under this deal the UAE Government will not view its
management of strategic American ports as one of its foreign policy
tools in its relations with the United States?
Secretary Joseph. Dubai Ports World (DPW) is owned not by the UAE
Government but by the Emirate of Dubai, the second richest of the seven
emirates (essentially states) of the UAE federation, which has existed
since 1971. Dubai does not have a foreign policy per se, since foreign
relations for all seven emirates are handled by the UAE Federal
Government. Dubai as an emirate is primarily interested in developing
and expanding its trade and business as a means of survival in the
post-oil economy.
In practice, DPW functions on business principles like any
competitive multinational maritime services provider, with a diverse
international managerial cadre recruited for its commercial skills. In
our judgment DPW does not operate in any practical sense as a tool of
the foreign policy of the Emirate of Dubai, or of the UAE Government,
which is headquartered in the Emirate of Abu Dhabi.
DEFENSE IMPLICATIONS
19. Senator Bill Nelson. Secretary England, please describe the
process that the Department of Defense (DOD) followed in granting its
approval within the CFIUS process. Does the DOD look at the deal solely
in regards to the potential threat, or does it look at it in the
context of the overall relationship with UAE? Please respond
specifically to the concern that the DOD may have agreed to approve the
deal as a ``trade'' in exchange for our existing military relationships
with UAE.
Secretary England. The DOD did not agree to approve the deal as a
``trade'' in exchange for our existing military relationships with the
UAE. The DOD conducted an in-depth and comprehensive review of the
proposed transaction. This transaction was staffed and reviewed within
the DOD by 17 of our agencies or major organizations which examined the
filing for impact on U.S. national security interests, critical
technologies, the presence of any classified operations existing with
the company being purchased and any other concerns this transaction
posed. Given the issues related to port security in this case, we took
the added measure of including U.S. Transportation Command among the
reviewing agencies and organizations. In summary, DOD conducted a
comprehensive and indepth review of this transaction, and no issues
were raised by any of the reviewing agencies or organizations within
the DOD.
20. Senator Bill Nelson. Secretary England, it is my understanding
that some of the ports implicated by the Dubai Ports World deal are
centers for shipment of military materiel. Did the DOD consider the
strategic implications of this deal in light of which specific ports
are involved and how they are used in military operations?
Secretary England. The DOD considered the strategic implications of
this deal in light of the specific ports involved and how they are used
in military operations. In particular, consideration was given to the
critical infrastructure aspects of this case because some of the port
facilities also handle U.S. military traffic. Defense analyzed the
Dubai Ports World case thoroughly and determined that it posed no risk
to national security, including to the shipment of military cargo. The
U.S. Transportation Command (USTRANSCOM) is the Department's designated
single port manager for military cargo. Port operations are overseen by
military and career government civilians. Other ports utilized for
military cargo have no connection with the Peninsular & Oriental
Steamship Navigation Company.
______
Questions Submitted by Senator Evan Bayh
CONSIDERATION OF COUNTRIES
21. Senator Bayh. To the panel, was any consideration given to the
country in which the acquiring entity is located?
Secretary England. The DOD took into account a number of factors
relating to the UAE. For example, Dubai was the first Middle Eastern
entity to join the CSI--a multinational program to protect global trade
from terrorism. It was also the first Middle Eastern entity to join the
Department of Energy's Megaports Initiative, a program aimed at
stopping illicit shipments of nuclear and other radioactive material.
In reviewing CFIUS filings, foreign government control and influence
over an acquiring company is an important consideration. But the actual
possibility of direct control and influence varies with the nature of
the transaction, including the types of companies being acquired and
how the business is ultimately managed. It may also depend on whether
the acquiring company is in a country of concern. If the DOD identified
threats to national security that could not be resolved adequately
during the 30-day review period, we would have asked for the
transaction to go to investigation. In this case, the DOD did not have
concerns with the foreign government involved, the acquiring company,
or the nature and structure of the actual business operations. The
ports will remain under the ownership and control of U.S. State and
local authorities, not DP World.
Secretary Joseph. The State Department defers this question to the
Treasury Department, the Chair of the CFIUS.
Secretary Kimmitt. CFIUS regularly considers the country in which
an acquiring entity is located as part of its broad and comprehensive
security review and gives extra scrutiny to transactions involving
foreign governments. CFIUS agencies are guided by the criteria in the
Exon-Florio amendment and consider whether the foreign acquirer, acting
through the U.S. target company, might take action to threaten the
national security and, if a threat is identified, whether existing laws
are adequate and appropriate to deal with it.
In establishing whether the foreign acquirer may be a threat to
national security, CFIUS examines the intelligence reporting and any
reports of the foreign acquirer violating U.S. laws and regulations,
such as not complying with the export control laws. In addition, it is
important to examine the home government of the foreign company with
respect to a number of issues, including whether it maintains an
acceptable export control regime that protects against unlawful U.S.
technology diversion.
Secretary Jackson. As part of its comprehensive examination of the
potential national security effects of every CFIUS transaction, DHS
always considers the identity of the acquiring entity and its
connection to the government.
22. Senator Bayh. To the panel, should the law be amended to
require such consideration?
Secretary England. The DOD defers to the Treasury Department, the
Chair of the CFIUS on this question.
Secretary Joseph. The State Department defers this question to the
Treasury Department, the Chair of the CFIUS.
Secretary Kimmitt. The law need not be amended to require such
consideration because, as described above, CFIUS already considers an
acquirer's country of origin in every case.
Secretary Jackson. The country in which an acquiring entity is
located is already considered as part of the national security
analysis, so there is no need to amend the law to require such a
consideration.
LINKS TO TERRORISTS
23. Senator Bayh. To the panel, was there any consideration and/or
investigation into the UAE's links to terrorist groups? Should there
have been?
Secretary England. There was consideration and investigation into
any reports of the UAE's links to terrorist groups. The UAE has been a
key partner in the war on terror, working closely with the United
States to shut down terror finance networks. The UAE has worked with us
to stop terrorist financing and money laundering, by freezing accounts,
enacting aggressive anti-money laundering and counterterrorist
financing laws and regulations, and exchanging information on people
and entities suspected of being involved in those actions.
Secretary Joseph. The State Department defers this question to the
Treasury Department, the Chair of the CFIUS.
Secretary Kimmitt. Yes, consideration was given to the UAE's
position on terrorism. The UAE has addressed terrorist financing issues
since September 11 and has worked with the United States in shutting
down terrorist finance networks. The UAE has strengthened its banking
laws and regulations to prevent the misuse of its financial
institutions by money launderers and terrorist financiers. The UAE has
taken steps to curb and block financial flows to terrorists. We
continue to encourage the UAE government to take further steps to
strengthen its financial defenses and to vigorously enforce its
existing anti-money laundering/counterterrorist financing laws and
regulations.
In its thorough review of the proposed DP World transaction, CFIUS
did not uncover any evidence that any DP World executive contributed
funds to terrorist organizations. As in all of its cases, CFIUS
carefully considered the possibility that the proposed transaction
could contribute to a heightened risk of terrorism.
In the first review of the DP World transaction, CFIUS requested
and received an assessment of the transaction from the DNI's
Intelligence CARC as well as extensive analytical input from the
National Counterterrorism Center (NCTC). The CARC conducted a thorough
assessment of the proposed transaction, which CFIUS member agencies
reviewed carefully before making a determination on whether or not to
proceed to an extended 45-day investigation. CFIUS also requested and
received an assessment of the transaction from the DIA as well as
extensive analytical input from the National Counterterrorism Center.
During the second review, an all-source, all-threat assessment was
produced by the National Intelligence Council, which incorporated
judgments based on terrorist-related name traces of senior DP World
personnel conducted by the Federal Bureau of Investigation and the
Intelligence Community Acquisition Risk Center. The Treasury
Department, DHS, and Department of Justice also directed other
appropriate authorities to investigate whether any DP World executive
was implicated in terrorism, money laundering, or any other criminal
activity. A thorough interagency search did not produce evidence of any
such activity.
Secretary Jackson. A detailed answer to this question would involve
the discussion of classified material. The unclassified answer is that
all relevant information, including any alleged links to terrorist
groups, was considered.
ASSESSMENT OF INFRASTRUCTURE
24. Senator Bayh. To the panel, what consideration was given to the
nature of the asset? Specifically, was there a closer examination
because the acquisition involved critical infrastructure?
Secretary England. For the DOD, consideration was given to critical
infrastructure because some of the port facilities also handle U.S.
military cargo. Defense analyzed the Dubai Ports World case thoroughly
and determined that it posed no risk to national security, including to
the shipment of military cargo. The U.S. Transportation Command
(USTRANSCOM), the DOD's designated single port manager for military
cargo, took part in the review. Port operations are overseen by
military and career government civilians. Other ports utilized for
military cargo have no connection with Peninsular & Oriental Navigation
Company.
Secretary Joseph. The State Department defers this question to the
Treasury Department, the Chair of the CFIUS.
Secretary Kimmitt. As part of CFIUS' broad consideration of
national security issues, CFIUS always considers the nature of the
assets being acquired and whether such assets represent critical
infrastructure for the United States, broadly defined. With respect to
the DP World transaction, CFIUS member agencies carefully considered
the fact that P&O North America carries out operations at ports across
the Eastern and Gulf Coasts. The Committee looked at both threats and
vulnerabilities to the United States when assessing the implications of
the DP World deal. CFIUS agencies do not ask companies to enter into
security agreements for every transaction CFIUS reviews; the fact that
this acquisition involved critical infrastructure played a role in
DHS's decision to seek assurances. In fact, DHS signed an assurances
letter with DP World with respect to law enforcement, public safety,
and national security.
Secretary Jackson. DHS gave very close consideration to this
transaction because of the nature of the asset and its role within our
critical infrastructure. Given our special responsibilities for
critical infrastructure pursuant to Homeland Presidential Security
Directive (HSPD)-7, DHS takes a particularly active role in
transactions like DP World that involve an asset under the regulatory
supervision of DHS and/or where the asset is part of the Nation's
critical infrastructure.
25. Senator Bayh. To the panel, should the law be amended to
require such consideration?
Secretary England. The DOD defers this question to the Treasury
Department, the Chair of the CFIUS.
Secretary Joseph. The State Department defers this question to the
Treasury Department, the Chair of the CFIUS.
Secretary Kimmitt. CFIUS already considers a broad range of factors
in considering whether a proposed acquisition could pose a threat to
national security, including whether the assets to be acquired
constitute critical infrastructure. Consequently, we do not believe it
is necessary to amend the law to require consideration of such factors.
Secretary Jackson. No amendment to the law is necessary since DHS
already gives close scrutiny to any transaction involving a critical
infrastructure asset.
CONGRESSIONAL NOTIFICATION
26. Senator Bayh. To the panel, was there any thought to notifying
Congress in advance of this pending transaction?
Secretary England. The DOD defers this question to the Treasury
Department, the Chair of the CFIUS.
Secretary Joseph. The State Department defers this question to the
Treasury Department, the Chair of the CFIUS.
Secretary Kimmitt. Over the past 17 years, CFIUS has not notified
Congress before a review and investigation is complete. To keep
Congress informed adequately and regularly about the CFIUS process, I
have offered that Treasury, on behalf of CFIUS, orally briefs our
oversight committees, the Senate Banking and House Financial Services
Committees, generally every quarter on completed reviews. On a case-by-
case basis, CFIUS may suggest that its oversight committees invite
other potentially interested members and committees with jurisdiction
over areas affected by decisions under Exon-Florio to attend these
briefings. For instance, Treasury officials were scheduled to brief
Senate Banking Committee staff on CFIUS matters on February 16, but the
briefing concentrated on the DP World case, which had arisen the
preceding weekend. I am open to other suggestions on ways to improve
our reporting on the process so that Congress can fulfill its oversight
responsibilities.
Secretary Jackson. Traditionally, Congress has not been notified of
pending CFIUS cases. At the time this transaction was under review, the
Department of the Treasury, as interagency chair, had the lead role in
providing information to Congress on transactions that had been
reviewed.
27. Senator Bayh. To the panel, should the law require that
congressional notification be made?
Secretary England. The DOD defers this question to the Treasury
Department, the Chair of the CFIUS.
Secretary Joseph. The State Department defers this question to the
Treasury Department, the Chair of the CFIUS.
Secretary Kimmitt. The administration is committed to improved
communication with Congress in connection with the CFIUS process. Since
the DP World matter arose, we have promptly notified Congress of all
reviews upon completion. As noted above, we are also briefing Congress
on a quarterly basis.
Secretary Jackson. The administration and the CFIUS agencies are
examining how to expand notifications of decisions to Congress so that
it can fulfill its important oversight responsibilities. Since those
discussions are still ongoing, it would be premature for DHS to express
a firm opinion at this time.
DIRECTOR OF NATIONAL INTELLIGENCE
28. Senator Bayh. To the panel, did the CFIUS ask for the views of
the DNI?
Secretary England. The DOD defers this question to the Treasury
Department, the Chair of the CFIUS.
Secretary Joseph. The State Department defers this question to the
Treasury Department, the Chair of the CFIUS.
Secretary Kimmitt. In the first review of the DP World transaction,
CFIUS requested and received an assessment of the transaction from the
DNI's Intelligence CARC. The CARC conducted a thorough assessment of
the proposed transaction, which CFIUS member agencies reviewed
carefully before making a determination on whether or not to proceed to
a further 45-day investigation. CFIUS also requested and received an
assessment of the transaction from the DIA as well as extensive
analytical input from the National Counterterrorism Center.
After DP World filed a second notice under the Exon-Florio
amendment, an all-source assessment was conducted by the National
Intelligence Council of any potential threats arising from the proposed
transaction. As part of some procedural changes CFIUS has made to
improve its reviews, the DNI's National Intelligence Council is now
providing consolidated all-source Intelligence Community assessments of
any potential threats arising from a proposed transaction for all CFIUS
cases.
Secretary Jackson. The views of the intelligence community are
considered in every CFIUS case since the Director of National
Intelligence's CARC provides classified reports to all CFIUS members.
The CARC provided a classified threat assessment to all CFIUS members
regarding the proposed DP World transaction.
29. Senator Bayh. To the panel, should the DNI play a substantive
role in CFIUS?
Secretary England. The DOD defers this question to the Treasury
Department, the Chair of the CFIUS.
Secretary Joseph. The State Department defers this question to the
Treasury Department, the Chair of the CFIUS.
Secretary Kimmitt. Senior representatives from the Office of the
DNI now participate in all CFIUS meetings. The DNI does not and should
not vote on CFIUS matters because the role of the DNI is to provide
intelligence in support of the President and not to issue policy
judgments based upon that intelligence. However, the DNI examines every
transaction and provides CFIUS with broad and comprehensive
intelligence assessments.
Secretary Jackson. DHS is not certain what is meant by playing ``a
substantive role.'' The intelligence community provides relevant
reporting in each CFIUS case. The DNI is asked to assess the threat to
U.S. national security posed by each proposed transaction, not to
render a judgment about whether the transaction should be approved. DHS
believes that these policy judgments must continue to be made by each
of the CFIUS members. CFIUS continues to work with the DNI to integrate
appropriately the DNI into the CFIUS process.
PUBLIC PARTICIPATION AND NOTIFICATION
30. Senator Bayh. To the panel, has any consideration been given to
convening unclassified public hearings?
Secretary England. The DOD defers this question to the Treasury
Department, the Chair of the CFIUS.
Secretary Joseph. The State Department defers this question to the
Treasury Department, the Chair of the CFIUS.
Secretary Kimmitt. Since implementation of the Exon-Florio
amendment involves national security, there is a limit on the extent to
which the process can be public. For example, sometimes the impetus for
an investigation is based on information contained in a classified
report. In such cases, it may not be possible to reveal the reasons for
an investigation without compromising classified information. Similar
considerations may pertain to the reasons for the final determination
by the President. In addition, companies filing with CFIUS provide
proprietary information to enable CFIUS to conduct its reviews. Under
the Exon-Florio amendment, this information--and the fact of the filing
itself--cannot be made public by the government.
Secretary Jackson. The public has a role to play in the CFIUS
process by alerting government officials, to national security concerns
they perceive from transactions that have been reported on in the
press. DHS does not believe, however, that there should be a formal
mechanism in the CFIUS process for the general public to express
satisfaction or dissatisfaction with proposed or pending mergers,
acquisitions, and takeovers by or with foreign persons.
Moreover, under Exon-Florio and its implementing regulations, no
information provided to CFIUS in connection with a CFIUS review may be
made public. Therefore, any detailed discussion in an unclassified
public hearing of a transaction reviewed by CFIUS would be problematic.
31. Senator Bayh. To the panel, should the law be amended to allow
some public participation?
Secretary England. The DOD defers this question to the Treasury
Department, the Chair of the CFIUS.
Secretary Joseph. The State Department defers this question to the
Treasury Department, the Chair of the CFIUS.
Secretary Kimmitt. Direct public participation in the CFIUS process
would be problematic given the commercial sensitivity of much of the
information provided and discussed in connection with the CFIUS
process. The administration believes that the most appropriate way to
bring about public participation is through effective communication
with Congress.
Secretary Jackson. For the reasons already given, the law should
not be amended.
[Whereupon, at 1:35 p.m., the briefing adjourned.]